##### Table of Contents



| |                                   
| | ----------------------------------
| |                                   
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|
| | UNITED STATES                     
| | SECURITIES AND EXCHANGE COMMISSION
| | Washington, D.C. 20549            
|
|
| |                                   
|
|
| | Form 10-K                         

|                                                |  |                                                                                             
|----------------------------------------------- |  | --------------------------------------------------------------------------------------------
|(Mark One)                                      |  |                                                                                             
|þ                                               |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|                                               
|For the fiscal year ended December 29,
    2002
|                                               
|or                                             
|                                               
|o                                               |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                               
|For the transition period
    from          to 

Commission file number 000-27823



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Spanish Broadcasting System, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                                                                           |  |                                         
|-------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                                                                   |  | 13-3827791                              
|(State or other jurisdiction
    of incorporation or organization)                                                         |  | (I.R.S. Employer
    Identification No.)
|2601 South Bayshore Drive, PH II
    Coconut Grove, Florida 33133(Address of principal executive
    offices 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 þ         No o

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.         o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Exchange Act
Rule 12b-2).

Yes þ         No o


As of June 28, 2002, the last business day
of the Companys most recently completed second fiscal
quarter, the Company had 37,065,755 shares of Class A
common stock, par value $.0001 per share, and 27,606,650 shares
of Class B common stock, par value $.0001 per share,
outstanding. As of June 28, 2002, the aggregate market
value of the Class A common stock held by non-affiliates of
the Company was approximately $369.7 million. The aggregate
market value of the Class B common stock held by
non-affiliates of the Company was approximately
$0.4 million. We calculated the aggregate market value
based upon the closing price of our Class A common stock
reported on the Nasdaq National Market System on June 28,
2002 of $10.00 per share, and 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 March 24, 2003, 37,076,655 shares of
Class A common stock, par value $.0001 per share, and
27,605,150 shares of Class B common stock, par value $.0001
per share, were outstanding.

Documents Incorporated by Reference:
None



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TABLE OF CONTENTS



|                                                                                                        |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|PART I                                                                                                 
|Item 1. Business                                                                                       
|Item 2. Properties                                                                                     
|Item 3. Legal Proceedings                                                                              
|Item 4. Submission of Matters to a Vote of Security Holders                                            
|PART II                                                                                                
|Item 5. Market For Registrants Common Equity and Related Stockholder Matters                          
|Item 6. Selected Financial Data                                                                        
|Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations          
|Item 7A. Quantitative and Qualitative Disclosures About Market Risk                                    
|Item 8. Financial Statements and Supplementary Data                                                    
|Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure           
|PART III                                                                                               
|Item 10. Directors and Executive Officers of the Registrant                                            
|Item 11. Executive Compensation                                                                        
|Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|Item 13. Certain Relationships and Related Transactions                                                
|Item 14. Controls and Procedures                                                                       
|PART IV                                                                                                
|Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                              
|Index to Consolidated Financial Statements                                                             
|INDEPENDENT AUDITORS REPORT                                                                           
|CONSOLIDATED BALANCE SHEETS                                                                            
|CONSOLIDATED STATEMENTS OF OPERATIONS                                                                  
|CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS (DEFICIENCY) EQUITY                                
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                  
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                             
|SIGNATURES                                                                                             
|CERTIFICATIONS                                                                                         
|EXHIBIT INDEX                                                                                          
|Asset Purchase Agreement                                                                               
|Time Brokerage Agreement                                                                               
|Guaranty  Agreement                                                                                    
|EX-21.1 List of Subsidiaries                                                                           
|EX-99.1 Certification of Chief Executive Officer                                                       
|EX-99.2 Certification of Chief Financial Officer                                                       



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##### Table of Contents



TABLE OF CONTENTS

|         |          |  |                                                                                                    |      |  |    | 
|-------- | -------- |  | -------------------------------------------------------------------------------------------------- | ---- |  | -- | 
|         |          |  |                                                                                                    | Page
|         |          |  |                                                                                                    |     
|PART I   |          |  |                                                                                                    |     
|         | ITEM 1.  |  | Business                                                                                           |      |  | 1  | 
|         | ITEM 2.  |  | Properties                                                                                         |      |  | 26 | 
|         | ITEM 3.  |  | Legal Proceedings                                                                                  |      |  | 27 | 
|         | ITEM 4.  |  | Submission of Matters to a Vote of Security
    Holders                                            |      |  | 28 | 
|PART II  |          |  |                                                                                                    |     
|         | ITEM 5.  |  | Market For Registrants Common Equity and
    Related Stockholder Matters                          |      |  | 29 | 
|         | ITEM 6.  |  | Selected Financial Data                                                                            |      |  | 31 | 
|         | ITEM 7.  |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations          |      |  | 33 | 
|         | ITEM 7A  |  | Quantitative and Qualitative Disclosures About
    Market Risk                                     |      |  | 44 | 
|         | ITEM 8.  |  | Financial Statements and Supplementary Data                                                        |      |  | 44 | 
|         | ITEM 9.  |  | Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure           |      |  | 44 | 
|PART III |          |  |                                                                                                    |     
|         | ITEM 10. |  | Directors and Executive Officers of the Registrant                                                 |      |  | 45 | 
|         | ITEM 11. |  | Executive Compensation                                                                             |      |  | 47 | 
|         | ITEM 12. |  | Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters |      |  | 54 | 
|         | ITEM 13. |  | Certain Relationships and Related Transactions                                                     |      |  | 55 | 
|         | ITEM 14. |  | Controls and Procedures                                                                            |      |  | 56 | 
|PART IV  |          |  |                                                                                                    |     
|         | ITEM 15. |  | Exhibits, Financial Statement Schedules, and
    Reports on Form 8-K                               |      |  | 56 | 

i



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PART I




Item 1.     Business

All references to we, us,
our, SBS, our company or
the 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, PH
II, 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 largest Hispanic-controlled
radio broadcasting company in the United States. We currently
own and/or operate 27 radio stations in seven of the top-ten
Hispanic markets in the United States, including Los Angeles,
New York, Puerto Rico, Miami, Chicago, San Francisco and San
Antonio. Our radio stations are located in markets that reach
approximately 49% of the U.S. Hispanic population. Our WSKQ-FM
station in New York and WLEY-FM station in Chicago are each
ranked as the number one station in their respective target
demographic group (Hispanics ages 18-49 and Hispanics ages
18-34, respectively) in the Fall 2002 Arbitron® ratings.

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

SBS is led by Mr. Raúl Alarcón,
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 Alarcón
family has been involved in Spanish-language radio broadcasting
since the 1950s, when Mr. Pablo Raúl
Alarcón, Sr., our Chairman Emeritus and a member of our
Board of Directors, established his first radio station in
Camagüey, Cuba. Members of our senior management team, on
average, have over 20 years of experience in
Spanish-language media and radio broadcasting.

Business Strategy

We focus on maximizing the revenue and
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. We also focus on long-term growth by investing in
advertising, programming research and on-air talent.

Operating Strategy

Our operating strategy focuses on maximizing our
radio stations appeal to our targeted 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 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
third party consultants, in-house research 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
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. The teams generally consist of

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a general manager, a general sales manager and a
programming director. Stations are staffed with managers who
have experience in and knowledge of the local radio market
and/or the local Hispanic market. Because of the cultural
diversity of the Hispanic population from market to market 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 based upon collected advertising
revenue. We seek to maximize our sales to national advertisers
because they generally place large advertising orders throughout
the year. 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 are in line with the radio broadcast
industrys average operating margins. We emphasize control
of each stations operating costs through detailed
budgeting, tight control over staffing levels and constant
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.One of our goals is to use our
expertise in marketing to the Hispanic consumer in each of the
markets in which we operate stations to attract a large share of
advertising revenue. We believe that effective promotional
efforts play a significant role in both adding new listeners and
increasing listener loyalty. 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 some instances, these events are co-sponsored by
local television stations, newspapers, and local promoters,
allowing our mutual advertisers to reach a larger combined
audience.

Maintaining Strong Community Involvement.We have historically been, and will
continue to be, actively involved in the local communities that
we serve. Our radio stations participate in numerous community
programs, fund-raisers and activities benefiting the local
community and Hispanics abroad. 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 deter 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 governmental entities and community and
philanthropic organizations for their service. We believe that
this involvement helps 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 revenue 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 successfully
be reformatted.

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



| |   |                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------
| |  | the size of the Hispanic market;                                                                                 
|
| |  | anticipated growth, demographics, and other
    similar 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, assure you 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 in managing
our rapid growth; and we may be required to raise additional
funds in order to finance such acquisitions while our ability to
do so may be limited by the terms of our debt instruments.

Internet Strategy

Our Internet strategy is designed to complement
our operating strategy and enables us to capitalize on our
Hispanic market expertise. The core of our Internet strategy is
our Web site LaMusica.com and local radio stations Web
sites which are on-line communities focused on the Hispanic
market. These Web sites provide our advertisers with a
complementary method of reaching their target audience.

Top 10 Hispanic Radio Markets in the United
States

The table below lists the top 10 Hispanic radio
markets in the United States, including Puerto Rico. We
currently own radio stations in Los Angeles, New York, Puerto
Rico, Miami, Chicago, San Francisco and San Antonio. Population
estimates are for 2002 and are based upon statistics provided by
the Strategy Research Corporation  2002 U.S.
Hispanic Market Report, the U.S. Census Bureau Population
Estimates for Puerto Rico  2002and the U.S.
Census Bureau, Census 2000.

|         |     |        |  |                                   |  |               |          |                 |  |  |      |   |  |  |      |  
|-------- | --- | ------ |  | --------------------------------- |  | ------------- | -------- | --------------- |  |  | ---- | - |  |  | ---- | -
|         |     |        |  |                                   |  | % Hispanic    |          |                
|         |     |        |  |                                   |  | of            |          |                
|         |     |        |  | Hispanic                          |  | Total         |          | % of Total U.S.
|Hispanic |     |        |  | Population                        |  | Population in |          | Hispanic       
|Rank     |     | Market |  | (000)                             |  | the Market    |          | Population     
|         |     |        |  |                                   |  |               |          |                
|         | 1.  |        |  | Los Angeles                       |  |               | 7,000.8  |                 |  |  | 41.4 | % |  |  | 16.5 | %
|         | 2.  |        |  | New York                          |  |               | 3,971.3  |                 |  |  | 19.2 |   |  |  | 9.4  |  
|         | 3.  |        |  | Puerto Rico                       |  |               | 3,812.5  |                 |  |  | 98.8 |   |  |  | 9.0  |  
|         | 4.  |        |  | Miami                             |  |               | 1,719.4  |                 |  |  | 41.1 |   |  |  | 4.1  |  
|         | 5.  |        |  | Chicago                           |  |               | 1,603.7  |                 |  |  | 17.1 |   |  |  | 3.8  |  
|         | 6.  |        |  | Houston                           |  |               | 1,584.0  |                 |  |  | 29.7 |   |  |  | 3.7  |  
|         | 7.  |        |  | San Francisco                     |  |               | 1,356.6  |                 |  |  | 19.6 |   |  |  | 3.2  |  
|         | 8.  |        |  | Dallas                            |  |               | 1,324.9  |                 |  |  | 22.0 |   |  |  | 3.1  |  
|         | 9.  |        |  | San Antonio                       |  |               | 1,150.5  |                 |  |  | 55.4 |   |  |  | 2.7  |  
|         | 10. |        |  | Phoenix                           |  |               | 1,035.0  |                 |  |  | 25.0 |   |  |  | 2.4  |  
|         |     |        |  |                                   |  |               |          |                 |  |  |      |   |  |  |      |  
|         |     |        |  | Total for Top 10 Hispanic Markets |  |               | 24,558.7 |                 |  |  | 30.9 | % |  |  | 57.9 | %
|         |     |        |  |                                   |  |               |          |                 |  |  |      |   |  |  |      |  

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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 in-house research departments located in Miami
and Los Angeles, which conduct extensive radio market research
on a daily, weekly, monthly and annual basis. By employing
listener study groups and telephone surveys modeled after
Arbitron® written survey methodology, but with even larger
sample sizes than Arbitron®, we are able to assess listener
preferences, track trends and gauge our success on a daily
basis, well before Arbitron® quarterly results are
published. In this manner, we can respond immediately to any
changing preferences of listeners and/or 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 the Hispanics whom we target 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, norteña, 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. Norteña
    means northern, and is representative of Northern Mexico.
    Featuring an accordion, norteña has a polka sound with a
    distinct Mexican flavor. Banda is a regional format from the
    state of Sinalóa, Mexico and is popular in California.
    Banda resembles up-tempo marching band music with synthesizers.
|
| |  | Spanish Adult Contemporary.The Spanish Adult Contemporary format
    includes soft romantic ballads and Spanish pop music.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | American Contemporary Hits.The American Contemporary Hits format
    consists of popular music released within the last year. This
    format also tends to include a variety of music styles such as
    Rock, Pop, R&B, Rap and Dance which are mostly rhythmic in
    nature.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | American Adult Contemporary 80s &
    90s Hits.The American Adult
    Contemporary format consists of the top American chart hits from
    the 1980s and 1990s.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | American Top 40.The
    American Top 40 format consists of the most popular current
    chart hits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Spanish Oldies.The
    Spanish Oldies format includes a variety of Latin music mainly
    from the 1950s, 1960s, 1970s and 1980s.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Spanish Hot Adult Contemporary.The Spanish Hot Adult Contemporary
    format consists of Rock ballads as well as alternative dance and
    pop music.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Mexican Adult Contemporary.The Mexican Adult Contemporary format
    includes pop and ballads with an emphasis on Mexican artists.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Dance Contemporary Hit Radio.The Dance Contemporary Hit Radio
    format includes current and past English language dance hits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Central American Tropical.The Central American Tropical format
    includes cumbia, soca and punta, with traditional salsa and
    merengue for variety.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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##### Table of Contents



The following table lists the programming formats
of our radio stations and the target demographic of each
station. We own each of the following stations except for
KXOL-FM, WDEK-FM, WKIE-FM, and WKIF-FM, which we program
pursuant to time brokerage agreements. During fiscal year 2002,
we changed the call letters of some of our radio stations as
follows: WODA-FM, formerly programmed under the call letters
WCOM-FM; WNOD-FM, formerly programmed under the call letters
WOYE-FM; WZET-FM, formerly programmed under the call letters
WSMA-FM; KPTI-FM, formerly programmed under the call letters
KXJO-FM; KZAB-FM, formerly programmed under the call letters
KFSG-FM; and KZBA-FM, formerly programmed under the call letters
KFSB-FM.

|       |               |         |  |        |         |                |  |                                                                                           |  |  |       | 
|------ | ------------- | ------- |  | ------ | ------- | -------------- |  | ----------------------------------------------------------------------------------------- |  |  | ----- | 
|       |               |         |  |        |         | Target        
|       |               |         |  |        |         | Demographic   
|       |               |         |  |        |         | (by age and   
|       |               |         |  |        |         | gender,       
|Market |               | Station |  | Format |         | if applicable)
|       |               |         |  |        |         |               
|       | Los Angeles   |         |  |        | KLAX-FM |                |  | Regional Mexican                                                                          |  |  | 18-49 | 
|       |               |         |  |        | KZAB-FM |                |  | Central American Tropical                                                                 |  |  | 18-49 | 
|       |               |         |  |        | KZBA-FM |                |  | Central American Tropical                                                                 |  |  | 18-49 | 
|       |               |         |  |        | KXOL-FM |                |  | Mexican Adult Contemporary  Programmed
    by SBS pursuant to a time brokerage agreement |  |  | 18-49 | 
|      
|       | New York      |         |  |        | WSKQ-FM |                |  | Spanish Tropical                                                                          |  |  | 18-49 | 
|       |               |         |  |        | WPAT-FM |                |  | Spanish Adult Contemporary                                                                |  |  | 25-54 | 
|      
|       | Puerto Rico   |         |  |        | WMEG-FM |                |  | American Top 40                                                                           |  |  | 18-34 | 
|       |               |         |  |        | WEGM-FM |                |  | American Top 40                                                                           |  |  | 18-34 | 
|       |               |         |  |        | WCMA-FM |                |  | American Adult Contemporary 80s &
    90s Hits                                          |  |  | 18-49 | 
|       |               |         |  |        | WIOA-FM |                |  | Spanish Adult Contemporary                                                                |  |  | 18-49 | 
|       |               |         |  |        | WIOB-FM |                |  | Spanish Adult Contemporary                                                                |  |  | 18-49 | 
|       |               |         |  |        | WIOC-FM |                |  | Spanish Adult Contemporary                                                                |  |  | 18-49 | 
|       |               |         |  |        | WZNT-FM |                |  | Spanish Tropical                                                                          |  |  | 18-49 | 
|       |               |         |  |        | WZMT-FM |                |  | Spanish Tropical                                                                          |  |  | 18-49 | 
|       |               |         |  |        | WZET-FM |                |  | Spanish Tropical                                                                          |  |  | 18-49 | 
|       |               |         |  |        | WODA-FM |                |  | Spanish Hot Adult Contemporary                                                            |  |  | 18-34 | 
|       |               |         |  |        | WNOD-FM |                |  | Spanish Hot Adult Contemporary                                                            |  |  | 18-34 | 
|      
|       | Miami         |         |  |        | WXDJ-FM |                |  | Spanish Tropical                                                                          |  |  | 18-34 | 
|       |               |         |  |        | WCMQ-FM |                |  | Spanish Oldies                                                                            |  |  | 35-54 | 
|       |               |         |  |        | WRMA-FM |                |  | Spanish Adult Contemporary                                                                |  |  | 25-54 | 
|      
|       | Chicago       |         |  |        | WLEY-FM |                |  | Regional Mexican                                                                          |  |  | 18-49 | 
|       |               |         |  |        | WDEK-FM |                |  | Spanish Adult Contemporary  Programmed
    by SBS pursuant to a time brokerage agreement |  |  | 25-54 | 
|       |               |         |  |        | WKIE-FM |                |  | Spanish Adult Contemporary  Programmed
    by SBS pursuant to a time brokerage agreement |  |  | 25-54 | 
|       |               |         |  |        | WKIF-FM |                |  | Spanish Adult Contemporary  Programmed
    by SBS pursuant to a time brokerage agreement |  |  | 25-54 | 
|       | San Francisco |         |  |        | KPTI-FM |                |  | Dance Contemporary Hit Radio                                                              |  |  | 18-49 | 
|       | San Antonio   |         |  |        | KLEY-FM |                |  | Regional Mexican                                                                          |  |  | 18-49 | 
|       |               |         |  |        | KSAH-AM |                |  | Regional Mexican                                                                          |  |  | 18-49 | 

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Radio Station Portfolio

The following is a general description of each of
our markets. The market revenue information is based on data
provided by BIA Research, Inc.s Investing in Radio,
2002 Market Report, Strategy Research Corporation 
2002 U.S. Hispanic Market Report, the U.S. Census Bureau
Population Estimates for Puerto Rico  2002and
the U.S. Census Bureau, Census 2000.

Los Angeles

The Los Angeles market is the largest radio
market in terms of advertising revenue which is projected to be
approximately $901.9 million in 2002. In 2002, the Los Angeles
market had the largest U.S. Hispanic population with
approximately 7.0 million Hispanics, which is approximately
41.4% of the Los Angeles markets total population. The Los
Angeles market experienced annual radio revenue growth of 9.6%
between 1996 and 2001. Radio revenue in the Los Angeles market
is expected to grow at an annual rate of 5.4% between 2001 and
2006.

New York

The New York market is the second largest radio
market in terms of advertising revenue which is projected to be
approximately $751.2 million in 2002. In 2002, the New York
market had the second largest U.S. Hispanic population, with
approximately 4.0 million Hispanics, which is approximately
19.2% of the New York markets total population. We believe
that we own the strongest franchise in our target demographic
group, with two of the three FM Spanish-language radio stations
in the New York market, WSKQ-FM and WPAT-FM. These radio
stations have audience shares of 5.0 for the 18-49 demographic
and 3.4 for the 25-54 demographic, respectively, in the Fall
2002 Arbitron® ratings. The New York market experienced
annual radio revenue growth of 7.2% between 1996 and 2001. Radio
revenue in the New York market is expected to grow at an annual
rate of 6.4% between 2001 and 2006.

Puerto Rico

The Puerto Rico market is the thirty-third
largest radio market in terms of advertising revenue which is
projected to be approximately $89.1 million in 2002. In 2002,
the Puerto Rico market had the third largest U.S. Hispanic
population, with approximately 3.8 million Hispanics, which we
believe is approximately 98.8% of the Puerto Rico markets
total population. The Puerto Rico market experienced annual
radio revenue growth of 4.0% between 1996 and 2001. Radio
revenue in the Puerto Rico market is expected to grow at an
annual rate of 6.1% between 2001 and 2006.

Miami

The Miami market is the eleventh largest radio
market in terms of advertising revenue which is projected to be
approximately $272.4 million in 2002. In 2002, the Miami market
had the fourth largest U.S. Hispanic population, with
approximately 1.7 million Hispanics, which is approximately
41.1% of the Miami markets total population. The Miami
market experienced annual radio revenue growth of 7.5% between
1996 and 2001. Radio revenue in the Miami market is expected to
grow at an annual rate of 6.2% between 2001 and 2006.

Chicago

The Chicago market is the third largest radio
market in terms of advertising revenue which is projected to be
approximately $560.8 million in 2002. In 2002, the Chicago
market had the fifth largest U.S. Hispanic population, with
approximately 1.6 million Hispanics, which is approximately
17.1% of the Chicago markets total population. We believe
that we own the strongest franchise in our target demographic
group in the Chicago market, with WLEY-FM, the number one ranked
FM Spanish-language radio station. This radio station has an
audience share of 6.7 for the 18-34 demographic in the Fall 2002
Arbitron® ratings. The Chicago market experienced annual
radio revenue growth of 8.8% between 1996 and 2001. Radio
revenue in the Chicago market is expected to grow at an annual
rate of 5.6% between 2001 and 2006.

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##### Table of Contents



San Francisco

The San Francisco market is the fourth largest
radio market in terms of advertising revenue which is projected
to be approximately $409.6 million in 2002. In 2002, the San
Francisco market had the seventh largest U.S. Hispanic
population, with approximately 1.4 million Hispanics, which is
approximately 19.6% of the San Francisco markets total
population. The San Francisco market experienced annual radio
revenue growth of 10.5% between 1996 and 2001. Radio revenue in
the San Francisco market is expected to grow at an annual rate
of 5.5% between 2001 and 2006.

San Antonio

The San Antonio market is the twenty-eighth
largest radio market in terms of advertising revenue which is
projected to be approximately $100.7 million in 2002. In 2002,
San Antonio had the ninth largest U.S. Hispanic population, with
approximately 1.2 million Hispanics, which is approximately
55.4% of the San Antonio markets total population. The San
Antonio market experienced annual radio revenue growth of 8.0%
between 1996 and 2001. Radio revenue in the San Antonio market
is expected to grow at an annual rate of 6.3% between 2001 and
2006.

Latin Music On-Line
(LaMusica.com)

LaMusica.com is a bilingual Spanish-English
Internet Web site and on-line community that focuses on the
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 entertainers. At the same
time, LaMusica.com enables our advertisers to cost-effectively
reach their targeted Hispanic consumer through an additional,
dynamic and growing medium.

LaMusica.com has links to the Web sites of some
of our radio stations. This network of Web sites permits our
target audiences to interact easily with their favorite on-air
personalities and find out about events, contests and
programming at our stations. 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 bulletin
boards and chat rooms. We also provide regular weekly
newsletters focusing on our latest content offerings, special
events and contests.

LaMusica.com and our network of station Web sites
generate revenue primarily from advertising and sponsorship. We
use our stations on-air marketing power to attract
visitors to LaMusica.com. We 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.

Management and Personnel

As of March 24, 2003, we had 555 full-time
employees, 10 of whom are primarily involved in corporate
management and/or station management, 230 in programming, 197 in
sales, 99 in general administration and 19 in technical.

To facilitate efficient management from our
corporate headquarters, we utilize computerized accounting
systems, including Oracle accounting software, to provide timely
information to management on station operations and assist in
cost control as well as the preparation of monthly financial
statements. Corporate executives regularly visit stations to
monitor their operations and ensure that our policies are being
followed.

Our business depends upon the efforts, abilities
and expertise of our executive officers and other key employees,
including Raúl Alarcón, 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.

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Seasonality

Seasonal broadcasting revenue fluctuations are
common in the radio broadcasting industry and are primarily due
to fluctuations in advertising expenditures by local and
national advertisers. Historically, the first calendar quarter
(January through March) has generally produced the lowest net
broadcasting revenue for the year because of normal post-holiday
decreases in advertising expenditures.

Patents, Trademarks, Licenses and
Franchises

In the course of our business, we use various
trademarks, trade names and service marks, including logos, in
our advertising and promotions. We believe the strength of our
trademarks, trade names and service marks are important to our
business and we intend to continue to protect and promote these
marks as appropriate. We do not hold or depend upon any material
patent, government license, franchise or concession, except the
broadcast licenses granted by the Federal Communications
Commission (FCC).

Industry Segments

We consider radio broadcasting to be our only
operating segment.

Advertising

Virtually all of our revenue is derived from
advertising. Advertising revenue is usually classified into two
categories  national or
local. National generally refers to
advertising that is solicited by a representative firm for
national advertisers. Our national sales representative is
SBS/Interep LLC, a division of Interep National Radio Sales,
Inc. Local refers to advertising purchased by
advertisers and agencies in the local market 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 airtime 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 a radio broadcaster who has multiple
stations in a market is appealing to national advertisers
because these advertisers can reach more listeners, thus
enabling the broadcaster to attract a greater share of the
advertising revenue in a given market. We believe that we will
be able to continue increasing 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 revenue 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.

We have short and long-term relationships with
our advertisers, although it is customary in the radio industry
that the majority of advertising contracts are short-term and
generally run for less than three months. In each of our
broadcasting markets, we employ sales people to obtain local
advertising revenue. 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 receipt of
payment for their respective billings which assists us in our
collection efforts. We offer assistance to local advertisers by
providing them with studio facilities to produce commercials
free of charge.

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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 may have
substantially greater financial resources than we do. Factors
which are material to competitive position include management
experience, the radio 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 do 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 a given 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 below.

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 and
multi-format digital radio services with sound quality
equivalent to that of compact discs. The FCC has licensed
companies for the use of a new technology, satellite digital
audio radio services (known as SDARS), to deliver
audio programming. SDARS provide a medium for the delivery by
satellite of multiple new audio programming formats to local and
national audiences. The FCC has begun allowing AM (daytime
operations only) and FM radio stations to use digital technology
on an interim limited basis on existing frequencies. The FCC
also has begun granting licenses for a new low power
radio or microbroadcasting service to provide low
cost neighborhood service on frequencies which would not
interfere with existing stations.

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 may 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 may have on our business. See Federal
Regulation of Radio Broadcasting below.

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

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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 broadcast stations pursuant to the
Communications Act of 1934, as amended (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, all of which could have a material adverse impact on
our operations.

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 our 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;
|
| |  | auctions of new broadcast licenses;                                 

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| |   |                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes to the FCCs equal employment
    opportunity regulations and other matters relating to the
    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 a terrestrial basis;                                                                                               
|
| |  | changes in broadcast, 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, or 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 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.

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The FCC licenses of our radio stations are held
by wholly-owned subsidiaries of SBS. The following table sets
forth the license expiration dates of each of our stations.

|        |          |        |  |                     |                   |                 |  |           |                     |  |  |  |          |  |  |  |           | 
|------- | -------- | ------ |  | ------------------- | ----------------- | --------------- |  | --------- | ------------------- |  |  |  | -------- |  |  |  | --------- | 
|        |          |        |  |                     |                   | Date of License |  | Operating
|Station |          | Market |  | Date of Acquisition |                   | Expiration      |  | Frequency
|        |          |        |  |                     |                   |                 |  |          
|        | KLAX-FM, |        |  |                     | Los Angeles, CA   |                 |  |           | 2/24/88             |  |  |  | 12/01/05 |  |  |  | 97.9 MHz  | 
|        | KZAB-FM, |        |  |                     | Los Angeles, CA   |                 |  |           | 11/09/00            |  |  |  | 12/01/05 |  |  |  | 93.5 MHz  | 
|        | KZBA-FM, |        |  |                     | Los Angeles, CA   |                 |  |           | 11/09/00            |  |  |  | 12/01/05 |  |  |  | 93.5 MHz  | 
|        | KXOL-FM, |        |  |                     | Los Angeles, CA   |                 |  |           | pending acquisition |  |  |  | 12/01/05 |  |  |  | 96.3 MHz  | 
|        | WSKQ-FM, |        |  |                     | New York, NY      |                 |  |           | 1/26/89             |  |  |  | 6/01/06  |  |  |  | 97.9 MHz  | 
|        | WPAT-FM, |        |  |                     | New York, NY      |                 |  |           | 3/25/96             |  |  |  | 6/01/06  |  |  |  | 93.1 MHz  | 
|        | WMEG-FM, |        |  |                     | Puerto Rico       |                 |  |           | 5/13/99             |  |  |  | 2/01/04  |  |  |  | 106.9 MHz | 
|        | WEGM-FM, |        |  |                     | Puerto Rico       |                 |  |           | 1/14/00             |  |  |  | 2/01/04  |  |  |  | 95.1 MHz  | 
|        | WCMA-FM, |        |  |                     | Puerto Rico       |                 |  |           | 12/01/98            |  |  |  | 2/01/04  |  |  |  | 96.5 MHz  | 
|        | WZET-FM, |        |  |                     | Puerto Rico       |                 |  |           | 5/13/99             |  |  |  | 2/01/04  |  |  |  | 92.1 MHz  | 
|        | WIOA-FM, |        |  |                     | Puerto Rico       |                 |  |           | 1/14/00             |  |  |  | 2/01/04  |  |  |  | 99.9 MHz  | 
|        | WIOB-FM, |        |  |                     | Puerto Rico       |                 |  |           | 1/14/00             |  |  |  | 2/01/04  |  |  |  | 97.5 MHz  | 
|        | WIOC-FM, |        |  |                     | Puerto Rico       |                 |  |           | 1/14/00             |  |  |  | 2/01/04  |  |  |  | 105.1 MHz | 
|        | WZNT-FM, |        |  |                     | Puerto Rico       |                 |  |           | 1/14/00             |  |  |  | 2/01/04  |  |  |  | 93.7 MHz  | 
|        | WZMT-FM, |        |  |                     | Puerto Rico       |                 |  |           | 1/14/00             |  |  |  | 2/01/04  |  |  |  | 93.3 MHz  | 
|        | WODA-FM, |        |  |                     | Puerto Rico       |                 |  |           | 1/14/00             |  |  |  | 2/01/04  |  |  |  | 94.7 MHz  | 
|        | WNOD-FM, |        |  |                     | Puerto Rico       |                 |  |           | 1/14/00             |  |  |  | 2/01/04  |  |  |  | 94.l MHz  | 
|        | WXDJ-FM, |        |  |                     | Miami, FL         |                 |  |           | 3/28/97             |  |  |  | 2/01/04  |  |  |  | 95.7 MHz  | 
|        | WCMQ-FM, |        |  |                     | Miami, FL         |                 |  |           | 12/22/86            |  |  |  | 2/01/04  |  |  |  | 92.3 MHz  | 
|        | WRMA-FM, |        |  |                     | Miami, FL         |                 |  |           | 3/28/97             |  |  |  | 2/01/04  |  |  |  | 106.7 MHz | 
|        | WLEY-FM, |        |  |                     | Chicago, IL       |                 |  |           | 3/27/97             |  |  |  | 12/01/04 |  |  |  | 107.9 MHz | 
|        | WDEK-FM, |        |  |                     | Chicago, IL       |                 |  |           | pending acquisition |  |  |  | 12/01/04 |  |  |  | 92.5 MHz  | 
|        | WKIE-FM, |        |  |                     | Chicago, IL       |                 |  |           | pending acquisition |  |  |  | 12/01/04 |  |  |  | 92.7 MHz  | 
|        | WKIF-FM, |        |  |                     | Chicago, IL       |                 |  |           | pending acquisition |  |  |  | 12/01/04 |  |  |  | 92.7 MHz  | 
|        | KPTI-FM, |        |  |                     | San Francisco, CA |                 |  |           | 11/09/00            |  |  |  | 12/01/05 |  |  |  | 92.7 MHz  | 
|        | KLEY-FM, |        |  |                     | San Antonio, TX   |                 |  |           | 5/13/98             |  |  |  | 8/01/05  |  |  |  | 94.1 MHz  | 
|        | KSAH-AM, |        |  |                     | San Antonio, TX   |                 |  |           | 11/09/00            |  |  |  | 8/01/05  |  |  |  | 720 KHz   | 

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.

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

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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 adopted rules to
divide Class C stations into two subclasses based on
antenna height. Stations not meeting the 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 by 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 the capital stock is owned
of record or voted by non-U.S. citizens or entities or their
representatives, by 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

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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 twenty percent or more of the voting stock of the
corporation holding broadcast licenses.


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 as
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 or
other non-voting interests with rights of conversion to voting
interests that have not yet been exercised and insulated limited
partnership interests where the limited partner is not
materially involved in the media-related activities of the
partnership generally do not subject their holders to
attribution. However, the holder of an equity or debt instrument
or interest in a broadcast licensee, cable television system,
daily newspaper or other media outlet shall have that interest
attributed if the equity (including all stock holdings whether
voting or non-voting, common or preferred) and debt interest or
interests in the aggregate exceed 33 percent of the total
asset value, defined as the aggregate of all equity plus all
debt of that media outlet and the interest holder also holds an
interest in a broadcast licensee, cable television system,
newspaper or other media outlet operating in the same market
that is subject to the broadcast multiple ownership or
cross-ownership rules and is otherwise attributable or if the
interest holder supplies over 15 percent of the total
weekly broadcast programming hours of the station in which the
interest is held.

The 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; 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® or other surveys, or for purposes of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. 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 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 reviewing its ban on the common ownership of
a radio station and daily newspaper in the same market.

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).

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| |   |                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.

The FCC is currently reviewing its rules and
policies concerning local radio ownership which could result in
the modification of the numerical limits on local radio
ownership or the adoption of an entirely new local radio
ownership rule. The FCCs review includes the treatment and
competitive effect of local marketing agreements and joint sales
agreements.

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.

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.

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 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 local
marketing agreements 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.

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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 Satellite Service.The FCC has adopted rules for the
Digital Audio Radio Satellite Service (DARS) in the
2310-2360 MHz frequency band. In adopting the rules, the FCC
stated, although healthy satellite DARS systems are likely
to have some adverse impact on terrestrial radio audience size,
revenues and profits, the record does not demonstrate that
licensing satellite DARS would have such a strong adverse impact
that it threatens the provision of local service. The FCC
has granted two nationwide licenses, one to XM Satellite Radio,
which began broadcasting in May 2001, and a second to Sirius
Satellite Radio, which began broadcasting in February 2002 in
three markets, and has now expanded nationwide. The satellite
radio systems provide multiple channels of audio programming in
exchange for the payment of a subscription fee. Because the DARS
service is in its infant stage, we cannot predict whether, or
the extent to which, it will have an adverse impact on our
business.

Low Power Radio Broadcast Service.The FCC has 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.

Equal Employment Opportunity Rules.On March 10, 2003, new equal
employment opportunity (EEO) rules and policies for
broadcasters went into effect. The rules prohibit discrimination
by broadcasters and multichannel video programming distributors.
They also require broadcasters to provide notice of job
vacancies and to undertake additional outreach measures, such as
job fairs and scholarship programs. The rules mandate a
three prong outreach program; i.e., Prong 1: widely
disseminate information concerning each full-time (30 hours or
more) job vacancy, except for vacancies filled in exigent
circumstances; Prong 2: provide notice of each full-time job
vacancy to recruitment organizations that have requested such
notice; and Prong 3: complete two (for broadcast employment
units with five to ten full-time employees or that are located
in smaller markets) or four (for employment units with more than
ten full-time employees located in larger markets) longer-term
recruitment initiatives within a two-year period. These include,
for example, job fairs, scholarship and internship programs, and
other community events designed to inform the public as to
employment opportunities in broadcasting. The rules mandate
extensive record keeping and reporting requirements. The EEO
rules will be enforced through review at renewal time, at
mid-term for larger broadcasters, and through random audits and
targeted investigations resulting from information received as
to possible violations. The FCC has not yet decided on whether
and how to apply the EEO rule to part-time positions.

Failure to observe these or other rules and
policies can result in the imposition of various sanctions,
including monetary forfeitures, the grant of short
(less than the full eight-year) renewal terms or, for
particularly egregious violations, the denial of a license
renewal application or the revocation of a license.

Proposed Changes.The FCC on January 13, 1999
released a study and conducted a forum on the impact of
advertising practices on minority-owned and minority-formatted
broadcast stations. The study provided evidence that advertisers
often exclude radio stations serving minority audiences from ad
placements and pay them less than other stations when they are
included. On February 22, 1999, a summit was
held at the FCCs headquarters to continue this initiative
where participants considered the advertising studys
recommendations to adopt a Code of Conduct to oppose unfair ad
placement and payment, to encourage diversity in hiring and
training and to enforce laws against unfair business practices.
We cannot predict at this

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time whether the FCC will adopt new rules that
would require the placement of part of an advertisers
budget on minority-owned and minority-formatted broadcast
stations, and if so, whether such rules would have an adverse
impact on us.


Environmental Matters

As the owner, lessee or operator of various real
properties and facilities, we are subject to various federal,
state and local environmental laws and regulations.
Historically, compliance with these laws and regulations has not
had a material adverse effect on our business. There can be no
assurance, however, that compliance with existing or new
environmental laws and regulations will not require us to make
significant expenditures of funds.

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 (the
Transmitter Property). On September 12, 2002,
the landlords of the property, Frank F. Viola, Thomas C. Viola
Trust and Louis Viola Company (collectively, the
Landlord), received a notice from the New Jersey
Meadowlands Commission (the Meadowlands Commission)
indicating that it was planning to redevelop the site which
includes the Transmitter Property and offering compensation to
the Landlord for the purchase of the Transmitter Property. The
Meadowlands Commission also indicated that it would not seek
reimbursement from the Landlord for the costs of landfill
closure or for the remediation of environmental conditions that
resulted from the operation of the landfill. The Landlord did
not accept the offer of the Meadowlands Commission. On
December 4, 2002, the Meadowlands Commission filed a
condemnation proceeding in the Superior Court of New Jersey,
Bergen County, against the Landlord, and named SBS as an
additional defendant. We believe that we have meritorious
defenses against any claim arising from this matter, however, it
is impossible to assess the ultimate outcome of this matter at
this time. No amounts have been accrued in the consolidated
financial statements for any contingent liability relating to
the Transmitter Property.

On March 19, 2002, the Environmental Quality
Board, Mayagüez, Puerto Rico Regional Office
(EQB), inspected our transmitter site in Maricao,
Puerto Rico. Based on the inspection, EQB issued a letter to SBS
on March 26, 2002 noting the following potential
violations: (1) alleged violation of EQBs Regulation
for the Control of Underground Injection through construction
and operation of a septic tank (for sanitary use only) at each
of the two antenna towers without the required permits, (2)
alleged violation of EQBs Regulation for the Control of
Atmospheric Pollution through construction and operation of an
emergency generator of more than 10hp at each transmitter tower
without the required permits and (3) alleged failure to
show upon request an EQB approved emergency plan detailing
preventative measures and post-event steps that SBS will take in
the event of an oil spill. To date, no penalties or other
sanctions have been imposed against us relating to these
matters. 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

Purchase of Additional Chicago Stations.On December 31, 2002, we entered
into an asset purchase agreement (the Chicago Asset
Purchase Agreement) with Big City Radio, Inc. and Big City
Radio-Chi, LLC to acquire the assets of radio stations WDEK-FM,
WKIE-FM and WKIF-FM, serving the Chicago, Illinois market, at a
purchase price of $22.0 million. The Chicago Asset Purchase
Agreement contains customary representations and warranties, and
the closing of our acquisition is subject to the satisfaction of
certain customary conditions. We intend to fund the acquisition
of these radio stations from cash on hand. Although we intend to
complete this transaction in the second quarter of fiscal year
2003, there can be no assurance that the acquisition of these
radio stations will be completed.

On December 31, 2002, we also entered into a
time brokerage agreement (the Chicago Time Brokerage
Agreement) with Big City Radio-Chi, LLC pursuant to which
we have been broadcasting our programming

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over radio stations WDEK-FM, WKIE-FM and WKIF-FM
since January 6, 2003. The Chicago Time Brokerage Agreement
will terminate upon the earlier to occur of (i) the
termination of the Chicago Asset Purchase Agreement or
(ii) the closing of the purchase of the assets of these
radio stations.


Purchase of Additional Los Angeles Station.On November 2, 2000, we entered
into an asset purchase agreement (the Asset Purchase
Agreement) with the International Church of the FourSquare
Gospel (ICFG) to acquire the assets of radio station
KXOL-FM, serving Los Angeles, California, at a purchase price of
$250.0 million and made a non-refundable deposit of $5.0 million
to be credited towards the purchase price at closing. The Asset
Purchase Agreement contains customary representations and
warranties, and the closing of our acquisition is subject to the
satisfaction of certain customary conditions, including receipt
of regulatory approval from the Federal Communications
Commission and expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. On March 13, 2001, we entered into an Addendum to
the Asset Purchase Agreement and two Time Brokerage Agreements
with ICFG pursuant to which we are permitted to broadcast our
programming over radio station KXOL-FM (the TBA) and
ICFG was permitted to broadcast its programming over radio
stations KFSG-FM (currently KZAB-FM) and KFSB-FM (currently
KZBA-FM) (the 93.5 TBA). In connection with the
Addendum to the Asset Purchase Agreement and the TBA, we made an
additional non-refundable deposit of $20.0 million, which will
be credited towards the purchase price at closing. On
April 30, 2001, we commenced broadcasting our programming
under the TBA and ICFG commenced broadcasting its programming
under the 93.5 TBA.

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

Pursuant to the Second Amendment, on
February 8, 2002, we granted ICFG a warrant exercisable for
an aggregate of 2,000,000 shares of our Class A common
stock at an exercise price of $10.50 per share. This warrant is
exercisable for a period of thirty-six months from the date of
issuance after which it will expire if not exercised. To date,
this warrant has not been exercised. We assigned the warrant a
fair market value of approximately $8.9 million based on the
Black-Scholes option pricing model in accordance with SFAS
No. 123, Accounting for Stock-Based
Compensation. The fair market value of this warrant was
recorded as an increase to intangible assets and additional
paid-in capital on the date of grant. Under the Second
Amendment, we must also grant to ICFG additional warrants if
ICFG ceases to broadcast its programming under the 93.5 TBA. On
February 28, 2003, ICFG ceased to broadcast its programming
under the 93.5 TBA. Therefore, on March 31, 2003, and on
the last day of each calendar month thereafter, we will issue to
ICFG warrants exercisable for 100,000 shares of our Class A
common stock at an exercise price equal to the closing price of
our shares on the last trading day of such respective month,
until the earlier to occur of (i) the KXOL Closing or (ii)
the termination of the amended Asset Purchase Agreement. These
warrants will also be exercisable for a period of thirty-six
months after the date of issuance after which they will expire
if not exercised. The fair market value of these warrants, as
calculated under the Black-Scholes option pricing model, will be
recorded as a programming expense.

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

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Sale of Station.On
June 4, 2002, SBS and one of its subsidiaries, KTCY
Licensing, Inc., entered into an asset purchase agreement (the
Entravision Agreement) with Entravision-Texas
Limited Partnership, a Texas limited partnership
(Entravision) for the sale of certain assets and the
FCC license of KTCY-FM serving Dallas, Texas for a purchase
price of $35.0 million. Additionally, KTCY Licensing, Inc.
entered into a time brokerage agreement with Entravision
Communications Corporation, a Delaware corporation
(Entravision Communications), whereby Entravision
Communications was permitted to broadcast its programming over
radio station KTCY-FM until the closing of the asset sale. The
FCC granted approval for the transfer of the FCC license of
KTCY-FM and on August 23, 2002, we sold KTCY-FMs
assets held for sale consisting of $31.4 million of intangible
assets and $1.3 million of property and equipment. We recognized
a gain of approximately $1.8 million, net of closing costs and
taxes. We determined that the sale of certain assets and the FCC
license of KTCY-FM met the criteria in accordance with SFAS
No. 144 to classify KTCY-FMs assets as held for sale
and its operations as discontinued operations. The results of
operations in the current year and prior year periods of KTCY-FM
have been classified as discontinued operations in the
consolidated statements of operations.

Resignation of Director from Audit Committee.Castor Fernandez has resigned his
position as a member of our Audit Committee. We intend to fill
Mr. Fernandezs position as a member of the Audit
Committee by nominating a new independent board member for
election at our upcoming annual meeting.

Termination of Time Brokerage Agreement and
Stock Purchase Agreement.On
May 8, 2000, we entered into a stock purchase agreement
with New World Broadcasters Corp. (New World) and
910 Broadcasting Corp. (910 Broadcasting) to acquire
all the outstanding capital stock of 910 Broadcasting, the owner
and operator of radio station KXEB-AM serving the Dallas, Texas
market. We programmed KXEB-AM under a time brokerage agreement
from May 8, 2000 to July 31, 2001. On July 3,
2001, we received a notice from New World and 910 Broadcasting
that purported to terminate the stock purchase agreement. On
August 1, 2001 we filed a complaint in the United States
District Court for the Southern District of New York against New
World and 910 Broadcasting for breach of the stock purchase
agreement and time brokerage agreement. On that same day, we
also filed a motion for a preliminary injunction preventing New
World and 910 Broadcasting from selling KXEB-AM pending the
resolution of the action. On August 27, 2001, New World and
910 Broadcasting filed their answer and counterclaim, asserting
claims for breach of contract, conversion and tortuous
interference with pre-contractual relations, seeking damages in
excess of approximately $10.0 million. On May 14, 2002
the parties signed a Stipulation and Order of Settlement, which
was entered by the Court on June 10, 2002, dismissing with
prejudice all claims and counterclaims in the action. Pursuant
to this Stipulation and Order of Settlement, on June 10, 2002
the Court awarded New World and 910 Broadcasting approximately
$0.7 million, which was recorded in other expense, net in the
consolidated statement of operations for the fiscal year ended
December 29, 2002.

Exchange Offer.In
connection with the issuance and sale of $100.0 million of our
9 5/8% senior subordinated notes due 2009 (the 2001
Notes) through a Rule 144A debt offering on
June 8, 2001, we entered into a registration rights
agreement with the initial purchaser in the offering pursuant to
which we agreed to file a registration statement to permit
holders of the 2001 Notes to exchange such notes for notes newly
registered under the Securities Act of 1933 (the Exchange
Notes). In addition, this exchange offer allowed for the
exchange of the full outstanding amount of the $235.0 million of
our 9 5/8% senior subordinated notes due 2009 that we
issued under a registration statement in November 1999 (the
1999 Notes). The exchange offer was consummated on
December 5, 2001, with an aggregate amount of $334,995,000
of the 2001 Notes and the 1999 Notes being exchanged into
Exchange Notes and $5,000 of the 1999 Notes remaining
outstanding.

Change of Fiscal Year End.On November 6, 2001, the Board of
Directors approved a resolution to change our fiscal year end
from the last Sunday in September of each calendar year to the
last Sunday in December of each calendar year. We filed a
transition report on Form 10-Q covering the transition
period from October 1, 2001 through December 30, 2001.
Audited financial statement results for the transition period
are reported in this annual report on Form 10-K.

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On December 30, 2002, our Board of Directors
approved a resolution to change our fiscal year end from the
last Sunday in December of each calendar year to
December 31 of each calendar year.

Shelf Registration.Pursuant to a registration rights
agreement dated as of November 9, 2000, which we entered
into in conjunction with our purchase of all the outstanding
capital stock of Rodriguez Communications, Inc.
(RCI) and the purchase of radio station KTCY-FM from
New World Broadcasters Corp. (New World), on
June 25, 2001 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
4,441,545 shares of our Class A common stock. The shares
were originally issued to the selling stockholders as partial
payment for the purchase of all of the outstanding capital stock
of RCI and the purchase of radio station KTCY-FM from New World.
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. We will not receive any portion
of the proceeds from the sale of these shares by the selling
stockholders.

Risk Factors

You should carefully consider the risks and
uncertainties described below and the other information in this
report. These are not the only risks we face. Additional risks
and uncertainties that we are not aware of or that we currently
deem immaterial also may impair our business. If any of the
following risks actually occur, our business, financial
condition and operating results could be materially adversely
affected and the trading price of our common stock could decline.

Pending Acquisitions  we have
incurred and we may continue to incur costs in connection with
our time brokerage agreements for our pending acquisitions. In
addition, our ability to finance these acquisitions may be
limited.

On April 30, 2001, we commenced broadcasting
our programming on radio station KXOL-FM in Los Angeles,
California under a time brokerage agreement with the
International Church of the FourSquare Gospel
(ICFG). We have incurred start-up costs and continue
to incur promotional costs in connection with our time brokerage
agreement. Unless terminated earlier, the time brokerage
agreement expires on December 31, 2003, by which date we
are required to complete our acquisition of KXOL-FM. To date, we
have made a total of $60.0 million in non-refundable payments to
be credited towards the purchase price at the closing of this
acquisition; the balance of the purchase price of $190.0 million
must be paid at closing. Our ability to finance the acquisition
of KXOL-FM through additional debt offerings will be limited by
the terms of our indentures. We may have to raise the funds to
consummate the KXOL-FM transaction through asset sales, equity
or debt offerings, additional debt and internally generated
cash. Although we intend to complete this transaction, there can
be no assurance that we will be able to raise sufficient funds
to consummate the acquisition of KXOL-FM. If we are unable to
finance the balance of the purchase price for KXOL-FM, we will
lose the business opportunity and the deposits paid under the
time brokerage agreement.

On December 31, 2002, we entered into a time
brokerage agreement with Big City Radio-Chi, LLC pursuant to
which we have been broadcasting our programming over radio
stations WDEK-FM, WKIE-FM and WKIF-FM, serving the Chicago,
Illinois market, since January 6, 2003. We have incurred
and may continue to incur costs in connection with this time
brokerage agreement. The time brokerage agreement will terminate
upon the earlier to occur of (i) the termination of the
asset purchase agreement for the purchase of the assets of these
radio stations or (ii) the closing of the purchase of the
assets of these radio stations. We intend to fund the
acquisition of these radio stations from cash on hand. Although
we intend to complete this transaction, there can be no
assurance that the acquisition of these radio stations will be
completed.

Recession and war  our broadcasting
revenue and operating results could be adversely affected by the
current recession, or by another national or regional recession,
or by the current war in Iraq.

Our broadcasting revenue could be adversely
affected by the current recession and/or downturn in the United
States economy since advertising expenditures generally decrease
as the economy slows down. In

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addition, our operating results in individual
geographic markets could be adversely affected by local or
regional economic downturns. Our broadcasting revenue has been
adversely affected by past recessions.


In addition, the current war in Iraq may both
adversely affect prevailing economic conditions and lead to
reduced advertising expenditures and the withdrawal of
previously placed orders for advertising time on our stations.
Current and future economic downturns and the war in Iraq might
have a material adverse effect on our ability to generate
advertising revenue and might materially and adversely affect
our financial condition and operating results.

Substantial debt  our substantial
level of debt could limit our ability to grow and
compete.

Our consolidated debt is substantial. As of
December 29, 2002 we had outstanding long term debt
(including current portions) of approximately $328.3 million and
stockholders equity of $227.4 million. Our debt to last
twelve months cash flow ratio exceeds 7.0 to 1.0. As a result,
we will be unable to incur additional debt under the indentures
for our 9 5/8% senior subordinated notes due 2009 other
than for specifically identified occurrences, including senior
debt not to exceed $175 million.

Our substantial level of debt could have several
important consequences to the holders of our securities,
including the following:



| |   |                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a significant portion of our cash flow from
    operations will be dedicated to servicing our debt obligations
    and will not be available for operations, future business
    opportunities or other purposes;                    
|
| |  | our ability to obtain additional financing in the
    future for working capital, capital expenditures, acquisitions,
    general corporate or other purposes may be limited;                                                        
|
| |  | our substantial debt could make us more
    vulnerable to economic downturns, limit our ability to withstand
    competitive pressures and reduce our flexibility in responding
    to changing business and economic conditions; and
|
| |  | our substantial debt could place us at a
    disadvantage compared to our competitors who have less debt.                                                                                                                            

Our ability to satisfy all of our debt
obligations depends upon our future operating performance. Our
operating performance will be affected by prevailing economic
conditions and financial, business and other factors, some of
which are beyond our control. We believe that our operating cash
flow will be sufficient to meet our operating expenses and to
service our debt requirements as they become due. However, if we
are unable to pay our debts, whether upon acceleration of our
debt or in the ordinary course of business, we will be forced to
pursue alternative strategies such as selling assets,
restructuring our debt, or seeking additional equity capital. We
cannot assure you that we can successfully complete any of these
strategies on satisfactory terms or that the approval of the FCC
could be obtained on a timely basis, or at all, for the transfer
of any of the stations licenses in connection with a
proposed sale of assets.

Additional borrowings available despite
current indebtedness levels  we and our subsidiaries
may still be able to incur substantially more debt. This could
further intensify the risks described above.

We and our subsidiaries may be able to incur
substantial additional indebtedness in the future. Although the
indentures relating to our 9 5/8% senior subordinated notes
due 2009 restrict our ability to incur additional debt if our
debt to last twelve months cash flow ratio exceeds 7.0 to 1.0,
which is currently the case, the terms of the indentures do not
fully prohibit us or our subsidiaries from incurring certain
additional indebtedness. We may under the more restrictive terms
of the indentures incur up to $175 million of additional
indebtedness. If we or our subsidiaries incur additional debt,
the related risks that we and our subsidiaries face could
intensify.

Indebtedness may be accelerated  if
any lender to us or our subsidiaries accelerates any debt, we
and our subsidiaries may not have the resources to repay that
debt. An event of default under any material debt instruments
would harm our business and financial condition.

If there were an event of default under our or
our subsidiaries indebtedness, the holders of the affected
indebtedness could elect to declare all of that indebtedness to
be due and payable immediately, which in turn,

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could cause all of our or our subsidiaries
other indebtedness to become due and payable. We cannot assure
you that we or our subsidiaries would have sufficient funds
available, or that we or our subsidiaries would have access to
sufficient capital from other sources, to repay the accelerated
debt. Even if we or our subsidiaries could obtain additional
financing, we cannot assure you that the terms would be
favorable to us. Assuming that we enter into a new credit
facility, if the amounts outstanding under our indebtedness were
accelerated, we would expect our lenders to have the right to
foreclose on their liens on substantially all of our and our
subsidiaries assets, and on the stock of our subsidiaries.
As a result, any event of default under our material debt
instruments could have a material adverse effect on our business
and financial condition.


Restrictions imposed by our debt 
the terms of our debt restrict us from engaging in many
activities, require us to satisfy various financial tests and
may adversely affect our business by limiting our
flexibility.

The indentures governing our 9 5/8% senior
subordinated notes due 2009 contain covenants that restrict,
among other things, our ability to:



| |   |                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | incur additional debt;                                                                                                                                     
|
| |  | create liens;                                                                                                                                              
|
| |  | pay dividends, distributions or make other
    specified restricted payments;                                                                              
|
| |  | sell assets;                                                                                                                                               
|
| |  | enter into transactions with affiliates;                                                                                                                   
|
| |  | sell capital stock of our subsidiaries; and                                                                                                                
|
| |  | merge or consolidate with any other person or
    sell, assign, transfer, lease, convey or otherwise dispose of
    all or substantially all of our assets.

If an event of default occurs under the
indentures, the noteholders could elect to declare all amounts
outstanding under the indentures, together with accrued
interest, to be immediately due and payable. In addition, there
is a change of control provision in the indentures which would
require us to make an offer to repurchase all of our notes in
the event that we experience a change of control.

History of net losses  we have
experienced net losses in the past and to the extent that we
experience net losses in the future, the market price of our
common stock may be adversely affected which in turn may
adversely affect our ability to raise capital.

We cannot assure you that we will achieve
profitability. Failure to achieve profitability may adversely
affect the market price of our common stock, which in turn may
adversely affect our ability to raise additional equity capital
and to incur additional debt. Our inability to obtain financing
in adequate amounts and on acceptable terms necessary to operate
our business, repay our debt obligations or finance our proposed
acquisitions could negatively impact our financial position and
results of operations.

We experienced a net loss in the fiscal year
ended December 29, 2002, in the three-month transitional
period ended December 30, 2001, and in the fiscal years
ended September 30, 2001 and September 24, 2000. The
primary reason for the net loss in the fiscal year ended
December 29, 2002 was the adoption of SFAS No. 142,
effective December 31, 2001, which eliminated the
amortization of goodwill and intangible assets with indefinite
useful lives, and changed the method of determining whether
there is a goodwill or intangible assets impairment from an
undiscounted cash flow method to an estimated fair market value
method. As a result of the adoption of this standard, we
incurred a non-cash transitional charge of $45.3 million, net of
income tax benefit and an overall increase of $49.7 million as a
non-cash charge to income tax expense to establish a valuation
allowance against our deferred tax assets. The primary reasons
for the net loss in the three-month transitional period ended
December 30, 2001 were the overall weak advertising sector, the
economic recession and the tragic events of September 11,
2001. The primary reasons for the net loss in the fiscal year
ended September 30, 2001 were an extraordinary loss on the
early extinguishment of our senior credit facility, net of
income taxes, and a decline in same station operating results
due generally to lower advertising demand. The

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primary reasons for the net loss in the fiscal
year ended September 24, 2000 were an extraordinary loss on
the early extinguishment of debt, net of income taxes, and a
non-recurring severance payment related to the purchase of an
annuity for two of our retired executives.


If we complete our pending acquisitions of
KXOL-FM, WDEK-FM, WKIE-FM and WKIF-FM and/or acquire additional
radio stations in the future, depending on the financing used to
fund these acquisitions, interest expense may increase as well.

Importance of the New York and Miami
markets  a large portion of our net broadcast revenue
and broadcast cash flow currently comes from these
markets.

Our New York and Miami markets account for more
than half of our revenue for the fiscal years ended
September 24, 2000, September 30, 2001 and December
29, 2002. A significant decline in net broadcast revenue or
broadcast cash flow from our stations in either of these markets
could have a material adverse effect on our financial position
and results of operations.

Dependence on key personnel  loss
of key personnel could adversely affect our business.

Our business depends upon the efforts, abilities
and expertise of our executive officers and other key employees,
including Raúl Alarcón, Jr., our Chairman of the Board
of Directors, Chief Executive Officer and President. 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.

Competition  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.

Broadcasting is a highly competitive business.
Our radio stations compete in their respective markets for
audiences and advertising revenues with other radio stations of
all formats, as well as with other media, such as newspapers,
magazines, television, cable services, outdoor advertising, the
Internet and direct mail. As a result of this competition, our
stations audience ratings and market shares may decline
and any adverse change in a particular market could have a
material adverse effect on the revenue of our stations located
in that market and on the financial condition of SBS as a whole.

Although we believe that each of our stations is
able to compete effectively in its respective market, we cannot
assure you that any station will be able to maintain or increase
its current audience ratings and advertising revenues. Radio
stations can change formats quickly. Any other radio station
currently broadcasting could shift its format to duplicate the
format of any of our stations. If a station converts its
programming to a format similar to that of one of our stations,
or if one of our competitors strengthens its operations, the
ratings and broadcast cash flow of our station in that market
could be adversely affected. In addition, other radio companies
which are larger and have more resources may also enter markets
in which we operate.

Risks of acquisition strategy  our
growth depends on successfully executing our acquisition
strategy.

We have grown and intend to continue 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. Our acquisition strategy is subject to a number
of risks, including, but not limited to:



| |   |                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | acquired stations 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;                                                                                                           
|
| |  | we may have difficulty programming newly acquired
    stations to attract listenership;                                                                     
|
| |  | we may be required to raise additional financing
    and our ability to do so is limited by the terms of our debt
    instruments and market conditions; and

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| |   |                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we may finance acquisitions with the issuance of,
    or through sales of, our common stock in the public market which
    could adversely affect our stock price, due to dilution, and our
    ability to raise funds necessary to grow our business through
    additional stock offerings.

Controlling stockholder  Raúl
Alarcón, Jr., Chairman of the Board of Directors, Chief
Executive Officer and President, has majority voting control and
this control may discourage or influence certain types of
transactions, including an actual or potential change of control
of SBS such as a merger or sale of SBS.

Raúl Alarcón, Jr., our Chairman of the
Board of Directors, Chief Executive Officer and President, owns
shares of Class B common stock having approximately 83% of
the combined voting power of our outstanding shares of common
stock, as of the date of this annual report on Form 10-K.
Accordingly, Mr. Alarcón, Jr. has the ability to elect
all of our directors and can effectively control our policies
and affairs. This control may discourage certain types of
transactions involving an actual or potential change of control
of SBS such as a merger or sale of SBS.

Technology changes, new services and evolving
standards  we must be able to respond to rapidly
changing technology, services and standards which characterize
our industry in order to remain competitive.

The FCC is considering ways to introduce new
technologies to the radio broadcast industry, including
satellite and terrestrial delivery of digital audio
broadcasting, and the standardization of available technologies
which significantly enhance the sound quality of AM and FM
broadcasts. We cannot predict the effect new technology of this
nature will have on our financial condition and results of
operations. Several new media technologies are being developed,
including the following:



| |   |                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | cable television operators offer a service
    commonly referred to as cable radio which provides
    cable television subscribers with several high-quality channels
    of music, news and other information;  
|
| |  | the Internet offers new and diverse forms of
    program distribution;                                                                                                                                             
|
| |  | direct satellite broadcast television companies
    are supplying subscribers with several high quality music
    channels;                                                                                        
|
| |  | the introduction of satellite digital audio radio
    technology has resulted in new satellite radio services with
    sound quality equivalent to that of compact discs; and                                      
|
| |  | the introduction of in-band on-channel digital
    radio could provide multi-channel, multi-format digital radio
    services in the same bandwidth currently occupied by traditional
    AM and FM radio services.

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

The domestic broadcasting industry is subject to
extensive federal regulation which, among other things, requires
approval by the FCC for the issuance, renewal, transfer and
assignment of broadcasting station operating licenses and limits
the number of broadcasting properties we may acquire. Federal
regulations create significant new opportunities for
broadcasting companies but also create uncertainties as to how
these regulations will be interpreted and enforced by the courts.

Our success depends in part on acquiring and
maintaining broadcast licenses issued by the FCC, which are
typically issued for a maximum term of eight years and are
subject to renewal. While we believe that the FCC will approve
applications for renewal of our existing broadcasting licenses
when made, we cannot guarantee that pending or future renewal
applications submitted by us will be approved, or that renewals
will not include conditions or qualifications that could
adversely affect our operations. Although we may apply to renew
our FCC licenses, interested third parties may challenge our
renewal applications. In addition, if we or any of our
significant stockholders, officers, or directors violate the
FCCs rules and regulations or the Communications Act, or
are convicted of a felony, the FCC may commence a proceeding to
impose sanctions upon us. Examples of possible sanctions include
the imposition of fines; the revocation of our broadcasting

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licenses; or the renewal of one or more of our
broadcasting licenses for a term of fewer than eight years. If
the FCC were to issue an order denying a license renewal
application or revoking a license, we would be required to cease
operating the radio station covered by the license only after we
had exhausted administrative and judicial review without
success. Such an event would materially affect the carrying
value of our intangible assets.


The radio broadcasting industry is subject to
extensive and changing federal regulation. Among other things,
the Communications Act and FCC rules and policies limit the
number of broadcasting properties that any person or entity may
own (directly or by attribution) in any market and require FCC
approval for transfers of control and assignments. The filing of
petitions or complaints against us or any FCC licensee from
which we acquire a station could result in the FCC delaying the
grant of, or refusing to grant or imposing conditions on its
consent to the assignment or transfer of licenses. The
Communications Act and FCC rules also impose limitations on
non-U.S. ownership and voting of our capital stock.

Moreover, governmental regulations and policies
may change over time and we cannot assure you that those changes
would not have a material impact upon our business, financial
position or results of operations.

Antitrust matters  we may face
regulatory review for additional acquisitions in our existing
markets and, potentially, new markets.

An important part of our growth strategy is the
acquisition of additional radio stations. After the passage of
the Telecommunications Act of 1996, the U.S. Department of
Justice has become more aggressive in reviewing proposed
acquisitions of radio stations and radio station networks. The
Justice Department is particularly concerned when the proposed
buyer already owns three 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 market shares in excess of 40% of local radio advertising
revenue. Similarly, the FCC reviews 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.

Market fluctuation  the market
price of our shares of Class A common stock may fluctuate
significantly.

The stock market in general has recently
experienced extreme price fluctuations, which have often been
unrelated to the operating performance of the affected
companies. We believe that the principal factors that may cause
price fluctuations in our shares of Class A common stock
are:



| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | fluctuations in our financial results;                                                                                                     
|
| |  | general conditions or developments in the radio
    industry, television and other media, and the worldwide economy;                       
|
| |  | sales of our common stock into the marketplace;                                                                                            
|
| |  | significant decreases in radio station audience
    ratings;                                                                               
|
| |  | inability to implement our acquisition strategy;                                                                                           
|
| |  | a shortfall in revenue, gross margin, earnings or
    other financial results from operations or changes in
    analysts expectations; and
|
| |  | developments in our relationships with our
    customers and suppliers.                                                                    

We cannot assure you that the market price of our
Class A common stock will not experience significant
fluctuations in the future, including fluctuations that are
adverse and unrelated to our performance.

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Shares of common stock eligible for current or
future sale  current or future sales by existing
stockholders could depress the market price of our Class A
common stock.

The market price of our Class A common stock
could drop as a result of sales of a large number of shares of
Class A common stock or Class B common stock
(convertible into Class A common stock) by our existing
stockholders or the perception that these sales may occur. These
factors could make it more difficult for us to raise funds
through future offerings of our Class A common stock.

On February 8, 2002, pursuant to our amended
asset purchase agreement for the purchase of the assets of radio
station KXOL-FM, we granted to the International Church of the
Foursquare Gospel (ICFG) a warrant exercisable for
an aggregate of 2,000,000 shares of our Class A common
stock at an exercise price of $10.50 per share. This warrant is
exercisable for a period of thirty-six months from the date of
issuance after which it will expire if not exercised. To date,
this warrant has not been exercised. In addition, on
March 31, 2003, and on the last day of each calendar month
thereafter, we will issue to ICFG warrants exercisable for
100,000 shares of our Class A common stock at an exercise
price equal to the closing price of our shares on the last
trading day of such respective month, until the earlier to occur
of (i) the closing under the amended asset purchase
agreement or (ii) the termination of such agreement. These
warrants will also be exercisable for a period of thirty-six
months from the date of issuance after which they will expire if
not exercised.

Independent directors  we have only
two independent directors serving on our Audit
Committee.

We currently have only two independent directors
serving on our Audit Committee due to the resignation of a
director from the Audit Committee. Under current Nasdaq Stock
Market rules, we are required to have three independent
directors serving on the Audit Committee. If we are unable to
appoint an additional independent director to serve on our Audit
Committee, we may be at risk of having our securities delisted
from the Nasdaq Stock Markets National Market. We plan to
nominate another independent director for election at our next
annual meeting. However, there can be no assurance as to when we
will be able to appoint a suitable independent director to our
Board of Directors and Audit Committee.

Special Note Regarding Forward-Looking
Statements

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

Available Information

You can find more information about us at our
Internet website located at www.spanishbroadcasting.com. Our
annual report on Form 10-K, our quarterly reports on
Form 10-Q, our current reports on Form 8-K and any
amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of
1934 are available free of charge on our Internet website as
soon as reasonably practicable after we electronically file such
material with, or furnish such material to, the SEC.






Item 2.     Properties


The types of properties required to support each
of our radio stations include offices, broadcasting studios and
transmission facilities where broadcasting transmitters and
antenna equipment are located. We relocated our corporate
headquarters to Coconut Grove, Florida on December 1, 2000,
to a building indirectly owned by Raúl Alarcón, Jr.,
for which we have entered into a ten-year lease. The studios and
offices of our Miami

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stations are currently located in leased
facilities, which are indirectly owned by Raúl
Alarcón, Jr. and Pablo Raúl Alarcón, Sr., with
lease terms that expire in 2012. We own the building housing the
offices and studios in New York for WSKQ-FM and WPAT-FM, and in
Los Angeles for KLAX-FM, KXOL-FM, KZAB-FM (formerly KFSB-FM) and
KZBA-FM (formerly KFSG-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 buildings housing our
Puerto Rico offices and studios in Guaynabo, Puerto Rico and
Mayaguez, Puerto Rico. We own the transmitter sites for five of
our eleven stations in Puerto Rico and we own the transmitter
site for KSAH-AM in Universal City, Texas. 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. We lease all of our other transmitter sites, with
lease terms that expire between 2003 and 2035, assuming all
renewal options are exercised. We lease the office and studio
facilities for our stations in Chicago, Oakland and San Antonio
and additional office space for our stations in New York and
Puerto Rico.


We have backup transmitter facilities for our New
York station WSKQ-FM in midtown Manhattan on the Four Times
Square Building. We also have backup transmitter sites for
KLAX-FM in Los Angeles, WLEY-FM in Chicago, and in San Juan,
Puerto Rico for the five stations covering the San Juan
metropolitan area. All of these sites are leased with the
exception of the site in Puerto Rico.

These backup transmitter facilities are a large
part of our disaster recovery plan to continue broadcasting to
the public and to maintain our stations revenue streams in
the event of a significant emergency. We are also implementing
plans for backup studio locations and alternate program
origination points to maintain operations in the event of a
studio-site outage or emergency.

The studio and transmitter sites of our stations
are important to our overall operations. Management believes
that our properties are in good condition and are suitable for
our operations; however, we continually analyze the need to
upgrade our properties. We own substantially all of the
equipment used in our business.

See Item 1. Business 
Environmental Matters and Item 13. Certain
Relationships and Related Transactions.






Item 3.     Legal
Proceedings


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

On November 28, 2001, a complaint was filed
against SBS in the United States District Court for the Southern
District of New York and was amended on April 19, 2002. The
amended complaint alleges that the named plaintiff, Mitchell
Wolf, purchased shares of our Class A common stock pursuant
to the October 27, 1999 prospectus and registration
statement relating to our initial public offering which closed
on November 2, 1999 (the IPO). The complaint
was brought on behalf of Mr. Wolf and an alleged class of
similarly situated purchasers, against SBS, eight underwriters
and/or their successors-in-interest who led or otherwise
participated in the IPO (collectively, the
Underwriters), two members of our senior management
team, one of whom is our Chairman of the Board of Directors, and
an additional director (collectively, the
Individuals). To date, the complaint,while
served upon SBS, has not been served upon the Individuals, and
no counsel has appeared for them.

This case is one of more than 300 similar cases
brought by similar counsel against more than 300 issuers, 40
underwriters and 1,000 individual defendants alleging, in
general, violations of federal securities laws in connection
with initial public offerings, in particular, failing to
disclose that the underwriter defendants allegedly solicited and
received additional, excessive and undisclosed commissions from
certain investors in exchange for which they allocated to those
investors material portions of the restricted shares issued in
connection with each offering. All of these cases, including the
one involving SBS, have been assigned for consolidated pretrial
purposes to one judge of the United States District Court for
the Southern District of New York. The issuer defendants in the
consolidated case (Issuer Defendants) filed motions
to dismiss the consolidated case. These motions to dismiss
covered issues common among all Issuer Defendants in the
consolidated cases. As a result of these motions, the
Individuals were dismissed from one of the claims against them,
specifically the Section 10b-5 claim.

27



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The Issuer Defendants are in the process of
making multiple motions as a follow-up to the initial motion to
dismiss. They drafted a motion for reconsideration to the Court,
listing the reasons why various categories of Issuer Defendants
should have been dismissed from certain claims. If the motion
succeeds, SBS will be dismissed from one count in the complaint,
specifically, the Section 10b-5 claim, and the Individuals
will be dismissed from another count in the complaint, a
Section 20(a) claim. The Issuer Defendants plan to file the
motion for reconsideration in the near future. In addition to
the motion for reconsideration, the Issuer Defendants will file
individual second round motions concerning procedural defects
that warrant dismissing certain defendants from the case. SBS
believes that the grounds applicable to it will be set forth in
the general motion to reconsider. With respect to discovery, at
this point plaintiffs have chosen to focus on the underwriter
defendants, and have not made any formal requests for the
production of documents from the Issuer Defendants. We believe
that we would have a valid claim against the Underwriters for
indemnification in the event that the plaintiffs were to be
awarded damages as a result of this lawsuit.

On June 14, 2001, an action was filed in the
Circuit Court of the Eleventh Judicial Circuit in and for
Miami-Dade County, Florida, by Julio Rumbaut against SBS,
alleging that he was entitled to compensation for work performed
for SBS and a commission for the pending purchase of a radio
station by SBS. Mr. Rumbaut subsequently amended his theory
of damages and claimed approximately $8.0 million in damages,
plus attorneys fees and pre-judgment interest. On
July 29, 2002, a final judgment was entered in favor of
Mr. Rumbaut for a total of $1.5 million, but on
August 29, 2002, the final judgment was amended to reflect
an award of $1.2 million, consisting of compensation for
executive services of $0.2 million and $1.0 million for the
plaintiffs contribution towards the pending purchase of a
radio station. On October 11, 2002, we made a payment of
$1.4 million into an escrow account for the final judgment and
postjudgment interest, pending appeal. On October 23, 2002,
the Court awarded Mr. Rumbaut prejudgment interest in the
amount of $0.2 million. On January 10, 2003, the Court
awarded Mr. Rumbaut $0.1 million in litigation costs and on
January 21, 2003, awarded him $1.7 million for
attorneys fees. On February 19, 2003, we made a
payment of $2.0 million into an escrow account for the
attorneys fees awarded and postjudgment interest. We have
filed a notice of appeal and are considering additional legal
options. After consulting with legal counsel, we believe that it
is probable that the attorneys fees awarded will be
reduced upon appeal and we estimate that we will pay $0.7
million of the $2.0 million in escrow. We have accrued for this
judgment in the consolidated financial statements for the fiscal
year ended December 29, 2002.

On June 12, 2002, SBS filed a lawsuit in the
United States District Court for the Southern District of
Florida against Clear Channel Communications (Clear
Channel) and Hispanic Broadcasting Corporation
(HBC), and filed an amended complaint on
July 31, 2002. The lawsuit asserts federal and state
antitrust law violations and other state law claims and alleges
that Clear Channel and HBC have adversely affected SBSs
ability to raise capital, depressed SBSs share price,
impugned SBSs reputation, made station acquisitions more
difficult, and interfered with SBSs business opportunities
and contractual arrangements. In the amended complaint, SBS
sought actual damages in excess of $500.0 million, which are to
be trebled under anti-trust law.

Both defendants moved to dismiss the amended
complaint, and on January 31, 2003, the Court granted
defendants motions for failure to adequately allege
antitrust injury and dismissed our federal court claims with
prejudice and dismissed our state court claims for lack of
federal court jurisdiction in light of the dismissal of the
federal court claims. SBS has filed a motion for reconsideration
of that opinion and has asked for leave to file a proposed
second amended complaint, which contains additional economic
analysis and factual detail based on the depositions of Clear
Channels CEO and CFO and HBCs CFO and document
production in the action, and which seeks damages in an amount
to be determined at trial. That motion has been fully briefed
and is awaiting decision by the trial court.

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 the fiscal year ended
December 29, 2002.

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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.
Our Class A common stock is traded on the Nasdaq Stock
Markets National Market under the symbol SBSA.
Our shares of Class A common stock began trading on the
Nasdaq National Market on October 28, 1999. The tables
below show, for the quarters indicated, the reported high and
low bid quotes for our Class A common stock on the Nasdaq
Stock Markets National Market.

|                                     |  |      |       |     |  |   |      | 
|------------------------------------ |  | ---- | ----- | --- |  | - | ---- | 
|                                     |  | High |       | Low
|                                     |  |      |       |    
|Fiscal Year Ended September 30, 2001 |  |      |       |     |  |   |      | 
|First Quarter (09/25/00  12/31/00)  |  | $    | 12.81 |     |  | $ | 3.94 | 
|Second Quarter (01/01/01  03/25/01) |  | $    | 7.62  |     |  | $ | 4.88 | 
|Third Quarter (03/26/01  06/24/01)  |  | $    | 7.38  |     |  | $ | 5.02 | 
|Fourth Quarter (06/25/01  09/30/01) |  | $    | 10.30 |     |  | $ | 4.95 | 

|                                                                                  |  |      |      |     |  |   |      | 
|--------------------------------------------------------------------------------- |  | ---- | ---- | --- |  | - | ---- | 
|                                                                                  |  | High |      | Low
|                                                                                  |  |      |      |    
|Three-month Transitional Period Ended
    December 30, 2001 (10/01/01  12/30/01) |  | $    | 9.72 |     |  | $ | 6.41 | 

|                                     |  |      |       |     |  |   |      | 
|------------------------------------ |  | ---- | ----- | --- |  | - | ---- | 
|                                     |  | High |       | Low
|                                     |  |      |       |    
|Fiscal Year Ended December 29, 2002  |  |      |       |     |  |   |      | 
|First Quarter (12/31/01  03/31/02)  |  | $    | 14.30 |     |  | $ | 7.80 | 
|Second Quarter (04/01/02  06/30/02) |  | $    | 17.34 |     |  | $ | 8.92 | 
|Third Quarter (07/01/02  09/29/02)  |  | $    | 11.07 |     |  | $ | 5.35 | 
|Fourth Quarter (09/30/02  12/29/02) |  | $    | 9.37  |     |  | $ | 5.30 | 

As of March 17, 2003, there were
approximately 63 beneficial 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 March 17, 2003, there were 7 record
holders of our Class B common stock; this figure does not
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 have not declared or paid any cash or stock
dividends on shares of our common stock since 1998. 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
indentures governing our 9 5/8% senior subordinated notes
due 2009 contain restrictions on our ability to pay dividends.

Recent Sales of Unregistered
Securities

On February 8, 2002, we issued to the
International Church of the FourSquare Gospel (ICFG)
a warrant exercisable for an aggregate of 2,000,000 shares of
our Class A common stock at an exercise price of $10.50 per
share. We made this issuance as part of the consideration for
the extension of the deadline for closing our purchase of radio
station KXOL-FM under our asset purchase agreement with ICFG.
This warrant will be exercisable for a period of thirty-six
months from the date of issuance after which it will expire if
not exercised. To date, this warrant has not been exercised. We
assigned the warrant a fair market value of approximately $8.9
million based on the Black-Scholes option pricing model in
accordance with SFAS No. 123, Accounting for
Stock-Based Compensation. The fair market value of this
warrant was recorded as an increase to intangible assets and
additional paid-in capital on the date of grant. We relied on
Section 4(2)

29



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##### Table of Contents



of the Securities Act of 1933, as amended, to
claim exemption from registration for this issuance, as a
transaction not involving any public offering.


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
owned and operated radio stations KXJO-FM (currently KPTI-FM),
KFOX-FM (currently KZAB-FM), KREA-FM (currently KZBA-FM) and
KSAH-AM). 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.

Equity Compensation Plan Information

See Item 12. Security Ownership of
Certain Beneficial Owners and Management  Equity
Compensation Plan Information.

30



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##### Table of Contents






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 four-year period ended September 30, 2001, the
three-month transitional period ended December 30, 2001 and
the fiscal year ended December 29, 2002 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 December 30, 2001 and
December 29, 2002, and for each of the fiscal years in the
two-year period ended September 30, 2001, the three-month
transitional period ended December 30, 2001, and for the
fiscal year ended December 29, 2002, the related notes and
the independent auditors report included elsewhere in this
report. For additional information see the financials section of
this report and Item 7. Managements Discussion
and Analysis of Financial Condition and Results of
Operations.

|                                                                                  |                                                                                                                                                                              |                                       |         |              |   |             |         |         |   |          |         |          |   |   |         |        |   |   |        |        |   |   |         |         |  
|--------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------- | ------- | ------------ | - | ----------- | ------- | ------- | - | -------- | ------- | -------- | - | - | ------- | ------ | - | - | ------ | ------ | - | - | ------- | ------- | -
|                                                                                  |                                                                                                                                                                              |                                       |         |              |   |            
|                                                                                  |                                                                                                                                                                              | Fiscal Year Ended                     |         | Three-Months |   | Fiscal Year
|                                                                                  |                                                                                                                                                                              |                                       |         | Ended        |   | Ended      
|                                                                                  |                                                                                                                                                                              | 9/27/98                               |         | 9/26/99      |   | 9/24/00     |         | 9/30/01 |   | 12/30/01 |         | 12/29/02
|                                                                                  |                                                                                                                                                                              |                                       |         |              |   |             |         |         |   |          |         |         
|                                                                                  |                                                                                                                                                                              |                                      
|                                                                                  |                                                                                                                                                                              | (in thousands, except per share data)
|Statement of Operations Data:                                                     |                                                                                                                                                                              |                                       |         |              |   |             |         |         |   |          |         |          |   |   |         |        |   |   |        |        |   |   |         |        
|Gross revenue                                                                     |                                                                                                                                                                              | $                                     | 86,766  |              |   | $           | 110,532 |         |   | $        | 139,252 |          |   | $ | 148,415 |        |   | $ | 37,491 |        |   | $ | 159,548 |        
|Less: agency commissions                                                          |                                                                                                                                                                              |                                       | 10,623  |              |   |             | 13,182  |         |   |          | 18,012  |          |   |   | 17,867  |        |   |   | 4,461  |        |   |   | 19,303  |        
|                                                                                  |                                                                                                                                                                              |                                       |         |              |   |             |         |         |   |          |         |          |   |   |         |        |   |   |        |        |   |   |         |        
|Net revenue                                                                       |                                                                                                                                                                              |                                       | 76,143  |              |   |             | 97,350  |         |   |          | 121,240 |          |   |   | 130,548 |        |   |   | 33,030 |        |   |   | 140,245 |        
|Station operating expenses(1)                                                     |                                                                                                                                                                              |                                       | 39,520  |              |   |             | 44,619  |         |   |          | 56,081  |          |   |   | 80,722  |        |   |   | 20,320 |        |   |   | 81,280  |        
|Corporate expenses                                                                |                                                                                                                                                                              |                                       | 6,893   |              |   |             | 10,636  |         |   |          | 20,730  |          |   |   | 10,515  |        |   |   | 2,387  |        |   |   | 13,546  |        
|Depreciation and amortization                                                     |                                                                                                                                                                              |                                       | 8,877   |              |   |             | 9,906   |         |   |          | 13,120  |          |   |   | 17,671  |        |   |   | 4,530  |        |   |   | 3,005   |        
|                                                                                  |                                                                                                                                                                              |                                       |         |              |   |             |         |         |   |          |         |          |   |   |         |        |   |   |        |        |   |   |         |        
|Operating income from continuing operations                                       |                                                                                                                                                                              |                                       | 20,853  |              |   |             | 32,189  |         |   |          | 31,309  |          |   |   | 21,640  |        |   |   | 5,793  |        |   |   | 42,414  |        
|Interest expense, net(2)                                                          |                                                                                                                                                                              |                                       | (20,860 | )            |   |             | (21,178 | )       |   |          | (19,495 | )        |   |   | (30,542 | )      |   |   | (8,197 | )      |   |   | (34,118 | )      
|Other income (expense), net                                                       |                                                                                                                                                                              |                                       | (213    | )            |   |             | (749    | )       |   |          | (302    | )        |   |   | 497     |        |   |   | 650    |        |   |   | (720    | )      
|Gain on sale of AM stations                                                       |                                                                                                                                                                              |                                       | 36,242  |              |   |             |        |         |   |          |        |          |   |   |        |        |   |   |       |        |   |   |        |        
|                                                                                  |                                                                                                                                                                              |                                       |         |              |   |             |         |         |   |          |         |          |   |   |         |        |   |   |        |        |   |   |         |        
|                                                                                  | Income (loss) from continuing operations
    before income taxes, discontinued operations, extraordinary
    items and cumulative effect of a change in accounting principle |                                       |         | 36,022       |   |             |         | 10,262  |   |          |         | 11,512   |   |   |         | (8,405 | ) |   |        | (1,754 | ) |   |         | 7,576   |  
|Income tax expense (benefit)                                                      |                                                                                                                                                                              |                                       | 15,624  |              |   |             | 4,445   |         |   |          | 4,935   |          |   |   | (3,210  | )      |   |   | (633   | )      |   |   | 53,863  |        
|                                                                                  |                                                                                                                                                                              |                                       |         |              |   |             |         |         |   |          |         |          |   |   |         |        |   |   |        |        |   |   |         |        
|                                                                                  | Income (loss) from continuing operations
    before discontinued operations, extraordinary items and
    cumulative effect of a change in accounting principle               |                                       |         | 20,398       |   |             |         | 5,817   |   |          |         | 6,577    |   |   |         | (5,195 | ) |   |        | (1,121 | ) |   |         | (46,287 | )
|Discontinued operations, net of income taxes(3)                                   |                                                                                                                                                                              |                                       |        |              |   |             |        |         |   |          | (32     | )        |   |   | (497    | )      |   |   | (106   | )      |   |   | 1,729   |        
|Extraordinary loss, net of income taxes(4)                                        |                                                                                                                                                                              |                                       | (1,613  | )            |   |             |        |         |   |          | (17,151 | )        |   |   | (1,896  | )      |   |   |       |        |   |   |        |        
|Cumulative effect of a change in accounting
    principle, net of income taxes(5) |                                                                                                                                                                              |                                       |        |              |   |             |        |         |   |          |        |          |   |   |        |        |   |   |       |        |   |   | (45,288 | )      
|                                                                                  |                                                                                                                                                                              |                                       |         |              |   |             |         |         |   |          |         |          |   |   |         |        |   |   |        |        |   |   |         |        
|                                                                                  | Net income (loss)                                                                                                                                                            |                                       | $       | 18,785       |   |             | $       | 5,817   |   |          | $       | (10,606  | ) |   | $       | (7,588 | ) |   | $      | (1,227 | ) |   | $       | (89,846 | )
|                                                                                  |                                                                                                                                                                              |                                       |         |              |   |             |         |         |   |          |         |          |   |   |         |        |   |   |        |        |   |   |         |        
|Dividends on preferred stock                                                      |                                                                                                                                                                              |                                       | (30,270 | )            |   |             | (34,749 | )       |   |          | (28,372 | )        |   |   |        |        |   |   |       |        |   |   |        |        
|                                                                                  |                                                                                                                                                                              |                                       |         |              |   |             |         |         |   |          |         |          |   |   |         |        |   |   |        |        |   |   |         |        
|Net loss applicable to common stock                                               |                                                                                                                                                                              | $                                     | (11,485 | )            |   | $           | (28,932 | )       |   | $        | (38,978 | )        |   | $ | (7,588  | )      |   | $ | (1,227 | )      |   | $ | (89,846 | )      
|                                                                                  |                                                                                                                                                                              |                                       |         |              |   |             |         |         |   |          |         |          |   |   |         |        |   |   |        |        |   |   |         |        
|Dividends per share on common stock                                               |                                                                                                                                                                              | $                                     | 0.11    |              |   | $           |        |         |   | $        |        |          |   | $ |        |        |   | $ |       |        |   | $ |        |        
|                                                                                  |                                                                                                                                                                              |                                       |         |              |   |             |         |         |   |          |         |          |   |   |         |        |   |   |        |        |   |   |         |        
|Loss per common share:                                                            |                                                                                                                                                                              |                                       |         |              |   |             |         |         |   |          |         |          |   |   |         |        |   |   |        |        |   |   |         |        
|                                                                                  | Basic and Diluted (before discontinued
    operations, extraordinary items and cumulative effect of a
    change in accounting principle)                                    |                                       | $       | (0.33        | ) |             | $       | (0.86   | ) |          | $       | (0.38    | ) |   | $       | (0.08  | ) |   | $      | (0.02  | ) |   | $       | (0.72   | )
|                                                                                  | Basic and Diluted                                                                                                                                                            |                                       |         | (0.38        | ) |             |         | (0.86   | ) |          |         | (0.67    | ) |   |         | (0.12  | ) |   |        | (0.02  | ) |   |         | (1.39   | )
|Weighted average common shares outstanding(6):                                    |                                                                                                                                                                              |                                       |         |              |   |             |         |         |   |          |         |          |   |   |         |        |   |   |        |        |   |   |         |        
|                                                                                  | Basic and Diluted                                                                                                                                                            |                                       |         | 30,333       |   |             |         | 33,585  |   |          |         | 58,163   |   |   |         | 64,096 |   |   |        | 64,658 |   |   |         | 64,670  |  

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|                                                        |                                         |                                       |         |              |   |             |         |         |   |          |          |          |  |   |         |         |  |   |        |         |  |   |        |         | 
|------------------------------------------------------- | --------------------------------------- | ------------------------------------- | ------- | ------------ | - | ----------- | ------- | ------- | - | -------- | -------- | -------- |  | - | ------- | ------- |  | - | ------ | ------- |  | - | ------ | ------- | 
|                                                        |                                         |                                       |         |              |   |            
|                                                        |                                         | Fiscal Year Ended                     |         | Three-Months |   | Fiscal Year
|                                                        |                                         |                                       |         | Ended        |   | Ended      
|                                                        |                                         | 9/27/98                               |         | 9/26/99      |   | 9/24/00     |         | 9/30/01 |   | 12/30/01 |          | 12/29/02
|                                                        |                                         |                                       |         |              |   |             |         |         |   |          |          |         
|                                                        |                                         |                                      
|                                                        |                                         | (in thousands, except per share data)
|Balance Sheet Data:                                     |                                         |                                       |         |              |   |             |         |         |   |          |          |          |  |   |         |         |  |   |        |         |  |   |        |        
|Cash and cash equivalents                               |                                         | $                                     | 37,642  |              |   | $           | 16,975  |         |   | $        | 59,559   |          |  | $ | 59,900  |         |  | $ | 51,640 |         |  | $ | 71,430 |        
|                                                        | Total assets                            |                                       |         | 351,034      |   |             |         | 365,681 |   |          |          | 634,691  |  |   |         | 700,178 |  |   |        | 687,078 |  |   |        | 635,284 | 
|                                                        | Total debt (including current portion)  |                                       |         | 171,126      |   |             |         | 172,486 |   |          |          | 304,664  |  |   |         | 327,452 |  |   |        | 327,631 |  |   |        | 328,310 | 
|Preferred stock                                         |                                         |                                       | 201,368 |              |   |             | 235,918 |         |   |          |         |          |  |   |        |         |  |   |       |         |  |   |       |        
|                                                        | Total stockholders (deficiency) equity |                                       |         | (46,193      | ) |             |         | (75,122 | ) |          |          | 274,465  |  |   |         | 309,426 |  |   |        | 308,199 |  |   |        | 227,425 | 
|Other Financial Data:                                   |                                         |                                       |         |              |   |             |         |         |   |          |          |          |  |   |         |         |  |   |        |         |  |   |        |        
|Broadcast cash flow(7)                                  |                                         | $                                     | 36,623  |              |   | $           | 52,731  |         |   | $        | 65,159   |          |  | $ | 49,826  |         |  | $ | 12,710 |         |  | $ | 58,965 |        
|Broadcast cash flow margin(8)                           |                                         |                                       | 48.1    | %            |   |             | 54.2    | %       |   |          | 53.7     | %        |  |   | 38.2    | %       |  |   | 38.5   | %       |  |   | 42.0   | %      
|EBITDA(9)                                               |                                         | $                                     | 29,730  |              |   | $           | 42,095  |         |   | $        | 44,429   |          |  | $ | 39,311  |         |  | $ | 10,323 |         |  | $ | 45,419 |        
|Capital expenditures                                    |                                         |                                       | 1,645   |              |   |             | 2,100   |         |   |          | 3,793    |          |  |   | 5,595   |         |  |   | 830    |         |  |   | 3,994  |        
|Net cash provided by (used in) operating
    activities |                                         |                                       | 10,923  |              |   |             | 20,782  |         |   |          | 28,672   |          |  |   | 17,023  |         |  |   | (7,377 | )       |  |   | 10,666 |        
|Net cash provided by (used in) investing
    activities |                                         |                                       | 32,190  |              |   |             | (38,384 | )       |   |          | (205,050 | )        |  |   | (35,181 | )       |  |   | (837   | )       |  |   | 9,265  |        
|Net cash (used in) provided by financing
    activities |                                         |                                       | (17,758 | )            |   |             | (3,065  | )       |   |          | 218,962  |          |  |   | 18,499  |         |  |   | (46    | )       |  |   | (141   | )      

RECONCILIATION BETWEEN HISTORICAL GAAP
RESULTS

AND NON-GAAP PRO-FORMA RESULTS


|                                             |  |                   |        |              |  |             |        |         |  |          |         |          |  |   |         |  |  |   |        |  |  |   |         | 
|-------------------------------------------- |  | ----------------- | ------ | ------------ |  | ----------- | ------ | ------- |  | -------- | ------- | -------- |  | - | ------- |  |  | - | ------ |  |  | - | ------- | 
|                                             |  |                   |        |              |  |            
|                                             |  | Fiscal Year Ended |        | Three-Months |  | Fiscal Year
|                                             |  |                   |        | Ended        |  | Ended      
|                                             |  | 9/27/98           |        | 9/26/99      |  | 9/24/00     |        | 9/30/01 |  | 12/31/01 |         | 12/29/02
|                                             |  |                   |        |              |  |             |        |         |  |          |         |         
|Net revenue (as reported)                    |  | $                 | 76,143 |              |  | $           | 97,350 |         |  | $        | 121,240 |          |  | $ | 130,548 |  |  | $ | 33,030 |  |  | $ | 140,245 | 
|Station operating expenses (1) (as reported) |  |                   | 39,520 |              |  |             | 44,619 |         |  |          | 56,081  |          |  |   | 80,722  |  |  |   | 20,320 |  |  |   | 81,280  | 
|                                             |  |                   |        |              |  |             |        |         |  |          |         |          |  |   |         |  |  |   |        |  |  |   |         | 
|Broadcast cash flow (7)                      |  | $                 | 36,623 |              |  | $           | 52,731 |         |  | $        | 65,159  |          |  | $ | 49,826  |  |  | $ | 12,710 |  |  | $ | 58,965  | 
|                                             |  |                   |        |              |  |             |        |         |  |          |         |          |  |   |         |  |  |   |        |  |  |   |         | 
|Corporate expenses (as reported)             |  |                   | 6,893  |              |  |             | 10,636 |         |  |          | 20,730  |          |  |   | 10,515  |  |  |   | 2,387  |  |  |   | 13,546  | 
|                                             |  |                   |        |              |  |             |        |         |  |          |         |          |  |   |         |  |  |   |        |  |  |   |         | 
|EBITDA (9)                                   |  | $                 | 29,730 |              |  | $           | 42,095 |         |  | $        | 44,429  |          |  | $ | 39,311  |  |  | $ | 10,323 |  |  | $ | 45,419  | 
|                                             |  |                   |        |              |  |             |        |         |  |          |         |          |  |   |         |  |  |   |        |  |  |   |         | 

NOTES TO SELECTED HISTORICAL CONSOLIDATED
FINANCIAL INFORMATION



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Station operating expenses include engineering,
    programming, selling and general and administrative expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(2) | Interest expense, net includes non-cash interest,
    such as the accretion of principal, the amortization of
    discounts on debt and the amortization of deferred financing
    costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(3) | On August 23, 2002, the Company sold for $35
    million KTCY-FMs assets held for sale consisting of
    intangible assets and property and equipment. The Company
    recognized a gain of approximately $1.8 million, net of closing
    costs and taxes. The Company determined that the sale of certain
    assets and the FCC license of KTCY-FM met the criteria in
    accordance with SFAS No. 144 to classify KTCY-FMs
    assets as held for sale and its operations as discontinued
    operations. The results of operations in the current year and
    prior year periods of KTCY-FM have been classified as
    discontinued operations.
|(4) | For the fiscal year ended September 27,
    1998, we recorded an extraordinary loss of $1.6 million
    resulting from the repurchase of $13.2 million par value of our
    12 1/2% senior unsecured notes due 2002, 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% senior unsecured notes due
    2004 and 12 1/2% senior unsecured notes due 2002, 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.                                                                                                                                              
|    | For the fiscal year ended September 30,
    2001, we repaid $66.2 million of the outstanding indebtedness
    and accrued interest under our senior credit facility, which we
    then terminated. We recorded an extraordinary loss of
    approximately $1.9 million, net of the related tax benefit of
    approximately $1.2 million, which relates to the write-off of
    the related unamortized deferred financing costs.                                                                                                                                                                                                                        

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | As a result of adopting SFAS No. 142 in the
    fiscal year ended December 29, 2002, the Company recorded a
    non-cash charge for the cumulative effect of a change in
    accounting principle of $45.3 million, net of income tax benefit
    of $30.2 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(6) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(7) | The term broadcast cash flow is
    defined as Generally Accepted Accounting Principles
    GAAP operating income from continuing operations
    plus 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
    GAAP, it 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 we define it. We believe that broadcast cash
    flow is a useful indicator to investors of the cash flow
    generated by the operations of our stations and permits
    investors to compare our performance with respect to station
    operations with those of other radio broadcast companies. We
    also believe that broadcast cash flow can be useful in analyzing
    acquisition opportunities.
|(8) | Broadcast cash flow margin is defined as
    broadcast cash flow as a percentage of net revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|(9) | The term EBITDA is defined as GAAP
    operating income from continuing operations plus depreciation
    and amortization. Although EBITDA is not a measure of
    performance calculated in accordance with GAAP, EBITDA is also
    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 we define it. We
    believe that EBITDA is a useful indicator to investors of our
    capacity to incur and service debt. Many debt instruments,
    including the indentures governing our 9 5/8% senior
    subordinated notes, contain covenants which use formulas based
    on EBITDA calculations.                                                                                                                                                                                                                                                                                                                                                                                                                                                    






|         |                                                                                          
|-------- | -----------------------------------------------------------------------------------------
|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 in eight U.S. markets. Today, we are the largest
Hispanic-controlled radio broadcasting company in the United
States, and currently own and/or operate 27 radio stations in
seven of the top-ten Hispanic markets in the United States,
including Los Angeles, New York, Puerto Rico, Miami, Chicago,
San Francisco and San Antonio. Our radio stations are located in
markets that reach approximately 49% of the U.S. Hispanic
population.

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

Our primary source of revenue is the sale of
advertising time on our radio stations to local and national
advertisers. Our revenue is affected primarily by the
advertising rates that our radio stations are able to charge, as
well as the overall demand for radio advertising time in each
respective market. Seasonal net broadcasting

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revenue fluctuations are common in the radio
broadcasting industry and are due to fluctuations in advertising
expenditures by local and national advertisers. Typically for
the radio broadcasting industry, the first calendar quarter
generally produces the lowest revenue. Our most significant
operating expenses, for purposes of the computation of broadcast
cash flow and EBITDA, are compensation expenses, programming
expenses, and advertising and promotional expenses. Our senior
management strives to control these expenses as well as other
expenses by working closely with local station management and
others.


On November 6, 2001, the Board of Directors
approved a resolution to change our fiscal year end from the
last Sunday in September of each calendar year to the last
Sunday in December of each calendar year, effective beginning
October 1, 2001. A three-month transitional period from
October 1, 2001 through December 30, 2001 (the
transitional period) precedes the start of the fiscal year ended
December 29, 2002.

We report our revenue 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 September 24, 2000,
September 30, 2001 and December 29, 2002, we reported
52 weeks, 53 weeks, and 52 weeks of revenue and
expenses, respectively. For the three-month ended
December 31, 2000 and December 30, 2001, the Company
reported 14 weeks and 13 weeks of revenues and
expenses, respectively.

Fiscal Year Ended December 29, 2002
Compared to Fiscal Year Ended September 30, 2001

Net Revenue.Net
revenue was $140.2 million for the fiscal year ended
December 29, 2002 compared to $130.5 million for the fiscal
year ended September 30, 2001, an increase of $9.7 million
or 7.4%. The increase was generated by the growth in revenue
from our Los Angeles market, promotional events in various other
markets and an increase in local revenue. The revenue growth was
partially offset by a decrease in barter revenue related to the
AOL Time Warner barter agreement that concluded in August 2002.

Station Operating Expenses.Station operating expenses were $81.3
million for the fiscal year ended December 29, 2002
compared to $80.7 million for the fiscal year ended
September 30, 2001, an increase of $0.6 million or 0.7%.
The increase was primarily attributed to an increase in
advertising and promotional expenditures in various markets, as
well as, the increase in costs related to KXOL-FM which was
operated for the entire twelve-months ended December 29,
2002 compared to five-months in the prior year period. In turn,
these increases were offset by decreases in barter expenses due
to the conclusion of the AOL Time Warner barter agreement in
August 2002 and the allowance for doubtful accounts.

Broadcast Cash Flow.Broadcast cash flow was $59.0 million
for the fiscal year ended December 29, 2002 compared to
$49.8 million for the fiscal year ended September 30, 2001,
an increase of $9.2 million or 18.5%. Our broadcast cash flow
margin increased to 42.1% for the fiscal year ended
December 29, 2002 compared to 38.2% for the fiscal year
ended September 30, 2001. The broadcast cash flow margin
increased due to the increase in net revenue and the decreases
in the allowance for doubtful accounts and the AOL Timer Warner
barter expense. Additionally, the broadcast cash flow margin was
positively impacted by the growth in net revenue from our Los
Angeles market compared to the prior year period.

Corporate Expenses.Corporate expenses were $13.5 million
for the fiscal year ended December 29, 2002 compared to
$10.5 million for the fiscal year ended September 30, 2001,
an increase of $3.0 million or 28.6%. The increase in corporate
expenses resulted mainly from an increase in legal expenses.

EBITDA.EBITDA was
$45.4 million for the fiscal year ended December 29, 2002
compared to $39.3 million for the fiscal year ended
September 30, 2001, an increase of $6.1 million or 15.5%.
The increase in EBITDA was attributed to the increase in
broadcast cash flow, partially offset by the increase in
corporate expenses.

Depreciation and Amortization.Depreciation and amortization expense
was $3.0 million for the fiscal year ended December 29,
2002 compared to $17.7 million for the fiscal year ended
September 30, 2001, a decrease of $14.7 million or 83.1%.
The decrease was related to the adoption of SFAS No. 142,
which ceased the amortization of all our intangible assets and
goodwill, effective December 31, 2001.

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Operating Income From Continuing Operations.Operating income from continuing
operations was $42.4 million for the fiscal year ended
December 29, 2002 compared to $21.6 million for the fiscal
year ended September 30, 2001, an increase of $20.8 million
or 96.3%. The increase in operating income from continuing
operations was caused by an increase in EBITDA and a decrease in
amortization expense due to the adoption of SFAS No. 142.

Interest Expense, Net.Interest expense, net, was $34.1
million for the fiscal year ended December 29, 2002
compared to $30.5 million for the fiscal year ended
September 30, 2001, an increase of $3.6 million or 11.8%.
The increase in interest expense, net, was primarily due to
interest expense incurred on the additional $100 million
9 5/8% senior subordinated notes that were issued in June
2001. In addition, interest expense, net, increased due to a
decrease in interest income resulting from a general decline in
interest rates on our cash balances.

Other, Net.Other
expense, net, was $0.7 million for the fiscal year ended
December 29, 2002 due mainly to a legal judgment involving
compensation for executive services, which was offset by an
insurance recovery for a claim related to the New York
facilities. Other income, net, was $0.5 million for the fiscal
year ended September 30, 2001 due to the settlement of a
legal dispute related to a back-up auxiliary transmitter and
antenna for KLAX-FM and an insurance recovery claim related to
an office building in Los Angeles.

Income Taxes.Income
tax expense was $53.9 million for the fiscal year ended
December 29, 2002 compared to an income tax benefit of $3.2
million for the fiscal year ended September 30, 2001.
Income tax expense for the fiscal year ended December 29,
2002 was primarily impacted by an overall increase of $49.7
million on our valuation allowance against deferred tax assets.
As a result of adopting SFAS No. 142, amortization of
indefinite-life intangible assets ceased and the Company could
not be assured that the reversals of our deferred tax
liabilities related to those indefinite-life intangible assets
would occur within our net operating loss carry-forward period.
The increase in the valuation allowance on our deferred tax
assets was a non-cash charge. The remaining amount of income tax
expense for the fiscal year ended December 29, 2002 is comprised
of current and deferred federal, state and foreign taxes.

Discontinued Operations, Net of Taxes.Income on discontinued operations, net
of taxes, was $1.7 million for the fiscal year ended
December 29, 2002 compared to a loss on discontinued
operations, net of taxes of $0.5 million for the fiscal year
ended September 30, 2001. The Company determined that the
sale of its KTCY-FM station serving Dallas, Texas met the
criteria in accordance with SFAS No. 144 to classify
KTCY-FMs operations as discontinued operations.
KTCY-FMs results from operations for the fiscal years
ended December 29, 2002 and September 30, 2001 have
been classified as discontinued operations. On August 23,
2002, the Company sold KTCY-FMs assets held for sale
consisting of intangible assets and property and equipment and
recognized a gain of approximately $1.8 million, net of closing
costs and taxes.

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

Net Loss.Net loss
was $89.8 million for the fiscal year ended December 29, 2002
compared to $7.6 million for the fiscal year ended
September 30, 2001. The net loss for the fiscal year ended
December 29, 2002 was primarily due to the income tax
expense and the cumulative effect of a change in accounting
principle, net of income tax benefit, related to the adoption of
SFAS No. 142.

Three-Month Transitional Period Ended
December 30, 2001 Compared to Three-Month Ended
December 31, 2000

Net Revenue.Net
revenues were $33.0 million for the three months ended
December 30, 2001 compared to $36.2 million for the three
months ended December 31, 2000, a decrease of $3.2 million or
8.8%.

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Net revenues decreased primarily due to the
overall weak advertising sector, the economic recession and the
tragic events of September 11, 2001. The main revenue
decrease was in local revenues, which caused same station net
revenues to decline. Our most affected markets were New York,
Miami and Puerto Rico where the local economies are
significantly influenced by tourism.


Station Operating Expenses.Station operating expenses were $20.3
million for the three months ended December 30, 2001
compared to $21.1 million for the three months ended
December 31, 2000, a decrease of $0.8 million or 3.8%. The
decrease in station operating expenses was primarily attributed
to managements efforts in (a) administering cost
cutting approaches and improving economies of scale in our
Puerto Rico market which experienced decreased facilities
expenses and personnel compensation expenses and
(b) improving collections processes in our Puerto Rico
market which decreased the provision for bad debts. These
decreases were partially offset by an increase in advertising
and promotions expenditures in our key markets.

Broadcast Cash Flow.Broadcast cash flow was $12.7 million
for the three months ended December 30, 2001 compared to
$15.1 million for the three months ended December 31, 2000,
a decrease of $2.4 million or 15.9%. Our broadcast cash flow
margin decreased to 38.5% for the three months ended
December 30, 2001 compared to 41.7% for the three months
ended December 31, 2000. Our broadcast cash flow margin
decreased mainly due to lower same station net revenues. In
addition, our broadcast cash flow margin decreased due to the
negative margin contributed by our start-up station KXOL-FM
operated under a time-brokerage agreement, serving the Los
Angeles market.

Corporate Expenses.Corporate expenses were $2.4 million
for the three months ended December 30, 2001 compared to
$2.5 million for the three months ended December 31, 2000,
a decrease of $0.1 million or 4.0%. The decrease in corporate
expenses resulted mainly from a decrease in corporate personnel
compensation expenses.

EBITDA.EBITDA was
$10.3 million for the three months ended December 30, 2001
compared to $12.6 million for the three months ended
December 31, 2000, a decrease of $2.3 million or 18.3%. The
decrease in EBITDA was attributed to the decrease in broadcast
cash flow.

Depreciation and Amortization.Depreciation and amortization expense
was $4.5 million for the three months ended December 30,
2001 compared to $4.3 million for the three months ended
December 31, 2000, an increase of $0.2 million or 4.7%. The
increase was related primarily to an increase in amortization
costs resulting from stations acquired in November 2000.

Operating Income from Continuing Operations.Operating income from continuing
operations was $5.8 million for the three months ended
December 30, 2001 compared to $8.3 million for the three
months ended December 31, 2000, a decrease of $2.5 million
or 30.1%. The decrease in operating income was caused by the
decrease in EBITDA and an increase in depreciation and
amortization expense.

Interest Expense, Net.Interest expense was $8.2 million for
the three months ended December 30, 2001 compared to $7.4
million for the three months ended December 31, 2000, an
increase of $0.8 million or 10.8%. The increase in interest
expense, net is mainly due to a decrease in interest income due
to the decline in interest rates.

Other, Net.We
recorded $0.6 million of income during the three months ended
December 30, 2001 due to insurance proceeds received
related to the loss of equipment at the World Trade Center
Towers caused by the terrorist attacks. We recorded $0.2 million
of income for the three months ended December 31, 2000 due
to the settlement of a legal dispute related to a back-up
auxiliary transmitter and antenna for KLAX-FM serving the Los
Angeles market.

Income Taxes.Income
tax benefit was $0.6 million for the three months ended
December 30, 2001 compared to income tax expense of $0.5
million for the three months ended December 31, 2000. There
was no material change in our effective tax rates during these
periods.

Discontinued Operations, Net of Taxes.Loss on discontinued operations, net
of taxes, was $0.1 million for the three months ended
December 30, 2001 and minimal for the three months ended
December 31, 2000.

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The Company determined that the sale of its
KTCY-FM station serving Dallas, Texas met the criteria in
accordance with SFAS No. 144 to classify KTCY-FMs
operations as discontinued operations. KTCY-FMs results
from operations for the three months ended December 30,
2001 and December 31, 2000 have been classified as
discontinued operations.


Net (Loss) Income.Net loss was $1.2 million for the
three months ended December 30, 2001 compared to net income
of $0.6 million for the three months ended December 31,
2000. The net loss was caused by the decrease in operating
income and an increase in interest expense, net.

Fiscal Year Ended September 30, 2001
Compared to Fiscal Year Ended September 24, 2000

Net Revenue.Net
revenue was $130.5 million for fiscal year 2001, compared to
$121.2 million for fiscal year 2000, an increase of $9.3 million
or 7.7%. Most of the increase was generated by the inclusion of
the operating results of the stations acquired during calendar
year 2000 in Puerto Rico, San Antonio, San Francisco and Los
Angeles, as well as the AOL Time Warner barter agreement. The
increase was partially offset by a decline in same station net
revenue, generally related to weak demand in the advertising
sector mostly affecting our stations in New York and Los Angeles.

Station Operating Expenses.Total station operating expenses were
$80.7 million for fiscal year 2001 compared to $56.0 million for
fiscal year 2000, an increase of $24.7 million or 44.1%. The
increase was primarily attributed to the inclusion of the
operating results of the stations acquired during calendar year
2000, as well as the barter expense related to the AOL Time
Warner barter agreement. Operating expenses also increased due
to advertising expenditures related to the introduction of our
new full-power FM station in Los Angeles, KXOL-FM, which we have
programmed under a time brokerage agreement since April 30,
2001. In addition, higher compensation expenses related to
improvements in our programming department, the hiring of
additional programming personnel, and higher marketing and
promotions costs in our key markets increased operating expenses.

Broadcast Cash Flow.Broadcast cash flow was $49.8 million
for fiscal year 2001 compared to $65.2 million for fiscal year
2000, a decrease of $15.4 million or 23.6%. Our broadcast cash
flow margin decreased to 38.2% for fiscal year 2001 compared to
53.8% for fiscal year 2000. Our broadcast cash flow margin
decreased mainly due to lower margins contributed by newly
acquired stations and the AOL Time Warner barter agreement. In
addition, our broadcast cash flow margin decreased due to lower
same station net revenue.

Corporate Expenses.Total corporate expenses were $10.5
million for fiscal year 2001, compared to $20.7 million for
fiscal year 2000, a decrease of $10.2 million or 49.3%. The
decrease in corporate expenses resulted mainly from the absence
in fiscal year 2001 of a non-recurring severance payment, which
was recorded in the first quarter of fiscal year 2000.

EBITDA.EBITDA was
$39.3 million for fiscal year 2001 compared to $44.4 million for
fiscal year 2000, a decrease of $5.1 million or 11.5%. The
decrease in EBITDA was attributed to decreased broadcast cash
flow, offset by decreased corporate expenses.

Depreciation and Amortization.Depreciation and amortization expense
was $17.7 million for fiscal year 2001, compared to $13.1
million for fiscal year 2000, an increase of $4.6 million or
35.1%. The increase was related primarily to an increase in
amortization costs resulting from the stations acquired during
calendar year 2000.

Operating Income from Continuing Operations.Operating income from continuing
operations was $21.6 million for fiscal year 2001 compared to
$31.3 million for fiscal year 2000, a decrease of $9.7 million
or 31.0%. The decrease in operating income was caused by a
decrease in EBITDA and an increase in depreciation and
amortization expense.

Interest Expense, Net.Interest expense, net was $30.5
million for fiscal year 2001 compared to $19.5 million for
fiscal year 2000, an increase of $11.0 million or 56.4%. This
increase was due primarily to interest expense incurred on our
senior credit facility, which was entered into in July 2000 and
repaid and extinguished in June 2001, and the $100 million of
9 5/8% senior subordinated notes due 2009 that were issued
in June 2001.

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Other, Net.Other
income was $0.5 million for fiscal year 2001 due to the
settlement of a legal dispute related to a back-up auxiliary
transmitter and antenna for KLAX-FM and an insurance recovery
claim related to an office building in Los Angeles. We had other
expenses of $0.3 million for fiscal year 2000, which resulted
primarily from the write-off of financing costs.

Income Taxes.Income
tax benefit was $3.2 million for the fiscal year ended
September 30, 2001 compared to income tax expense of $4.9
million for the fiscal year ended September 24, 2000. The
Company recorded income taxes based on its estimated effective
tax rate for the fiscal years, respectively.

Discontinued Operations, Net of Taxes.Loss on discontinued operations, net
of taxes, was $0.5 million for the fiscal year ended
September 30, 2001 and minimal for the fiscal year ended
September 24, 2000. The Company determined that the sale of
its KTCY-FM station serving Dallas, Texas met the criteria in
accordance with SFAS No. 144 to classify KTCY-FMs
operations as discontinued operations. KTCY-FMs results
from operations for the fiscal years ended September 30,
2001 and September 24, 2000 have been classified as
discontinued operations.

Extraordinary Loss, Net of Taxes.During fiscal year 2001, we incurred
an extraordinary loss of $1.9 million, net of an income tax
benefit of $1.2 million, which was related to the write-off of
unamortized debt issuance costs due to the early extinguishment
of our senior credit facility in June 2001. During fiscal year
2000, we incurred an extraordinary loss of $17.2 million, net of
an income tax benefit of $11.4 million, which was related to the
early extinguishment of our 11% senior unsecured notes due 2004
and 12 1/2% senior unsecured notes due 2002 for an amount
in excess of the carrying value of the notes and the write-off
of the related unamortized debt issuance costs.

Net Loss.Net loss
was $7.6 million for fiscal year 2001 compared to a net loss of
$10.6 million for fiscal year 2000. The net loss for fiscal year
2001 was caused by the decrease in extraordinary losses,
partially offset by a decrease in operating income and increase
in interest expense, net.

Liquidity and Capital Resources

Our primary source of liquidity is cash on hand
and cash provided by operations. Our ability to raise funds by
increasing our indebtedness is limited by the terms of the
indentures governing our senior subordinated notes.
Additionally, the indentures place restrictions with respect to
the sale of assets, liens, investments, dividends, debt
repayments, capital expenditures, transactions with affiliates
and consolidations and mergers, among other things.

Net cash flows provided by operating activities
were $28.7 million, $17.0 million and $10.7 million for the
fiscal years ended September 24, 2000, September 30,
2001 and December 29, 2002 and net cash flows used in
operating activities were $7.4 million for the three month
transitional period ended December 30, 2001, respectively.
Changes in our net cash flows from operating activities were
primarily a result of changes in working capital balances.

Net cash flows used in investing activities were
$205.1 million, $35.2 million and $0.8 million for the fiscal
years ended September 24, 2000 and September 30, 2001,
and for the three-month transitional period ended December 30,
2001, respectively. Net cash flows provided by investing
activities were $9.3 million for the fiscal year ended
December 29, 2002. Changes in our net cash flows from
investing activities were primarily a result of the proceeds
from the sale of radio station KTCY-FM during the fiscal year
ended December 29, 2002, offset by deposits made for KXOL-FM, as
compared to the fiscal year ended September 30, 2001.

Net cash flows provided by financing activities
were $219.0 million and $18.5 million for the fiscal years ended
September 24, 2000 and September 30, 2001,
respectively. Net cash flows used in financing activities were
minimal and $0.1 million for the three-month transitional period
ended December 30, 2001 and the fiscal year ended
December 29, 2002, respectively. Our net cash flows from
financing activities during the fiscal year ended
September 30, 2001 were primarily a result of our
Rule 144A offering of $100 million of 9 5/8% senior
subordinated notes due 2009 and our repayment of the outstanding
indebtedness under our senior credit facility which we then
terminated.

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Total capital expenditures were $3.8 million,
$5.6 million and $4.0 million for the fiscal years ended
September 24, 2000, September 30, 2001 and
December 29, 2002 and $0.8 million for the three-month
transitional period ended December 30, 2001, respectively.
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 operating obligations in the foreseeable
future, including required cash interest payments pursuant to
the terms of the senior subordinated notes due 2009 and capital
expenditures, excluding the acquisitions of FCC licenses.
Assumptions (none of which can be assured) which underlie
managements beliefs, include the following:



| |   |                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the economic conditions within the radio
    broadcasting industry and economic conditions in general will
    not further deteriorate in any material respect;
|
| |  | we will continue to successfully implement our
    business strategy; and                                                                                      
|
| |  | we will not incur any material unforeseen
    liabilities, including environmental liabilities.                                                                

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

On December 31, 2002, we entered into an
asset purchase agreement (the Chicago Asset Purchase
Agreement) with Big City Radio, Inc. and Big City
Radio-Chi, LLC to acquire the assets of radio stations WDEK-FM,
WKIE-FM and WKIF-FM, serving the Chicago, Illinois market, at a
purchase price of $22.0 million. The Chicago Asset Purchase
Agreement contains customary representations and warranties, and
the closing of our acquisition is subject to the satisfaction of
certain customary conditions. We intend to fund the acquisition
of these radio stations from cash on hand. Although we intend to
complete this transaction in the second quarter of fiscal year
2003, there can be no assurance that the acquisition of these
radio stations will be completed.

On December 31, 2002, we also entered into a
time brokerage agreement (the Chicago Time Brokerage
Agreement) with Big City Radio-Chi, LLC pursuant to which
we have been broadcasting our programming over radio stations
WDEK-FM, WKIE-FM and WKIF-FM since January 6, 2003. The
Chicago Time Brokerage Agreement will terminate upon the earlier
to occur of (i) the termination of the Chicago Asset
Purchase Agreement or (ii) the closing of the purchase of
the assets of these radio stations.

On November 2, 2000, we entered into an
asset purchase agreement (the Asset Purchase
Agreement) with the International Church of the FourSquare
Gospel (ICFG) to acquire the assets of radio station
KXOL-FM, serving Los Angeles, California, at a purchase price of
$250.0 million and made a non-refundable deposit of $5.0 million
to be credited towards the purchase price at closing. The Asset
Purchase Agreement contains customary representations and
warranties, and the closing of our acquisition is subject to the
satisfaction of certain customary conditions, including receipt
of regulatory approval from the Federal Communications
Commission and expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. On March 13, 2001, we entered into an Addendum to
the Asset Purchase Agreement and two Time Brokerage Agreements
with ICFG pursuant to which we are permitted to broadcast our
programming over radio station KXOL-FM (the TBA) and
ICFG was permitted to broadcast its programming over radio
stations KFSG-FM (currently KZAB-FM) and KFSB-FM (currently
KZBA-FM) (the 93.5 TBA). In connection with the
Addendum to the Asset Purchase Agreement and the TBA, we made an
additional non-refundable deposit of $20.0 million, which will
be credited towards the purchase price at closing. On
April 30, 2001, we commenced broadcasting our programming
under the TBA and ICFG commenced broadcasting its programming
under the 93.5 TBA.

On February 8, 2002, we entered into an
additional amendment to the Asset Purchase Agreement and an
amendment to the TBA and the 93.5 TBA (collectively, the
Second Amendment). The Second Amendment extends the
deadline for closing under the amended Asset Purchase Agreement
(the KXOL Closing) to December 31, 2003. The
KXOL Closing is subject to acceleration if we sell all of five
specified

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stations (including KTCY-FM which was sold on
August 23, 2002), during the term of the TBA. Pursuant to
the Second Amendment, we made additional non-refundable deposits
of $15.0 million, $5.0 million and $15.0 million on
March 12, 2002, September 27, 2002 and March 12,
2003, respectively. All payments are non-refundable (except in
the case of breach by ICFG) and will be credited towards the
purchase price at the KXOL Closing. In accordance with the
Second Amendment, the term of the TBA will continue until the
earlier to occur of (i) the KXOL Closing or (ii) the
termination of the amended Asset Purchase Agreement.


Pursuant to the Second Amendment, on
February 8, 2002, we granted ICFG a warrant exercisable for
an aggregate of 2,000,000 shares of our Class A common
stock at an exercise price of $10.50 per share. This warrant is
exercisable for a period of thirty-six months from the date of
issuance after which it will expire if not exercised. To date,
this warrant has not been exercised. We assigned the warrant a
fair market value of approximately $8.9 million based on the
Black-Scholes option pricing model in accordance with SFAS
No. 123, Accounting for Stock-Based
Compensation. The fair market value of this warrant was
recorded as an increase to intangible assets and additional
paid-in capital on the date of grant. Under the Second
Amendment, we must also grant to ICFG additional warrants if
ICFG ceases to broadcast its programming under the 93.5 TBA. On
February 28, 2003, ICFG ceased to broadcast its programming
under the 93.5 TBA. Therefore, on March 31, 2003, and on
the last day of each calendar month thereafter, we will issue to
ICFG warrants exercisable for 100,000 shares of our Class A
common stock at an exercise price equal to the closing price of
our shares on the last trading day of such respective month,
until the earlier to occur of (i) the KXOL Closing or (ii)
the termination of the amended Asset Purchase Agreement. These
warrants will also be exercisable for a period of thirty-six
months after the date of issuance after which they will expire
if not exercised. The fair market value of these warrants, as
calculated under the Black-Scholes option pricing model, will be
recorded as a programming expense.

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

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

Critical Accounting Policies

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America 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. The following
accounting policies require significant management judgments,
assumptions and estimates.

Accounting for Intangible Assets

Our most important operating assets are our
intangible assets, principally consisting of our FCC licenses.
Impairment to the carrying value of these assets could have a
material effect on our operations and financial condition. The
Company has concluded that its FCC licenses qualify as
indefinite-life intangible assets under SFAS No. 142. The
Company at least annually assesses the recoverability of the
carrying amount of intangible assets, including goodwill, in
accordance with SFAS No. 142, Goodwill and Other
Intangible Assets. These annual assessments are based on a
discounted cash flow model incorporating various market
assumptions and types of signals, and assume the FCC licenses
are acquired and operated by a third-party. As a result of
adopting SFAS No. 142 in the fiscal year ended
December 29, 2002, the Company recorded a non-cash charge
for the cumulative effect of a change in accounting principle of
$45.3 million, net of income tax benefit

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of $30.2 million. Under SFAS No. 142,
goodwill is deemed to be impaired if the net book value of the
reporting unit exceeds its estimated fair value. The Company has
determined that it has one reporting unit under SFAS
No. 142 and that there is no impairment of goodwill.


Accounting for Income Taxes

The preparation of our consolidated financial
statements requires us to estimate our actual current tax
exposure together with our temporary differences resulting from
differing treatment of items for book and tax accounting. These
temporary differences result in the recognition of deferred tax
assets and liabilities, which are included in our consolidated
balance sheet. Statement of Financial Accounting Standards
(SFAS) No. 109, Accounting for Income
Taxes, requires the establishment of a valuation allowance
to reflect the likelihood of the realization of deferred tax
assets. Significant management judgment is required in
determining our provision for income taxes, our deferred tax
assets and liabilities and any valuation allowance recorded
against our net deferred tax assets. We evaluate the weight of
all available evidence to determine whether it is more likely
than not that some portion or all of the deferred income tax
assets will not be realized. As a result of adopting SFAS 142 on
December 31, 2001, amortization of intangible assets and
goodwill ceased for financial statement purposes. As a result,
the Company could not be assured that the reversals of the
deferred tax liabilities relating to those intangible assets and
goodwill would occur within the Companys net operating
loss carry-forward period. Therefore, on the date of adoption,
the Company recognized a non-cash charge totaling $55.4 million
to income tax expense to establish a valuation allowance for the
full amount of our deferred tax assets due to uncertainties
surrounding our ability to utilize some or all of our deferred
tax assets, primarily consisting of net operating losses, as
well as other temporary differences between book and tax
accounting. We expect to continue to reserve for any increase in
our deferred tax assets in the foreseeable future. If the
realization of deferred tax assets in the future is considered
more likely than not, an adjustment to the deferred tax assets
would increase net income in the period such determination is
made. In the event that actual results differ from these
estimates or we adjust these estimates in future periods, we may
need to adjust our valuation allowance, which could materially
affect our financial position and results of operations.

Valuation of Accounts Receivable

We review accounts receivable to determine which
are doubtful of collection. In making the determination of the
appropriate allowance for doubtful accounts, we consider our
history of write-offs, relationships with our customers and the
overall credit worthiness of our customers. For the years ended
September 24, 2000, September 30, 2001 and
December 29, 2002, we incurred bad debt expense
(recovery) of $4.1 million, $4.6 million and $(1.5)
million, respectively. For the three-month transitional period
ended December 30, 2001 we incurred bad debt expense of $1.7
million. Changes in the credit worthiness of customers, general
economic conditions and other factors may impact the level of
future write-offs.

Revenue Recognition

We recognize broadcasting revenue as
advertisements are aired on our radio stations, subject to
meeting certain conditions such as persuasive evidence that an
arrangement exists, a fixed and determinable price, and
reasonable assurance of collection. Agency commissions are
calculated based on a stated percentage applied to gross billing
revenue. Advertisers remit the gross billing amount to the
agency and the agency remits gross billings less their
commission to the Company when the advertisement is not placed
directly by the advertiser. Payments received in advance of
being earned are recorded as unearned revenue.

Contingencies and Litigations

We are currently involved in certain legal
proceedings and, as required, have accrued our estimate of the
probable costs for the resolution of these claims. These
estimates have been developed in consultation with counsel and
are based upon an analysis of potential results, assuming a
combination of litigation and settlement strategies. It is
possible, however, that future results of operations for any
particular period could be materially affected by changes in our
assumptions or the effectiveness of our strategies related to
these proceedings.

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Cumulative Effect of Accounting
Change

In July 2001, the Financial Accounting Standards
Board (FASB) issued (SFAS) No. 142,
Goodwill and Other Intangible Assets. SFAS
No. 142 requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead
tested for impairment at least annually in accordance with the
provisions of SFAS No. 142. The Company has concluded that
its intangible assets, comprised primarily of FCC licenses,
qualify as indefinite-life intangible assets under SFAS
No. 142.

The Company adopted the provisions of SFAS
No. 142 effective December 31, 2001. After performing
the transitional impairment evaluation of its indefinite-life
intangible assets, the Company determined that the carrying
value of certain indefinite-life intangible assets acquired from
AMFM Operating, Inc. in January 2000, and certain
indefinite-life intangible assets acquired from Rodriguez
Communications, Inc. and New World Broadcasters Corp., in
November 2000, exceeded their respective fair market values.
Fair market values of the Companys FCC licenses were
determined through the use of a third-party valuation. These
valuations were performed on the FCC licenses, which exclude the
franchise values of the stations (i.e., going concern value).
These valuations were based on a discounted cash flow model
incorporating various market assumptions and types of signals,
and assumed the FCC licenses were acquired and operated by a
third-party. As a result, the Company recorded a noncash charge
for the cumulative effect of a change in accounting principle of
$45.3 million, net of income tax benefit of $30.2 million. Under
SFAS No. 142, goodwill is deemed to be impaired if the net book
value of the reporting unit exceeds its estimated fair value.
The Company has determined that it has one reporting unit under
SFAS No. 142 and that there was no impairment of goodwill
as a result of adopting SFAS No. 142.

Additionally, since amortization of its
indefinite-life intangible assets ceased for financial statement
purposes under SFAS No. 142, the Company could not be
assured that the reversals of the deferred tax liabilities
relating to those indefinite-life intangible assets would occur
within the Companys net operating loss carry-forward
period. Therefore, on December 31, 2001, the Company
recognized a noncash charge totaling $55.4 million to income tax
expense to establish a valuation allowance against the
Companys deferred tax assets, primarily consisting of net
operating loss carry-forwards.

As of the Companys adoption of SFAS
No. 142 effective December 31, 2001, the Company had
unamortized goodwill in the amount of $32.7 million, and
unamortized identifiable intangible assets in the amount of
$543.2 million, all of which was subjected to the transition
provision of SFAS No. 142. Amortization expense related to
goodwill and identifiable intangible assets was $10.7 million,
$15.6 and $4.0 million for the fiscal years ended
September 24, 2000, September 30, 2001 and the
three-month transitional period ended December 30, 2001,
respectively. The following table presents adjusted financial
results for the fiscal years ended September 24, 2000 and
September 30, 2001, and for the three-month transitional
period

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ended December 30, 2001 and for the fiscal
year ended December 29, 2002, respectively, on a basis
consistent with the new accounting principle.


|                                                         |                                                                        |                                                                                     |         |               |         |              |        |              |        |   |        |        |        |   |         |        |        | 
|-------------------------------------------------------- | ---------------------------------------------------------------------- | ----------------------------------------------------------------------------------- | ------- | ------------- | ------- | ------------ | ------ | ------------ | ------ | - | ------ | ------ | ------ | - | ------- | ------ | ------ | 
|                                                         |                                                                        | Fiscal Year                                                                         |         | Fiscal Year   |         | Three-Month  |        | Fiscal Year 
|                                                         |                                                                        | September 24,                                                                       |         | September 30, |         | December 30, |        | December 29,
|                                                         |                                                                        | 2000                                                                                |         | 2001          |         | 2001         |        | 2002        
|                                                         |                                                                        |                                                                                     |         |               |         |              |        |             
|Reported net loss applicable to common
    stockholders: |                                                                        | $                                                                                   | (38,978 | )             |         |              | (7,588 | )            |        |   | (1,227 | )      |        |   | (89,846 | )     
|                                                         | Add back: cumulative effect of accounting
    principle, net of tax(1) |                                                                                     |         |              |         |              |        |             |        |   |        |       |        |   |         | 45,288 |       
|                                                         | Add back: income tax valuation allowance (2)                           |                                                                                     |         |              |         |              |        |             |        |   |        |       |        |   |         | 55,358 |       
|                                                         | Add back: amortization of goodwill and intangible
    assets (3)       |                                                                                     |         | 10,659        |         |              |        | 15,635       |        |   |        | 3,983  |        |   |         |       |       
|                                                         | Income tax expense adjustment (3)                                      |                                                                                     |         | (9,248        | )       |              |        | (11,369      | )      |   |        | (5,702 | )      |   |         |       |       
|                                                         |                                                                        |                                                                                     |         |               |         |              |        |              |        |   |        |        |        |   |         |       
|                                                         |                                                                        | Adjusted (loss) net income                                                          |         | $             | (37,567 | )            |        |              | (3,322 | ) |        |        | (2,946 | ) |         |        | 10,800 | 
|                                                         |                                                                        |                                                                                     |         |               |         |              |        |              |        |   |        |        |        |   |         |       
|Basic and diluted (loss) income per share:               |                                                                        |                                                                                     |         |               |         |              |        |              |        |   |        |        |        |   |         |       
|                                                         | Reported net loss per share:                                           |                                                                                     | $       | (0.67         | )       |              |        | (0.12        | )      |   |        | (0.02  | )      |   |         | (1.39  | )     
|                                                         |                                                                        | Cumulative effect per share of a change in
    accounting principle, net of tax (1) |         |               |        |              |        |              |       |   |        |        |       |   |         |        | 0.70   | 
|                                                         |                                                                        | Income tax valuation allowance per share (2)                                        |         |               |        |              |        |              |       |   |        |        |       |   |         |        | 0.86   | 
|                                                         |                                                                        | Amortization of goodwill and intangible assets
    per share (3)                    |         |               | 0.18    |              |        |              | 0.24   |   |        |        | 0.06   |   |         |        |       | 
|                                                         |                                                                        | Income tax adjustment per share (3)                                                 |         |               | (0.16   | )            |        |              | (0.17  | ) |        |        | (0.09  | ) |         |        |       | 
|                                                         |                                                                        |                                                                                     |         |               |         |              |        |              |        |   |        |        |        |   |         |       
|Adjusted net (loss) income per share                     |                                                                        | $                                                                                   | (0.65   | )             |         |              | (0.05  | )            |        |   | (0.05  | )      |        |   | 0.17    |       
|                                                         |                                                                        |                                                                                     |         |               |         |              |        |              |        |   |        |        |        |   |         |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As a result of the adoption of SFAS No. 142
    on December 31, 2001, the Company incurred a noncash
    transitional charge of $45.3 million, net of income tax benefit
    of $30.2 million, due to the cumulative effect of the change in
    accounting principle.                                                                                                                                                                 
|(2) | As a result of adopting SFAS No. 142 on
    December 31, 2001, the Company incurred a noncash income
    tax expense of $55.4 million to establish a valuation allowance
    against deferred tax assets on the date of adoption.                                                                                                                                                                                                      
|(3) | The adjusted financial results for the fiscal
    years ended September 24, 2000 and September 30, 2001
    and the three-month transitional period ended December 30,
    2001 add back noncash goodwill and intangible assets
    amortization of $10.7 million, $15.6 million and $4.0 million,
    respectively, and reflect adjusted income tax expense assuming
    that SFAS No. 142 was effective as of September 26,
    1999.

The Company performed an annual impairment review
of its indefinite-life intangible assets and goodwill during the
fourth quarter of fiscal year 2003 and determined that there was
no impairment of intangible assets and goodwill.

New Accounting Pronouncements

In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections (SFAS No. 145). SFAS No. 145
rescinds FASB Statement No. 4, Reporting Gains and
Losses from Extinguishment of Debt, and an amendment of
that Statement, FASB Statement No. 44, Accounting for
Intangible Assets of Motor Carriers and FASB Statement
No. 64, Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements. SFAS No. 145 amends FASB
No. 13, Accounting for Leases and other
existing authoritative pronouncements to make various technical
corrections and clarify meanings, or describes their
applicability under changed conditions. SFAS No. 145 will
be effective for fiscal years beginning after May 15, 2002.
The adoption of SFAS No. 145 will require that the
Companys extraordinary loss recognized on the
extinguishments of debt in 2000 and 2001 be reclassified to
income or loss from continuing operations in its consolidated
financial statements for the year-end December 31, 2003.

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In November 2002, the FASB issued Interpretation
No. 45 (FIN 45), Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. FIN 45 requires a
guarantor to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in
issuing the guarantee. The expanded disclosure requirements are
required for financial statements ending after December 15,
2002, while the liability recognition provisions are applicable
to certain guaranteed obligations modified or issued after
December 31, 2002. The adoption of FIN 45 did not have a
significant impact on the Companys consolidated financial
statements.

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure. This pronouncement
amends SFAS No. 123 to provide alternative methods of
transition for an entity that voluntarily changes to the fair
value-based method of accounting for stock-based compensation.
SFAS No. 148 also expands the disclosure requirements with
respect to stock-based compensation. The Company does not intend
to change to the fair value method of accounting. The required
expanded disclosure is included in the consolidated financial
statements.

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






|          |                                                               
|--------- | --------------------------------------------------------------
|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 two-year period ended September 30, 2001, the three-month
transitional period ended December 30, 2001 and the fiscal
year ended December 29, 2002. 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 operations other than where the currency is
the U.S. dollar. As of December 29, 2002, we do not have any
variable rate debt or derivative financial or commodity
instruments.






|         |                                                
|-------- | -----------------------------------------------
|Item  8. | Financial Statements and Supplementary
    Data

The information called for by this Item 8 is
included in Item 15, 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.

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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 December 29, 2002. Each of our
directors and officers serves until his successor is elected and
qualifies.

|                       |  |     |    |                   |  |                                        
|---------------------- |  | --- | -- | ----------------- |  | ---------------------------------------
|Name                   |  | Age |    | Position with SBS
|                       |  |     |    |                  
|Raúl Alarcón, Jr.      |  |     | 46 |                   |  | Chairman of the Board of Directors,    
|                       |  |     |    |                   |  | Chief Executive Officer and President  
|Joseph A. García       |  |     | 57 |                   |  | Chief Financial Officer, Executive Vice
|                       |  |     |    |                   |  | President and Secretary                
|Pablo Raúl Alarcón, Sr |  |     | 77 |                   |  | Chairman Emeritus and Director         
|José Grimalt           |  |     | 75 |                   |  | Secretary Emeritus and Director        
|Jason L. Shrinsky      |  |     | 65 |                   |  | Director                               
|Castor Fernandez       |  |     | 60 |                   |  | Director                               
|Carl Parmer            |  |     | 44 |                   |  | Director                               
|William B. Tanner      |  |     | 58 |                   |  | Executive Vice President of Programming

Raúl Alarcón, Jr.has been President and a director
since October 1985 and Chief Executive Officer since June 1994.
On November 2, 1999, Mr. Alarcón, Jr. became Chairman
of the Board of Directors and continues as our Chief Executive
Officer and President. Mr. Alarcón, Jr. is one of the
original members of our senior management team and has been one
of our key executives since our founding in 1983.
Mr. Alarcón, Jr. is responsible for our long-range
strategic planning, operational matters and is instrumental in
the acquisition and related financing of each of our radio
stations. Mr. Alarcón, Jr. is the son of
Mr. Alarcón, Sr. and the son-in-law of
Mr. Grimalt.

Joseph A. Garcíahas been Chief Financial Officer since
1984, Executive Vice President since 1996 and Secretary since
November 2, 1999. Mr. García is responsible for
the financial affairs of SBS, day-to-day operational matters and
investor relations, and he has been instrumental in the
acquisition of our radio stations. Before joining SBS in 1984,
Mr. García spent thirteen years in international
financial planning positions with Philip Morris Companies, Inc.
and Revlon, Inc., where he was Manager of Financial Planning for
Revlon  Latin America.

Pablo Raúl Alarcón, Sr.was our Chairman of the Board of
Directors from March 1983 until November 2, 1999, when he
became Chairman Emeritus. Mr. Alarcón, Sr. continues to be
a member of our Board of Directors. Mr. Alarcón, Sr. has
been involved in Spanish-language radio broadcasting since the
early 1950s when he established his first radio station in
Camagüey, Cuba. Upon his arrival in the United States,
Mr. Alarcón, 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. Alarcón, Sr. subsequently owned and operated a
recording studio and an advertising agency before purchasing our
first radio station in 1983. Mr. Alarcón, Sr. is
Raúl Alarcón, Jr.s father.

José Grimalthas been a member of our Board of
Directors since 1986 and was our Secretary from 1986 until
November 2, 1999, when he became Secretary Emeritus. From
1969 to 1986, Mr. Grimalt owned and operated
Spanish-language radio station WLVH-FM in Hartford, Connecticut.
Mr. Grimalt is Mr. Alarcón, Jr.s
father-in-law.

Jason L. Shrinskybecame one of our directors on
November 2, 1999. Mr. Shrinsky is a partner of the law firm
of Kaye Scholer 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 LLP has served as
our legal counsel for more than 18 years.

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##### Table of Contents



Castor Fernandezbecame one of our directors on
August 9, 2001. Mr. Fernandez has over forty years of
experience in advertising. In 1968 Mr. Fernandez founded
Castor Advertising Florida Corp., which was the oldest
Hispanic-owned advertising agency in the country, until its
dissolution on December 31, 2001. Mr. Fernandez is
also a founder and director of First BankAmericano, a
minority-owned bank.

Carl Parmerbecame
one of our directors on August 9, 2001. Mr. Parmer has
an extensive background in the ownership and management of radio
and television companies throughout the United States.
Mr. Parmer was the President and co-Chief Executive Officer
of Heftel Broadcasting Corporation (predecessor of Hispanic
Broadcasting Corporation) from 1991 to 1996. Mr. Parmer has
been President and CEO of Broadcasting Management, Inc. since
1996. Mr. Parmer began his career in broadcasting in 1991 after
several years of experience on Wall Street, including a position
as Vice President and shareholder of Kidder Peabody & Co.,
Inc.

William B. Tannerhas served as our Executive Vice
President of Programming since August 31, 2000. Prior to
joining us, Mr. Tanner was the Vice President of
Programming at Hispanic Broadcasting Corporation for six years.
Mr. Tanner began his career in the radio broadcasting
industry as an on-air personality and radio programmer.

See Item 13. 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 our directors and executive
officers and persons who own more than 10% of a registered class
of our equity securities (collectively, Reporting
Persons) to file reports of ownership and changes in
ownership of our securities with the Securities and Exchange
Commission (the SEC). Reporting Persons are required
by the SEC to furnish us with copies of all Section 16(a)
forms they file.

Based solely on our review of the copies of such
forms received or written representations from the Reporting
Persons, we believe that, with respect to the fiscal year ended
December 29, 2002, all the Reporting Persons complied with
all applicable filing requirements. We believe that with respect
to the three-month transitional period ended December 30,
2001, all the Reporting Persons complied with all applicable
filing requirements, except that one report covering one
transaction by Castor Fernandez was filed late. In addition, we
believe that two reports covering two separate transactions by
William B. Tanner in fiscal year 2001 were filed late.

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|          |                       
|--------- | ----------------------
|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
ended December 29, 2002, September 30, 2001 and
September 24, 2000, by our Chief Executive Officer and
President and our next highest paid executive officers as of
December 29, 2002, whose total annual salary and bonus
exceeded $100,000.

Summary Compensation Table

|                  |  |                     |  |              |      |            |  |           |           |                  |  |                 |           |     |  |   |         |     |  |  |         | 
|----------------- |  | ------------------- |  | ------------ | ---- | ---------- |  | --------- | --------- | ---------------- |  | --------------- | --------- | --- |  | - | ------- | --- |  |  | ------- | 
|                  |  |                     |  |              |      |            |  |           |           |                  |  | Long Term      
|                  |  |                     |  |              |      |            |  |           |           |                  |  | Compensation   
|                  |  |                     |  | Awards      
|                  |  | Annual Compensation |  |             
|                  |  |                     |  | Securities  
|                  |  |                     |  | Other Annual |      | Underlying
|Name              |  | Principal Position  |  | Year         |      | Salary ($) |  | Bonus ($) |           | Compensation ($) |  | Options/SARs(#)
|                  |  |                     |  |              |      |            |  |           |           |                  |  |                
|Raúl Alarcón, Jr. |  | Chief Executive     |  |              | 2002 |            |  | $         | 1,226,888 |                  |  | $               | 790,629   |     |  | $ | 101,008 | (a) |  |  | 100,000 | 
|                  |  | Officer,            |  |              | 2001 |            |  |           | 1,000,000 |                  |  |                 | 792,864   |     |  |   | 155,531 | (a) |  |  | 100,000 | 
|                  |  | President and       |  |              | 2000 |            |  |           | 1,000,000 |                  |  |                 | 1,000,000 |     |  |   | 201,829 | (a) |  |  | 100,000 | 
|                  |  | Chairman            |  |              |      |            |  |           |           |                  |  |                 |           |     |  |   |         |     |  |  |         | 
|                  |  | of the Board of     |  |              |      |            |  |           |           |                  |  |                 |           |     |  |   |         |     |  |  |         | 
|                  |  | Directors           |  |              |      |            |  |           |           |                  |  |                 |           |     |  |   |         |     |  |  |         | 
|                 
|Joseph A. García  |  | Executive Vice      |  |              | 2002 |            |  | $         | 423,077   | (b)              |  | $               | 200,000   |     |  |   |        | (c) |  |  | 150,000 | 
|                  |  | President, Chief    |  |              | 2001 |            |  |           | 379,615   |                  |  |                 | 100,000   | (d) |  |   |        | (c) |  |  | 100,000 | 
|                  |  | Financial Officer   |  |              | 2000 |            |  |           | 300,000   |                  |  |                 | 150,000   |     |  |   |        | (c) |  |  | 250,000 | 
|                  |  | and Secretary       |  |              |      |            |  |           |           |                  |  |                 |           |     |  |   |         |     |  |  |         | 
|                 
|                 
|William B. Tanner |  | Executive Vice      |  |              | 2002 |            |  | $         | 563,582   |                  |  | $               | 192,000   |     |  | $ | 154,742 | (e) |  |  | 15,000  | 
|                  |  | President of        |  |              | 2001 |            |  |           | 530,058   |                  |  |                 | 18,000    |     |  |   | 156,572 | (e) |  |  | 15,000  | 
|                  |  | Programming         |  |              | 2000 |            |  |           |          |                  |  |                 |          |     |  |   |        |     |  |  | 218,552 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Mr. Alarcón, Jr. received personal
    benefits in addition to his salary and bonus, including the use
    of automobiles. We paid an aggregate of $98,388, $123,611 and
    $85,329 in fiscal years 2002, 2001 and 2000, respectively, for
    automobiles used by Mr. Alarcón, Jr., including
    drivers salary. The amount noted in the table for fiscal
    year 2000 includes $116,500 paid by SBS for living quarters for
    Mr. Alarcón, Jr. and his family in Key Biscayne,
    Florida pending completion of the construction of their
    residential home in Miami, Florida. As a result of
    Mr. Alarcón, Jr.s relocation to his newly
    constructed home, our last rent payment for his apartment in Key
    Biscayne was made on November 30, 2000. The amounts noted
    in the table exclude payments made by us in connection with our
    lease of an apartment in New York City owned by
    Mr. Alarcón, Jr., which was terminated in September
    2002. Mr. Alarcón, Jr. and others used the apartment
    while in New York on SBS business.
|(b) | Includes $23,077 paid to Mr. García for
    unused vacation time from prior years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(c) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(d) | Reflects bonus earned for performance in fiscal
    year 2001 which Mr. García received in January 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(e) | In November 2001 and December 2002, we made
    payments of $154,742 to William Tanner pursuant to a side letter
    agreement to Mr. Tanners employment agreement which
    required us to make a payment to Mr. Tanner if the price of
    our Class A common stock had not reached specified levels
    by August 30, 2001 and August 30, 2002. Such amounts
    were accrued in our consolidated financial statements in the
    fiscal years ended December 29, 2002 and September 30,
    2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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##### Table of Contents



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 three-month
transitional period ended December 30, 2001, by our Chief
Executive Officer and President and our next highest paid
executive officers as of December 29, 2002, whose total
annual salary and bonus exceeded $100,000.

|                  |  |                                                  |  |              |         |            |  |                  |        |                 |  |   |        |     |  |  |         | 
|----------------- |  | ------------------------------------------------ |  | ------------ | ------- | ---------- |  | ---------------- | ------ | --------------- |  | - | ------ | --- |  |  | ------- | 
|                  |  |                                                  |  |              |         |            |  |                  |        | Long Term      
|                  |  |                                                  |  |              |         |            |  |                  |        | Compensation   
|                  |  |                                                  |  | Awards      
|                  |  | Transitional Period Compensation                 |  |             
|                  |  |                                                  |  | Securities  
|                  |  |                                                  |  | Other Annual |         | Underlying
|Name              |  | Principal Position                               |  | Salary ($)   |         | Bonus ($)  |  | Compensation ($) |        | Options/SARs(#)
|                  |  |                                                  |  |              |         |            |  |                  |        |                
|Raúl Alarcón, Jr. |  | Chief Executive Officer,                         |  | $            | 306,722 |            |  | $                |       |                 |  | $ | 32,382 | (a) |  |  | 100,000 | 
|                  |  | President and Chairman of the Board of Directors |  |              |         |            |  |                  |        |                 |  |   |        |     |  |  |         | 
|                 
|Joseph A. García  |  | Executive Vice                                   |  | $            | 100,000 |            |  | $                |       |                 |  |   |       | (b) |  |  |        | 
|                  |  | President, Chief Financial Officer and Secretary |  |              |         |            |  |                  |        |                 |  |   |        |     |  |  |         | 
|                 
|William B. Tanner |  | Executive Vice President of Programming          |  | $            | 148,625 |            |  | $                | 38,500 |                 |  |   |       | (b) |  |  |        | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Mr. Alarcón, Jr. received personal
    benefits in addition to his salary and bonus, including the use
    of automobiles. We paid an aggregate of $31,827 during the
    three-month transitional period ended December 30, 2001,
    for automobiles used by Mr. Alarcón, Jr., including
    drivers salary. The amount noted in the table excludes
    payments made by us in connection with our lease of an apartment
    in New York City owned by Mr. Alarcón, Jr., which was
    terminated in September 2002. Mr. Alarcón, Jr. and
    others used the apartment while in New York on SBS business.
|(b) | Excludes perquisites and other personal benefits,
    securities or property which aggregate the lesser of $12,500 or
    10% of the total of salary and bonus for the transitional period.                                                                                                                                                                                                                                                                                                                                                                                                                  

Stock Options

The following table sets forth information
concerning the grant of stock options to each of the named
executive officers in the fiscal year ended December 29,
2002.

Option/SAR Grants in Last Fiscal
Year

|                  |  |                   |         |              |  |             |      |                            |  |       |      |        |  |  |          |  |  |   |         |  |  |   |           | 
|----------------- |  | ----------------- | ------- | ------------ |  | ----------- | ---- | -------------------------- |  | ----- | ---- | ------ |  |  | -------- |  |  | - | ------- |  |  | - | --------- | 
|                  |  |                   |         |              |  |            
|                  |  | Individual Grants |         |              |  |            
|                  |  |                   |         |             
|                  |  |                   |         | Percent of   |  |             |      | Potential Realizable Value
|                  |  |                   |         | Total        |  |             |      | at Assumed Annual Rates   
|                  |  | Number of         |         | Options/SARs |  |             |      | of Stock Price            
|                  |  | Securities        |         | Granted to   |  |             |      | Appreciation for Option   
|                  |  | Underlying        |         | Employees in |  | Exercise or |      |                            |  | Term 
|                  |  | Options/SARs      |         | Fiscal Year  |  | Base Price  |      |                            |  |      
|Name              |  | Granted(#)(a)     |         | 2002         |  | ($/Sh)      |      | Expiration Date            |  | 5%($) |      | 10%($)
|                  |  |                   |         |              |  |             |      |                            |  |       |      |       
|Raúl Alarcón, Jr  |  |                   | 100,000 | (b)          |  |             | 32.0 | %                          |  | $     | 6.13 |        |  |  | 10/27/12 |  |  | $ | 385,512 |  |  | $ | 976,964   | 
|Joseph A. García  |  |                   | 150,000 | (c)          |  |             | 48.0 |                            |  | $     | 9.10 |        |  |  | 1/16/12  |  |  |   | 858,441 |  |  |   | 2,175,458 | 
|William B. Tanner |  |                   | 15,000  | (d)          |  |             | 4.8  |                            |  | $     | 7.07 |        |  |  | 8/31/07  |  |  |   | 29,300  |  |  |   | 64,745    | 






|    |                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Each option was granted under our 1999 Stock
    Option Plan. The options that are not otherwise exercisable
    prior to a change in control of SBS will become exercisable on
    the date of a change in control of SBS and will remain
    exercisable for the remainder of the term of the option, as
    discussed in our 1999 Stock Option Plan.
|(b) | Raúl Alarcón, Jr.s option vested
    and became exercisable immediately upon the granting of such
    option on October 27, 2002.                                                                                                                                                                                                                     
|(c) | Twenty percent of Joseph A. Garcías
    option vested immediately on January 16, 2002, the date of
    grant, and the rest vests ratably over a four year period.                                                                                                                                                                                     
|(d) | William B. Tanners option vested and became
    exercisable immediately upon the granting of such option on
    August 31, 2002.                                                                                                                                                                                                                      

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The following table sets forth information
concerning the grant of stock options to each of the named
executive officers in the three-month transitional period ended
December 30, 2001.

Option/SAR Grants in Three-Month Transitional
Period

|                  |  |                   |         |              |  |             |       |                            |  |       |      |        |  |  |          |  |  |  |         |  |  |   |           | 
|----------------- |  | ----------------- | ------- | ------------ |  | ----------- | ----- | -------------------------- |  | ----- | ---- | ------ |  |  | -------- |  |  |  | ------- |  |  | - | --------- | 
|                  |  |                   |         |              |  |            
|                  |  | Individual Grants |         |              |  |            
|                  |  |                   |         |             
|                  |  |                   |         | Percent of   |  |             |       | Potential Realizable Value
|                  |  |                   |         | Total        |  |             |       | at Assumed Annual Rates   
|                  |  | Number of         |         | Options/SARs |  |             |       | of Stock Price            
|                  |  | Securities        |         | Granted to   |  |             |       | Appreciation for Option   
|                  |  | Underlying        |         | Employees in |  | Exercise or |       |                            |  | Term 
|                  |  | Options/SARs      |         | Three-Month  |  | Base Price  |       |                            |  |      
|Name              |  | Granted(#)        |         | Period       |  | ($/Sh)      |       | Expiration Date            |  | 5%($) |      | 10%($)
|                  |  |                   |         |              |  |             |       |                            |  |       |      |       
|Raúl Alarcón, Jr  |  |                   | 100,000 | (a)          |  |             | 40.82 | %                          |  | $     | 7.77 |        |  |  | 10/27/11 |  |  |  | 488,651 |  |  | $ | 1,238,338 | 
|Joseph A. García  |  |                   |        |              |  |             |      |                            |  |       |     |        |  |  |         |  |  |  |        |  |  |   |          | 
|William B. Tanner |  |                   |        |              |  |             |      |                            |  |       |     |        |  |  |         |  |  |  |        |  |  |   |          | 






|    |                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------
|(a) | Raúl Alarcón, Jr.s option vested
    and became exercisable immediately upon the granting of such
    option on October 27, 2001.

The following table sets forth certain
information regarding stock options exercised by the named
executive officers during fiscal year 2002, 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
December 29, 2002. 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 December 29, 2002.

Aggregated Option/SAR Exercises in Last
Fiscal

Year and Fiscal Year End Options/SAR
Values


|                  |  |                |   |          |  |                        |   |                          |  |             |         |               |  |  |         |  |  |   |         |  |  |   |        | 
|----------------- |  | -------------- | - | -------- |  | ---------------------- | - | ------------------------ |  | ----------- | ------- | ------------- |  |  | ------- |  |  | - | ------- |  |  | - | ------ | 
|                  |  |                |   |          |  |                        |   |                          |  |            
|                  |  |                |   |          |  | Number of Securities   |   |                         
|                  |  |                |   |          |  | Underlying Unexercised |   | Value of Unexercised In-
|                  |  |                |   |          |  | Options/SARs at Fiscal |   | the-Money Options at    
|                  |  | Shares         |   | Value    |  | Year End(#)            |   | Fiscal Year End($)      
|                  |  | Acquired       |   | Realized |  |                        |   |                         
|Name              |  | on Exercise(#) |   | ($)      |  | Exercisable            |   | Unexercisable            |  | Exercisable |         | Unexercisable
|                  |  |                |   |          |  |                        |   |                          |  |             |         |              
|Raúl Alarcón, Jr  |  |                |  |          |  |                        |  |                          |  |             | 400,000 |               |  |  |        |  |  | $ | 112,000 |  |  |   |       | 
|Joseph A. García  |  |                |  |          |  |                        |  |                          |  |             | 290,000 |               |  |  | 210,000 |  |  | $ | 146,220 |  |  | $ | 97,480 | 
|William B. Tanner |  |                |  |          |  |                        |  |                          |  |             | 248,552 |               |  |  |        |  |  | $ | 2,700   |  |  |   |       | 

The following table sets forth certain
information regarding stock options exercised by the named
executive officers during the three-month transitional period
ended December 30, 2001, 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 December 30, 2001. 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 December 30, 2001.

Aggregated Option/SAR Exercises in Three-Month
Transitional Period

and Three-Month Transitional Period
Options/SAR Values


|                  |  |                |   |          |  |                          |   |                          |  |             |         |               |  |  |         |  |  |   |         |  |  |   |         | 
|----------------- |  | -------------- | - | -------- |  | ------------------------ | - | ------------------------ |  | ----------- | ------- | ------------- |  |  | ------- |  |  | - | ------- |  |  | - | ------- | 
|                  |  |                |   |          |  |                          |   |                          |  |            
|                  |  |                |   |          |  | Number of Securities     |   |                         
|                  |  |                |   |          |  | Underlying Unexercised   |   | Value of Unexercised In-
|                  |  |                |   |          |  | Options/SARs at End of   |   | the-Money Options at End
|                  |  |                |   |          |  | Three-Month Transitional |   | of Three-Month          
|                  |  | Shares         |   | Value    |  | Period(#)                |   | Transitional Period($)  
|                  |  | Acquired       |   | Realized |  |                          |   |                         
|Name              |  | on Exercise(#) |   | ($)      |  | Exercisable              |   | Unexercisable            |  | Exercisable |         | Unexercisable
|                  |  |                |   |          |  |                          |   |                          |  |             |         |              
|Raúl Alarcón, Jr  |  |                |  |          |  |                          |  |                          |  |             | 300,000 |               |  |  |        |  |  | $ | 214,130 |  |  |   |        | 
|Joseph A. García  |  |                |  |          |  |                          |  |                          |  |             | 190,000 |               |  |  | 160,000 |  |  | $ | 195,080 |  |  | $ | 292,620 | 
|William B. Tanner |  |                |  |          |  |                          |  |                          |  |             | 160,701 |               |  |  | 72,851  |  |  |   |        |  |  |   |        | 

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##### Table of Contents



Director Compensation

All directors are reimbursed for their
out-of-pocket expenses incurred in connection with their
services as directors. Directors who are officers do not receive
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.

In connection with his election to the Board of
Directors on November 2, 1999, we granted Jason L. Shrinsky
an option to purchase 50,000 shares of Class A common stock,
with an exercise price of $20.00 per share, of which options to
purchase 10,000 shares vested immediately, and the remaining
options to purchase 40,000 shares vest ratably over four years.
Mr. Shrinsky holds his options for the benefit of his law
firm, Kaye Scholer LLP. See Stock Plans 
Non-Employee Director Stock Option Plan.

Effective as of October 29, 2001, in
connection with the election of Castor Fernandez and Carl Parmer
to our Board of Directors on August 9, 2001, we granted
each of Messrs. Fernandez and Parmer options to purchase
50,000 shares of Class A common stock, with an exercise
price of $7.50 per share, of which options to purchase 10,000
shares vested on October 29, 2001 and the remaining options
to purchase 40,000 shares vest ratably over four years.

During the fiscal year ended December 29,
2002, Pablo Raúl Alarcón, Sr., José Grimalt,
Castor Fernandez and Carl Parmer each received a payment in the
amount of $20,000 in directors fees. Mr. Shrinsky
declined to accept such fee. We also paid for the use of
automobiles by Mr. Alarcón, Sr. in the amount of
$32,971.

Employment Agreements and
Arrangements

Raúl
Alarcón, Jr.

We have an employment agreement with Raúl
Alarcón, Jr. dated as of October 25, 1999, pursuant to
which Mr. Alarcón, 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. 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. Alarcón, 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. Alarcón, Jr. has the right to receive options to
purchase 100,000 shares of Class A common stock each year
of the employment term at an exercise price equal to the fair
market value of our Class A common stock on the respective
grant date. Mr. Alarcón, 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. Alarcón, 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. Alarcón, Jr. is entitled to the
use of one automobile and driver at our expense.

Joseph A.
García

We have an employment agreement with Joseph A.
García dated as of December 7, 2000, pursuant to which
Mr. García serves as our Chief Financial Officer,
Executive Vice President and Secretary. The agreement became
effective on December 7, 2000 and expires on
December 7, 2005. Mr. García receives an annual
base salary of $400,000. In addition, Mr. García is
entitled to receive an annual cash bonus to be determined by the
Board of Directors, based on performance and operating targets
achieved. Mr. García received an option to purchase
100,000 shares of Class A common stock, with 20% vesting
immediately and the rest vesting ratably over a four-year period
at an exercise price of $4.81 per share, for past performance.
Mr. García is 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. Prior to December 7, 2000, we
had an employment agreement with Joseph A. García dated as
of October 25, 1999 (the 1999 Employment
Agreement), which was superceded by the current agreement.
Under the 1999 Employment

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Agreement, Mr. García received an
option to purchase 250,000 shares of Class A common stock,
with 20% vesting immediately and the rest vesting ratably over a
four-year period at an exercise price of $20.00 per share.


William B.
Tanner

We have an employment agreement with William B.
Tanner dated as of August 31, 2000, pursuant to which
Mr. Tanner serves as our Executive Vice President of
Programming. The term of the agreement is from August 31,
2000 to August 31, 2005. The agreement provides for an annual
base salary of $475,000, with an annual 10% increase over the
prior years base salary. Mr. Tanner is entitled to
receive quarterly bonuses based on SBS radio stations achieving
certain Arbitron® ratings. Under the terms of the
agreement, Mr. Tanner received (1) an option to purchase
218,552 shares of Class A common stock, with 33% vesting
immediately and the rest vesting ratably over a two-year period,
and (2) options to purchase an aggregate of 75,000 shares
of Class A common stock to be granted ratably over a
five-year period, at an exercise price equal to the closing
price of our Class A common stock on the immediately
preceding business day of each respective grant date.
Mr. Tanner is also entitled to receive standard employee
benefits provided to all of our similarly situated executives,
such as health, life and long-term disability insurance and
reimbursement of business related expenses. He is also entitled
to payment of power and telephone bills for a Los Angeles
residence and a monthly automobile allowance.

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 a
subcommittee of the Compensation Committee or by the Board of
Directors if such committees are 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. During the fiscal year ended
December 29, 2002, options to purchase 312,500 shares of
Class A common stock were granted under this plan at
exercise prices ranging from $5.71 to $15.48 per share.

The Compensation Committee 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 after September 27, 1999, 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 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
become exercisable at such times and in such installments as the
Compensation Committee determines. Notwithstanding this, any
nonexercisable options will 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 option holders death,
disability or retirement. If termination is for any reason other
than the preceding and other than for cause, exercisable options
will remain exercisable for three months following such
termination. If termination is for cause, exercisable options
will not be exercisable after the date of termination. Payment of

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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 terminates ten years after
September 27, 1999, the date that it was approved and
adopted by the stockholders of SBS. The plan is administered by
the Board of Directors. To date, each of our non-employee
directors has been granted an option to purchase 50,000 shares
of Class A common stock at the market price of the
Class A common stock as of the respective grant date, with
20% of the option vesting immediately and the rest vesting
ratably over a four year period.

Under the plan, any non-exercisable options will
immediately vest and become exercisable upon a change of control
of SBS. If a non-employee director ceases to be a member of the
Board of Directors due to death, retirement or disability, all
his unvested options will terminate immediately and all his
exercisable option on such date will remain exercisable for
their term. If a non-employee directors service as a
director is terminated for any reason other than the preceding,
all his unvested options will terminate immediately and all his
exercisable options on such date will remain exercisable for
thirty days.

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
contribute to the 401(k) Plan 1%-15% from his annual salary, not
to exceed the statutorily prescribed annual limit, which was
$11,000 for 2002, and have the amount of such. 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. To date, we have not made any such contributions.
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 acted in good faith and in a manner they
reasonably believed 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.

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We have obtained insurance for the benefit of our
directors and officers that provides for coverage of up to $30.0
million.

There is a pending litigation claim against us
and certain of our directors and officers concerning which such
directors and officers may seek indemnification. On
November 28, 2001, a complaint was filed against SBS in the
United States District Court for the Southern District of New
York and was amended on April 19, 2002. The amended
complaint alleges that the named plaintiff, Mitchell Wolf,
purchased shares of our Class A common stock pursuant to
the October 27, 1999 prospectus and registration statement
relating to our initial public offering which closed on
November 2, 1999 (the IPO). The complaint was
brought on behalf of Mr. Wolf and an alleged class of
similarly situated purchasers, against SBS, eight underwriters
and/or their successors-in-interest who led or otherwise
participated in the IPO (collectively, the
Underwriters), two members of our senior management
team, one of whom is our Chairman of the Board of Directors, and
an additional director (collectively, the
Individuals). To date, the complaint, while served
upon SBS, has not been served upon the Individuals, and no
counsel has appeared for them.

This case is one of more than 300 similar cases
brought by similar counsel against more than 300 issuers, 40
underwriters and 1,000 individual defendants alleging, in
general, violations of federal securities laws in connection
with initial public offerings, in particular, failing to
disclose that the underwriter defendants allegedly solicited and
received additional, excessive and undisclosed commissions from
certain investors in exchange for which they allocated to those
investors material portions of the restricted shares issued in
connection with each offering. All of these cases, including the
one involving SBS, have been assigned for consolidated pretrial
purposes to one judge of the United States District Court for
the Southern District of New York. The issuer defendants in the
consolidated case (Issuer Defendants) filed motions
to dismiss the consolidated case. These motions to dismiss
covered issues common among all Issuer Defendants in the
consolidated cases. As a result of these motions, the
Individuals were dismissed from one of the claims against them,
specifically the Section 10b-5 claim.

The Issuer Defendants are in the process of
making multiple motions as a follow-up to the initial motion to
dismiss. They drafted a motion for reconsideration to the Court,
listing the reasons why various categories of Issuer Defendants
should have been dismissed from certain claims. If the motion
succeeds, SBS will be dismissed from one count in the complaint,
specifically, the Section 10b-5 claim, and the Individuals
will be dismissed from another count in the complaint, a
Section 20(a) claim. The Issuer Defendants plan to file the
motion for reconsideration in the near future. In addition to
the motion for reconsideration, the Issuer Defendants will file
individual second round motions concerning procedural defects
that warrant dismissing certain defendants from the case. SBS
believes that the grounds applicable to it will be set forth in
the general motion to reconsider. With respect to discovery, at
this point plaintiffs have chosen to focus on the underwriter
defendants, and have not made any formal requests for the
production of documents from the Issuer Defendants. We believe
that we would have a valid claim against the Underwriters for
indemnification in the event that the plaintiffs were to be
awarded damages as a result of this lawsuit.

Compensation Committee Interlocks and Insider
Participation

Our Board of Directors maintains a Compensation
Committee whose current members are three non-employee directors
of SBS: Jason L. Shrinsky, Castor Fernandez and Carl Parmer,
each of whom was a member of the Compensation Committee during
all of fiscal year 2002. Raúl Alarcón, Jr., our
Chairman of the Board of Directors, Chief Executive Officer and
President, was a member of the Compensation Committee until his
resignation on December 31, 2001. The Board of Directors
also maintained a Stock Option Committee until the delegation of
such committees functions to the Compensation Committee on
May 6, 2002. During fiscal year 2002, the members of the
Stock Option Committee were Messrs. Shrinsky, Fernandez and
Parmer. See Item 13. Certain Relationships and
Related Transactions.

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|          |                                                                                                       
|--------- | ------------------------------------------------------------------------------------------------------
|Item  12. | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder
    Matters

The following table sets forth information
concerning the beneficial ownership of our Class A common
stock and our Class B common stock as of March 24,
2003, 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.

|                                                               |  |                |           |                |  |           |      |         |  |          |            |        |  |  |      |   |  |  |      |   |  |  |      |  
|-------------------------------------------------------------- |  | -------------- | --------- | -------------- |  | --------- | ---- | ------- |  | -------- | ---------- | ------ |  |  | ---- | - |  |  | ---- | - |  |  | ---- | -
|                                                               |  |                |           |                |  |           |      |        
|                                                               |  | Class A Shares |           | Class B Shares |  |           |      |        
|                                                               |  |                |           |                |  | Percent   |      | Percent
|                                                               |  |                |           | Percent        |  |           |      | Percent |  | of       |            | of    
|                                                               |  | Number         |           | of             |  |           |      | of      |  | Total    |            | Total 
|                                                               |  | of             |           | Class A        |  | Number of |      | Class B |  | Economic |            | Voting
|Name and Address(1)(2)                                         |  | Shares         |           | Shares         |  | Shares    |      | Shares  |  | Interest |            | Power 
|                                                               |  |                |           |                |  |           |      |         |  |          |            |       
|Raúl Alarcón, Jr.(3)                                           |  |                | 400,000   |                |  |           | 1.1  | %       |  |          | 26,000,000 |        |  |  | 94.2 | % |  |  | 40.6 | % |  |  | 83.1 | %
|Pablo Raúl Alarcón, Sr.(4)                                     |  |                |          |                |  |           |     |         |  |          | 1,070,000  |        |  |  | 3.9  | % |  |  | 1.7  | % |  |  | 3.4  | %
|José Grimalt                                                   |  |                |          |                |  |           |     |         |  |          | 501,650    |        |  |  | 1.8  | % |  |  | *    |   |  |  | 1.6  | %
|Joseph A. García(5)                                            |  |                | 330,000   |                |  |           | *    |         |  |          |           |        |  |  |     |   |  |  | *    |   |  |  | *    |  
|William B. Tanner(6)                                           |  |                | 248,552   |                |  |           | *    |         |  |          |           |        |  |  |     |   |  |  | *    |   |  |  | *    |  
|Jason L. Shrinsky(7)                                           |  |                | 55,000    |                |  |           | *    |         |  |          |           |        |  |  |     |   |  |  | *    |   |  |  | *    |  
|Castor Fernandez(8)                                            |  |                | 20,000    |                |  |           | *    |         |  |          |           |        |  |  |     |   |  |  | *    |   |  |  | *    |  
|Carl Parmer(9)                                                 |  |                | 91,100    |                |  |           | *    |         |  |          |           |        |  |  |     |   |  |  | *    |   |  |  | *    |  
|                                                               |  |                |           |                |  |           |      |         |  |          |            |        |  |  |      |   |  |  |      |   |  |  |      |  
|All named executive officers and directors as a
    group (10) |  |                | 1,144,652 |                |  |           | 3.0  | %       |  |          | 27,571,650 |        |  |  | 99.9 | % |  |  | 43.7 | % |  |  | 88.1 | %
|                                                              
|T. Rowe Price Associates, Inc. (11)                            |  |                | 4,287,550 |                |  |           | 11.6 | %       |  |          |           |        |  |  |     |   |  |  | 6.6  | % |  |  | 1.4  | %
|TCW entities (12)                                              |  |                | 3,537,193 |                |  |           | 9.5  | %       |  |          |           |        |  |  |     |   |  |  | 5.5  | % |  |  | 1.1  | %
|Dimensional Fund Advisors, Inc. (13)                           |  |                | 2,082,400 |                |  |           | 5.6  | %       |  |          |           |        |  |  |     |   |  |  | 3.2  | % |  |  | 0.7  | %






| |   |                        
| | - | -----------------------
| | * | 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, PH
    II, 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 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 400,000 shares of 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) | Mr. Pablo Raúl Alarcón, Sr.s
    shares are held in a Flint Trust with Mr. Alarcón, Sr. as
    sole beneficiary.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | (5) | Includes 320,000 shares of 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (6) | Includes 248,552 shares of 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | (7) | Includes 40,000 shares of 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. Mr. Shrinsky holds these options for the benefit of
    his law firm, Kaye Scholer LLP. Mr. Shrinsky shares
    ownership of, and voting and investment power for, 15,000 shares
    of Class A common stock with his spouse.                                                                                                                                                                                                                                                                                                                                 
| | (8) | Includes 20,000 shares of 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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| |     |                                                                                                                                                                                                                                                                                 
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (9) | Represents 71,100 shares owned indirectly through
    Henry Carlson Parmer, Jr. Living Trust and 20,000 shares of
    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.

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Includes 1,048,552 shares of Class A common
    stock issuable upon the exercise of options that the holders
    have the right to exercise within sixty days of the date of this
    report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(11) | The address of T. Rowe Price Associates, Inc. is
    100 East Pratt Street, Baltimore, Maryland 21202. T. Rowe Price
    Associates, Inc. has sole voting power with respect to 847,200
    shares and sole investment power with respect to all the shares.
    The shares are owed by various individual and institutional
    investors, including T. Rowe Price New Horizons Fund, Inc., for
    which T. Rowe Price Associates, Inc. serves as an investment
    advisor. T. Rowe Price Associates, Inc. disclaims beneficial
    ownership of these shares. We obtained this information from a
    Schedule 13G filed by T. Rowe Price Associates, Inc. on
    February 14, 2003.                   
|(12) | Represents shares held by Trust Company of the
    West, TCW Asset Management Company and TCW Investment Management
    Company (together, the TCW Entities). The address of
    the TCW Entities is 865 South Figueroa Street, Los Angeles,
    California 90017. The parent holding company of the TCW Entities
    is The TCW Group, Inc. The TCW Group, Inc. possesses shared
    voting and investment power with respect to these shares.
    Société Genérale S.A., a company incorporated
    under the laws of France, may be deemed to control The TCW
    Group, Inc. and its direct and indirect subsidiaries. The TCW
    Group, Inc. provided this information to us on March 21,
    2003.
|(13) | Represents shares owned by advisory clients of
    Dimensional Funds Advisors Inc. for which Dimensional Fund
    Advisors Inc. possesses sole voting and investment power.
    Dimensional Fund Advisors, Inc. disclaims beneficial ownership
    of these shares. The address of Dimensional Fund Advisors, Inc.
    is 1299 Ocean Avenue, 11th Floor, Santa Monica, California
    90401. We obtained this information from a Schedule 13G
    filed by Dimensional Fund Advisors Inc. on February 10,
    2003.                                                                                                                                                                                        

Equity Compensation Plan Information

The following table sets forth, as of
December 29, 2002, the number of securities outstanding
under our equity compensation plans, the weighted average
exercise price of such securities and the number of securities
available for grant under these plans.

Equity Compensation Plan Information

as of December 29, 2002


|                                                           |                                         |                  |  |                  |           |                      |   |       |  |  |  |           |           | 
|---------------------------------------------------------- | --------------------------------------- | ---------------- |  | ---------------- | --------- | -------------------- | - | ----- |  |  |  | --------- | --------- | 
|                                                           |                                         | (a)              |  |                  |           |                     
|                                                           |                                         | Number of Shares |  | (b)              |           | (c)                 
|                                                           |                                         | to be Issued     |  | Weighted-Average |           | Number of Securities
|                                                           |                                         | Upon             |  | Exercise         |           | Remaining Available 
|                                                           |                                         | Exercise of      |  | Price of         |           | for Future Issuance 
|                                                           |                                         | Outstanding      |  | Outstanding      |           | Under Equity        
|                                                           |                                         | Options,         |  | Options,         |           | Compensation Plans  
|                                                           |                                         | Warrants         |  | Warrants         |           | (excluding          
|Plan Category                                              |                                         | and Rights       |  | and Rights       |           | Column (a))         
|                                                           |                                         |                  |  |                  |           |                     
|Equity Compensation Plans Approved by
    Shareholders     |                                         |                  |  |                  |           |                      |   |       |  |  |  |          
|                                                           | 1999 Stock Option Plan                  |                  |  | 1,764,952        |           |                      | $ | 12.97 |  |  |  | 1,235,048 |          
|                                                           | Non-Employee Director Stock Option Plan |                  |  | 150,000          |           |                      |   | 11.67 |  |  |  | 150,000   |          
|                                                          
|Equity Compensation Plans Not Approved by
    Shareholders |                                         |                  |  |                  |           |                      |   |       |  |  |  |          
|                                                           | Options issued to a former director(*)  |                  |  | 250,000          |           |                      |   | 20.00 |  |  |  |          |          
|                                                           |                                         |                  |  |                  |           |                      |   |       |  |  |  |          
|                                                           |                                         | Total            |  |                  | 2,164,952 |                      |   |       |  |  |  |           | 1,385,048 | 
|                                                           |                                         |                  |  |                  |           |                      |   |       |  |  |  |          






|    |                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(*) | Upon the closing of our initial public offering
    on November 2, 1999, we granted a stock option to purchase
    250,000 shares of Class A common stock to Arnold
    Sheiffer for his past services as a director of SBS.
    Mr. Sheiffer served as a director of SBS from 1996 until
    1999.






|          |                                                   
|--------- | --------------------------------------------------
|Item  13. | Certain Relationships and Related
    Transactions

From August 1987 to September 2002, we leased a
two-bedroom furnished condominium apartment in midtown Manhattan
from Mr. Alarcón, Jr., our Chief Executive Officer,
President and Chairman of the Board

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of Directors, for a monthly rent of $9,000. In
September 2002, we terminated the apartment lease. The apartment
was used by Mr. Alarcón, Jr. and others while in New
York on SBS business. We believe that the lease for this
apartment was at the market rate.


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

The son of José Grimalt, one of our
directors, is employed by SBS as an operations manager. He was
paid $183,586 and a bonus of $5,000 for fiscal year 2002. As
part of his compensation, we also paid the leasing costs for an
automobile in the amount of $7,250. Mr. Grimalts
daughter is employed by SBS as a sales researcher and was paid
$70,000 for fiscal year 2002.

Jason L. Shrinsky, one of our directors, is a
partner of Kaye Scholer LLP, which firm has regularly
represented us as our legal counsel for more than eighteen years
and will continue to do so. See Item 12. Security
Ownership of Certain Beneficial Owners and Management.

Our corporate headquarters are 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. Alarcón, Jr. Since November 1, 2000, we have
been leasing our office space under a 10-year lease, with the
right to renew for two consecutive five-year terms. We are
currently paying a monthly rent of approximately $41,000 for
this office space. We believe that the monthly rent we pay is at
the market rate.

During the fiscal year ended December 29,
2002, we paid $139,775 of our share of expenses to South
Broadcasting System, Inc., which is owned by
Mr. Alarcón, Sr., one of our directors, for a special
event that was co-sponsored by SBS and South Broadcasting
System, Inc.




Item 14.     Controls
and Procedures

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

Subsequent to the evaluation by our principal
executive and financial officers, there were no significant
changes in internal controls or other factors that could
significantly affect these internal controls.




PART IV






|          |                                                                     
|--------- | --------------------------------------------------------------------
|Item  15. | 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

56



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##### Table of Contents





| |                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Consolidated Balance Sheets as of
    December 30, 2001 and December 29, 2002                                                                                                                                                                         
|
| | Consolidated Statements of Operations for the
    fiscal years ended September 24, 2000 and
    September 30, 2001, for the three-month transitional period
    ended December 30, 2001 and for the fiscal year ended
    December 29, 2002           
|
| | Consolidated Statements of Changes in
    Stockholders (Deficiency) Equity for the fiscal years
    ended September 30, 2001, for the three-month transitional
    period ended December 30, 2001 and for the fiscal year
    ended December 29, 2002
|
| | Consolidated Statements of Cash Flows for the
    fiscal years ended September 24, 2000 and
    September 30, 2001, for the three-month transitional period
    ended December 30, 2001 and for the fiscal year ended
    December 29, 2002           
|
| | 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

57



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.

AND SUBSIDIARIES





Index to Consolidated Financial
Statements

|                                                                                                                                                                                                                                                                              |  |      |      | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                                                                                                                                                                                                                              |  | Page
|                                                                                                                                                                                                                                                                              |  |     
|Independent Auditors Report                                                                                                                                                                                                                                                  |  |      | F-2  | 
|                                                                                                                                                                                                                                                                             
|Consolidated Balance Sheets as of
    December 30, 2001 and December 29, 2002                                                                                                                                                                                                 |  |      | F-3  | 
|                                                                                                                                                                                                                                                                             
|Consolidated Statements of Operations for the
    fiscal years ended September 24, 2000 and
    September 30, 2001, for the three-month transitional period
    ended December 30, 2001 and for the fiscal year ended
    December 29, 2002                                   |  |      | F-4  | 
|                                                                                                                                                                                                                                                                             
|Consolidated Statements of Changes in
    Stockholders (Deficiency) Equity for the fiscal years
    ended September 24, 2000 and September 30, 2001, for
    the three-month transitional period ended December 30, 2001
    and for the fiscal year ended December 29, 2002 |  |      | F-5  | 
|                                                                                                                                                                                                                                                                             
|Consolidated Statements of Cash Flows for the
    fiscal years ended September 24, 2000 and
    September 30, 2001, for the three-month transitional period
    ended December 30, 2001 and for the fiscal year ended
    December 29, 2002                                   |  |      | F-6  | 
|                                                                                                                                                                                                                                                                             
|Notes to Consolidated Financial Statements                                                                                                                                                                                                                                    |  |      | F-8  | 
|                                                                                                                                                                                                                                                                             
|Financial Statement Schedule 
    Valuation and Qualifying Accounts                                                                                                                                                                                                          |  |      | F-39 | 

F-1



---



##### Table of Contents






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
(the Company) 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 December 30, 2001 and December
29, 2002 and the results of their operations and their cash
flows for the fiscal years ended September 24, 2000 and
September 30, 2001, for the three-month transitional period
ended December 30, 2001 and for the fiscal year ended
December 29, 2002, 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.

As discussed in Note 15 to the consolidated
financial statements, effective December 31, 2001, the
Company adopted Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets.

/s/ KPMG LLP

Miami, Florida 
 February 26, 2003, except for the ninth 
        paragraph in
Note 3 which 
        is as of
March 12, 2003

F-2



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.

AND SUBSIDIARIES







CONSOLIDATED BALANCE SHEETS


December 30, 2001 and December 29,
2002


|                                                                                                                       |                                                                                                                                                                                        |                                      |                            |              |        |         |         |          |        |         | 
|---------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | -------------------------- | ------------ | ------ | ------- | ------- | -------- | ------ | ------- | 
|                                                                                                                       |                                                                                                                                                                                        | December 30,                         |                            | December 29,
|                                                                                                                       |                                                                                                                                                                                        | 2001                                 |                            | 2002        
|                                                                                                                       |                                                                                                                                                                                        |                                      |                            |             
|                                                                                                                       |                                                                                                                                                                                        |                                     
|                                                                                                                       |                                                                                                                                                                                        | (In thousands, except share         
|                                                                                                                       |                                                                                                                                                                                        | data)                               
|Assets                                                                                                                 |                                                                                                                                                                                        |                                      |                            |              |        |         |         |         
|Current assets:                                                                                                        |                                                                                                                                                                                        |                                      |                            |              |        |         |         |         
|                                                                                                                       | Cash and cash equivalents                                                                                                                                                              |                                      | $                          | 51,640       |        |         |         | 71,430   |       
|                                                                                                                       | Receivables:                                                                                                                                                                           |                                      |                            |              |        |         |         |          |       
|                                                                                                                       |                                                                                                                                                                                        | Trade                                |                            |              | 28,839 |         |         |          | 29,558 |        
|                                                                                                                       |                                                                                                                                                                                        | Barter                               |                            |              | 5,838  |         |         |          | 4,473  |        
|                                                                                                                       |                                                                                                                                                                                        |                                      |                            |              |        |         |         |         
|                                                                                                                       |                                                                                                                                                                                        |                                      | 34,677                     |              |        |         | 34,031  |         
|                                                                                                                       |                                                                                                                                                                                        | Less allowance for doubtful accounts |                            |              | 11,289 |         |         |          | 8,515  |        
|                                                                                                                       |                                                                                                                                                                                        |                                      |                            |              |        |         |         |         
|                                                                                                                       |                                                                                                                                                                                        |                                      | Net receivables            |              |        | 23,388  |         |          |        | 25,516  | 
|                                                                                                                       | Other current assets                                                                                                                                                                   |                                      |                            | 1,706        |        |         |         | 2,252    |       
|                                                                                                                       | Assets held for sale                                                                                                                                                                   |                                      |                            | 41,113       |        |         |         |         |       
|                                                                                                                       |                                                                                                                                                                                        |                                      |                            |              |        |         |         |         
|                                                                                                                       |                                                                                                                                                                                        |                                      | Total current assets       |              |        | 117,847 |         |          |        | 99,198  | 
|                                                                                                                      
|Property and equipment, net                                                                                            |                                                                                                                                                                                        |                                      | 23,424                     |              |        |         | 24,482  |         
|Intangible assets                                                                                                      |                                                                                                                                                                                        |                                      | 535,511                    |              |        |         | 502,644 |         
|Deferred financing costs, net of accumulated
    amortization of $2,093 in 2001 and $3,376 in 2002                     |                                                                                                                                                                                        |                                      | 10,040                     |              |        |         | 8,759   |         
|Other assets                                                                                                           |                                                                                                                                                                                        |                                      | 256                        |              |        |         | 201     |         
|                                                                                                                       |                                                                                                                                                                                        |                                      |                            |              |        |         |         |         
|                                                                                                                       |                                                                                                                                                                                        | $                                    | 687,078                    |              |        |         | 635,284 |         
|                                                                                                                       |                                                                                                                                                                                        |                                      |                            |              |        |         |         |         
|                                                                                                                      
|Liabilities and Stockholders
    Equity                                                                               |                                                                                                                                                                                        |                                      |                            |              |        |         |         |         
|Current liabilities:                                                                                                   |                                                                                                                                                                                        |                                      |                            |              |        |         |         |         
|                                                                                                                       | 12 1/2% senior unsecured notes, due 2002                                                                                                                                               |                                      | $                          | 100          |        |         |         |         |       
|                                                                                                                       | Current portion of other long-term debt                                                                                                                                                |                                      |                            | 191          |        |         |         | 208      |       
|                                                                                                                       | Accounts payable and accrued expenses                                                                                                                                                  |                                      |                            | 13,765       |        |         |         | 15,691   |       
|                                                                                                                       | Accrued interest                                                                                                                                                                       |                                      |                            | 5,316        |        |         |         | 5,226    |       
|                                                                                                                       | Deferred commitment fee                                                                                                                                                                |                                      |                            | 1,282        |        |         |         | 581      |       
|                                                                                                                       |                                                                                                                                                                                        |                                      |                            |              |        |         |         |         
|                                                                                                                       |                                                                                                                                                                                        |                                      | Total current liabilities  |              |        | 20,654  |         |          |        | 21,706  | 
|9 5/8% senior subordinated notes, due 2009,
    net of unamortized discount of $11,816 in 2001 and $10,846 in
    2002 |                                                                                                                                                                                        |                                      | 323,184                    |              |        |         | 324,154 |         
|Other long-term debt, less current portion                                                                             |                                                                                                                                                                                        |                                      | 4,156                      |              |        |         | 3,948   |         
|Deferred income taxes                                                                                                  |                                                                                                                                                                                        |                                      | 30,885                     |              |        |         | 58,051  |         
|                                                                                                                      
|Commitments and contingencies (notes 13, 14 and
    17)                                                                |                                                                                                                                                                                        |                                      |                            |              |        |         |         |         
|                                                                                                                      
|Stockholders equity:                                                                                                  |                                                                                                                                                                                        |                                      |                            |              |        |         |         |         
|                                                                                                                       | Class A common stock, $0.0001 par value.
    Authorized 100,000,000 shares; 36,862,705 shares issued and
    outstanding in 2001; 37,076,655 shares issued and outstanding in
    2002 |                                      |                            | 3            |        |         |         | 3        |       
|                                                                                                                       | Class B common stock, $0.0001 par value.
    Authorized 50,000,000 shares; 27,795,500 shares issued and
    outstanding in 2001; 27,605,150 shares issued and outstanding in
    2002  |                                      |                            | 3            |        |         |         | 3        |       
|                                                                                                                       | Additional paid-in capital                                                                                                                                                             |                                      |                            | 435,522      |        |         |         | 444,594  |       
|                                                                                                                       | Accumulated deficit                                                                                                                                                                    |                                      |                            | (127,329     | )      |         |         | (217,175 | )     
|                                                                                                                       |                                                                                                                                                                                        |                                      |                            |              |        |         |         |         
|                                                                                                                       |                                                                                                                                                                                        |                                      | Total stockholders equity |              |        | 308,199 |         |          |        | 227,425 | 
|                                                                                                                       |                                                                                                                                                                                        |                                      |                            |              |        |         |         |         
|                                                                                                                       |                                                                                                                                                                                        | $                                    | 687,078                    |              |        |         | 635,284 |         
|                                                                                                                       |                                                                                                                                                                                        |                                      |                            |              |        |         |         |         

See accompanying notes to consolidated financial
statements

F-3



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.

AND SUBSIDIARIES







CONSOLIDATED STATEMENTS OF
OPERATIONS


Fiscal years ended September 24, 2000 and
September 30, 2001,


the three-month transitional period ended
December 30, 2001


and the fiscal year ended December 29,
2002


|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |         |         |  
|------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | ------------- | ------- | ------------ | ------- | ------------ | ------- | - | ------ | ------ | ------ | - | ------- | ------- | ------- | -
|                                                                                                        |                                                                                                                                                 | Fiscal year                                                                                                                                                                 |         | Fiscal year   |         | Three-month  |         | Fiscal year 
|                                                                                                        |                                                                                                                                                 | September 24,                                                                                                                                                               |         | September 30, |         | December 30, |         | December 29,
|                                                                                                        |                                                                                                                                                 | 2000                                                                                                                                                                        |         | 2001          |         | 2001         |         | 2002        
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |             
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                            
|                                                                                                        |                                                                                                                                                 | (In thousands, except per share data)                                                                                                                                      
|Gross revenue                                                                                           |                                                                                                                                                 | $                                                                                                                                                                           | 139,252 |               |         |              | 148,415 |              |         |   | 37,491 |        |        |   | 159,548 |        
|Less agency commissions                                                                                 |                                                                                                                                                 |                                                                                                                                                                             | 18,012  |               |         |              | 17,867  |              |         |   | 4,461  |        |        |   | 19,303  |        
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|                                                                                                        |                                                                                                                                                 | Net revenue                                                                                                                                                                 |         |               | 121,240 |              |         |              | 130,548 |   |        |        | 33,030 |   |         |         | 140,245 |  
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|Operating expenses:                                                                                     |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|                                                                                                        | Engineering                                                                                                                                     |                                                                                                                                                                             |         | 2,509         |         |              |         | 3,227        |         |   |        | 688    |        |   |         | 3,793   |        
|                                                                                                        | Programming                                                                                                                                     |                                                                                                                                                                             |         | 13,720        |         |              |         | 18,473       |         |   |        | 4,168  |        |   |         | 20,714  |        
|                                                                                                        | Selling                                                                                                                                         |                                                                                                                                                                             |         | 25,656        |         |              |         | 41,788       |         |   |        | 11,412 |        |   |         | 42,157  |        
|                                                                                                        | General and administrative                                                                                                                      |                                                                                                                                                                             |         | 14,196        |         |              |         | 17,234       |         |   |        | 4,052  |        |   |         | 14,616  |        
|                                                                                                        | Corporate expenses                                                                                                                              |                                                                                                                                                                             |         | 20,730        |         |              |         | 10,515       |         |   |        | 2,387  |        |   |         | 13,546  |        
|                                                                                                        | Depreciation and amortization                                                                                                                   |                                                                                                                                                                             |         | 13,120        |         |              |         | 17,671       |         |   |        | 4,530  |        |   |         | 3,005   |        
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|                                                                                                        |                                                                                                                                                 | Total operating expenses                                                                                                                                                    |         |               | 89,931  |              |         |              | 108,908 |   |        |        | 27,237 |   |         |         | 97,831  |  
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|                                                                                                        |                                                                                                                                                 | Operating income from continuing operations                                                                                                                                 |         |               | 31,309  |              |         |              | 21,640  |   |        |        | 5,793  |   |         |         | 42,414  |  
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|Other (expense) income:                                                                                 |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|                                                                                                        | Interest expense, net                                                                                                                           |                                                                                                                                                                             |         | (19,495       | )       |              |         | (30,542      | )       |   |        | (8,197 | )      |   |         | (34,118 | )      
|                                                                                                        | Other, net                                                                                                                                      |                                                                                                                                                                             |         | (357          | )       |              |         | 497          |         |   |        | 650    |        |   |         | (720    | )      
|                                                                                                        | Gain on sale of stations                                                                                                                        |                                                                                                                                                                             |         | 55            |         |              |         |             |         |   |        |       |        |   |         |        |        
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|                                                                                                        |                                                                                                                                                 | Income (loss) from continuing operations
    before income taxes, discontinued operations, extraordinary item
    and cumulative effect of a change in accounting principle |         |               | 11,512  |              |         |              | (8,405  | ) |        |        | (1,754 | ) |         |         | 7,576   |  
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|Income tax expense (benefit)                                                                            |                                                                                                                                                 |                                                                                                                                                                             | 4,935   |               |         |              | (3,210  | )            |         |   | (633   | )      |        |   | 53,863  |        
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|                                                                                                        |                                                                                                                                                 | Income (loss) from continuing operations
    before discontinued operations, extraordinary item and
    cumulative effect of a change in accounting principle               |         |               | 6,577   |              |         |              | (5,195  | ) |        |        | (1,121 | ) |         |         | (46,287 | )
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|Discontinued operations:                                                                                |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|                                                                                                        | Loss from operations of discontinued radio
    station KTCY-FM, net of tax                                                                      |                                                                                                                                                                             |         | (32           | )       |              |         | (497         | )       |   |        | (106   | )      |   |         | (85     | )      
|                                                                                                        | Gain on the sale of KTCY-FM, net of tax of $3,407                                                                                               |                                                                                                                                                                             |         |              |         |              |         |             |         |   |        |       |        |   |         | 1,814   |        
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|                                                                                                        |                                                                                                                                                 | (Loss) income on discontinued operations, net of
    tax                                                                                                                    |         |               | (32     | )            |         |              | (497    | ) |        |        | (106   | ) |         |         | 1,729   |  
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|Extraordinary itemloss on extinguishment of
    debt, net of tax of $11,434 in 2000 and $1,167 in 2001 |                                                                                                                                                 |                                                                                                                                                                             | (17,151 | )             |         |              | (1,896  | )            |         |   |       |        |        |   |        |        
|Cumulative effect of a change in accounting
    principle for intangible assets, net of tax of $30,192  |                                                                                                                                                 |                                                                                                                                                                             |        |               |         |              |        |              |         |   |       |        |        |   | (45,288 | )      
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|                                                                                                        |                                                                                                                                                 | Net loss                                                                                                                                                                    |         | $             | (10,606 | )            |         |              | (7,588  | ) |        |        | (1,227 | ) |         |         | (89,846 | )
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|Net loss applicable to common stockholders                                                              |                                                                                                                                                 | $                                                                                                                                                                           | (38,978 | )             |         |              | (7,588  | )            |         |   | (1,227 | )      |        |   | (89,846 | )      
|Basic and diluted loss per common share:                                                                |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|                                                                                                        | Net loss per common share before discontinued
    operations, extraordinary item and cumulative effect of a change
    in accounting principle: |                                                                                                                                                                             | $       | (0.38         | )       |              |         | (0.08        | )       |   |        | (0.02  | )      |   |         | (0.72   | )      
|                                                                                                        | Net (loss) income per common share for
    discontinued operations                                                                              |                                                                                                                                                                             |         |              |         |              |         | (0.01        | )       |   |        |       |        |   |         | 0.03    |        
|                                                                                                        | Net loss per common share for extraordinary item                                                                                                |                                                                                                                                                                             |         | (0.29         | )       |              |         | (0.03        | )       |   |        |       |        |   |         |        |        
|                                                                                                        | Net loss per common share attributed to a
    cumulative effect of a change in accounting principle                                             |                                                                                                                                                                             |         |              |         |              |         |             |         |   |        |       |        |   |         | (0.70   | )      
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|                                                                                                        |                                                                                                                                                 | Net loss per common share                                                                                                                                                   |         | $             | (0.67   | )            |         |              | (0.12   | ) |        |        | (0.02  | ) |         |         | (1.39   | )
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        
|                                                                                                        | Weighted average common shares outstanding (basic
    and diluted)                                                                              |                                                                                                                                                                             |         | 58,163        |         |              |         | 64,096       |         |   |        | 64,658 |        |   |         | 64,670  |        
|                                                                                                        |                                                                                                                                                 |                                                                                                                                                                             |         |               |         |              |         |              |         |   |        |        |        |   |         |        

See accompanying notes to consolidated financial
statements

F-4



---



##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.

AND SUBSIDIARIES







CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS (DEFICIENCY) EQUITY


Fiscal years ended September 24, 2000 and
September 30, 2001, the three-month


transitional period ended December 30,
2001 and the fiscal year ended December 29, 2002


|                              |                                                                                   |                                   |            |              |  |            |   |       |  |            |            |               |   |              |   |              |   |  |         |         |  |  |          |         |   |  |        |       |  |  |         |         |  
|----------------------------- | --------------------------------------------------------------------------------- | --------------------------------- | ---------- | ------------ |  | ---------- | - | ----- |  | ---------- | ---------- | ------------- | - | ------------ | - | ------------ | - |  | ------- | ------- |  |  | -------- | ------- | - |  | ------ | ----- |  |  | ------- | ------- | -
|                              |                                                                                   |                                   |            |              |  |            |   |       |  |            |            |              
|                              |                                                                                   | Class A                           |            | Class B      |  |            |   |       |  |            |            |              
|                              |                                                                                   | common stock                      |            | common stock |  |            |   |       |  | Less loans |            | Total        
|                              |                                                                                   |                                   |            |              |  | Additional |   |       |  | receivable |            | stockholders
|                              |                                                                                   | Number                            |            | Par          |  | Number     |   | Par   |  | paid-in    |            | Accumulated   |   | from         |   | (deficiency)
|                              |                                                                                   | of shares                         |            | value        |  | of shares  |   | value |  | capital    |            | deficit       |   | stockholders |   | equity      
|                              |                                                                                   |                                   |            |              |  |            |   |       |  |            |            |               |   |              |   |             
|                              |                                                                                   |                                  
|                              |                                                                                   | (In thousands, except share data)
|Balance at September 26, 1999 |                                                                                   |                                   |           |              |  | $          |  |       |  |            | 39,448,550 |               |   | $            | 4 |              |   |  | 6,869   |         |  |  | (79,536  | )       |   |  | (2,459 | )     |  |  | (75,122 | )      
|                              | Issuance of common stock for initial public
    offering, net of expenses         |                                   |            | 25,731,210   |  |            |   | 2     |  |            |            | (4,963,100    | ) |              |   |             |   |  |         | 386,104 |  |  |          |        |   |  |        |      |  |  |         | 386,106 |  
|                              | Conversion of Class B common stock to
    Class A common stock                    |                                   |            | 6,668,550    |  |            |   | 1     |  |            |            | (6,668,550    | ) |              |   | (1           | ) |  |         |        |  |  |          |        |   |  |        |      |  |  |         |        |  
|                              | Preferred stock dividends                                                         |                                   |            |             |  |            |   |      |  |            |            |              |   |              |   |             |   |  |         |        |  |  |          | (18,475 | ) |  |        |      |  |  |         | (18,475 | )
|                              | Accretion of preferred stock                                                      |                                   |            |             |  |            |   |      |  |            |            |              |   |              |   |             |   |  |         |        |  |  |          | (9,897  | ) |  |        |      |  |  |         | (9,897  | )
|                              | Repayment of stockholder note receivable                                          |                                   |            |             |  |            |   |      |  |            |            |              |   |              |   |             |   |  |         |        |  |  |          |        |   |  |        | 2,459 |  |  |         | 2,459   |  
|                              | Net loss                                                                          |                                   |            |             |  |            |   |      |  |            |            |              |   |              |   |             |   |  |         |        |  |  |          | (10,606 | ) |  |        |      |  |  |         | (10,606 | )
|                              |                                                                                   |                                   |            |              |  |            |   |       |  |            |            |               |   |              |   |              |   |  |         |         |  |  |          |         |   |  |        |       |  |  |         |        
|Balance at September 24, 2000 |                                                                                   |                                   | 32,399,760 |              |  |            | 3 |       |  |            | 27,816,900 |               |   |              | 3 |              |   |  | 392,973 |         |  |  | (118,514 | )       |   |  |       |       |  |  | 274,465 |        
|                              |                                                                                   |                                   |            |              |  |            |   |       |  |            |            |               |   |              |   |              |   |  |         |         |  |  |          |         |   |  |        |       |  |  |         |        
|                              | Issuance of common stock as partial payment of
    radio stations acquisition     |                                   |            | 4,441,545    |  |            |   |      |  |            |            |              |   |              |   |             |   |  |         | 42,549  |  |  |          |        |   |  |        |      |  |  |         | 42,549  |  
|                              | Conversion of Class B common stock to
    Class A common stock                    |                                   |            | 21,400       |  |            |   |      |  |            |            | (21,400       | ) |              |   |             |   |  |         |        |  |  |          |        |   |  |        |      |  |  |         |        |  
|                              | Net loss                                                                          |                                   |            |             |  |            |   |      |  |            |            |              |   |              |   |             |   |  |         |        |  |  |          | (7,588  | ) |  |        |      |  |  |         | (7,588  | )
|                              |                                                                                   |                                   |            |              |  |            |   |       |  |            |            |               |   |              |   |              |   |  |         |         |  |  |          |         |   |  |        |       |  |  |         |        
|Balance at September 30, 2001 |                                                                                   |                                   | 36,862,705 |              |  |            | 3 |       |  |            | 27,795,500 |               |   |              | 3 |              |   |  | 435,522 |         |  |  | (126,102 | )       |   |  |       |       |  |  | 309,426 |        
|                              |                                                                                   |                                   |            |              |  |            |   |       |  |            |            |               |   |              |   |              |   |  |         |         |  |  |          |         |   |  |        |       |  |  |         |        
|                              | Net loss                                                                          |                                   |            |             |  |            |   |      |  |            |            |              |   |              |   |             |   |  |         |        |  |  |          | (1,227  | ) |  |        |      |  |  |         | (1,227  | )
|                              |                                                                                   |                                   |            |              |  |            |   |       |  |            |            |               |   |              |   |              |   |  |         |         |  |  |          |         |   |  |        |       |  |  |         |        
|Balance at December 30, 2001  |                                                                                   |                                   | 36,862,705 |              |  |            | 3 |       |  |            | 27,795,500 |               |   |              | 3 |              |   |  | 435,522 |         |  |  | (127,329 | )       |   |  |       |       |  |  | 308,199 |        
|                              |                                                                                   |                                   |            |              |  |            |   |       |  |            |            |               |   |              |   |              |   |  |         |         |  |  |          |         |   |  |        |       |  |  |         |        
|                              | Issuance of warrants as a partial payment towards
    a radio station acquisition |                                   |            |             |  |            |   |      |  |            |            |              |   |              |   |             |   |  |         | 8,922   |  |  |          |        |   |  |        |      |  |  |         | 8,922   |  
|                              | Issuance of Class A common stock from
    options exercised                       |                                   |            | 23,600       |  |            |   |      |  |            |            |              |   |              |   |             |   |  |         | 150     |  |  |          |        |   |  |        |      |  |  |         | 150     |  
|                              | Conversion of Class B common stock to
    Class A common stock                    |                                   |            | 190,350      |  |            |   |      |  |            |            | (190,350      | ) |              |   |             |   |  |         |        |  |  |          |        |   |  |        |      |  |  |         |        |  
|                              | Net loss                                                                          |                                   |            |             |  |            |   |      |  |            |            |              |   |              |   |             |   |  |         |        |  |  |          | (89,846 | ) |  |        |      |  |  |         | (89,846 | )
|                              |                                                                                   |                                   |            |              |  |            |   |       |  |            |            |               |   |              |   |              |   |  |         |         |  |  |          |         |   |  |        |       |  |  |         |        
|Balance at December 29, 2002  |                                                                                   |                                   | 37,076,655 |              |  | $          | 3 |       |  |            | 27,605,150 |               |   | $            | 3 |              |   |  | 444,594 |         |  |  | (217,175 | )       |   |  |       |       |  |  | 227,425 |        
|                              |                                                                                   |                                   |            |              |  |            |   |       |  |            |            |               |   |              |   |              |   |  |         |         |  |  |          |         |   |  |        |       |  |  |         |        

See accompanying notes to consolidated financial
statements

F-5



---



##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.

AND SUBSIDIARIES







CONSOLIDATED STATEMENTS OF CASH
FLOWS


Fiscal years ended September 24, 2000 and
September 30, 2001,


the three-month transitional period ended
December 30, 2001


and the fiscal year ended December 29,
2002


|                                      |                                                                                                 |                                                                                 |                                                                  |                                                            |        |              |          |              |        |        |         |        |       |        |        |         |        |        |        | 
|------------------------------------- | ----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ---------------------------------------------------------- | ------ | ------------ | -------- | ------------ | ------ | ------ | ------- | ------ | ----- | ------ | ------ | ------- | ------ | ------ | ------ | 
|                                      |                                                                                                 | Fiscal year                                                                     |                                                                  | Fiscal year                                                |        | Three-month  |          | Fiscal year 
|                                      |                                                                                                 | September 24,                                                                   |                                                                  | September 30,                                              |        | December 30, |          | December 29,
|                                      |                                                                                                 | 2000                                                                            |                                                                  | 2001                                                       |        | 2001         |          | 2002        
|                                      |                                                                                                 |                                                                                 |                                                                  |                                                            |        |              |          |             
|                                      |                                                                                                 |                                                                                
|                                      |                                                                                                 | (In thousands, except per share data)                                          
|Cash flows from operating activities: |                                                                                                 |                                                                                 |                                                                  |                                                            |        |              |          |              |        |        |         |        |       |        |        |        
|                                      | Net loss                                                                                        |                                                                                 | $                                                                | (10,606                                                    | )      |              |          | (7,588       | )      |        |         | (1,227 | )     |        |        | (89,846 | )     
|                                      |                                                                                                 |                                                                                 |                                                                  |                                                            |        |              |          |              |        |        |         |        |       |        |        |        
|                                      | Adjustments to reconcile net loss to net cash
    provided by operating activities:             |                                                                                 |                                                                  |                                                            |        |              |          |              |        |        |         |        |       |        |        |         |       
|                                      |                                                                                                 | Loss (income) from discontinued operations,
    net of tax                      |                                                                  |                                                            | 32     |              |          |              | 497    |        |         |        | 106   |        |        |         | (1,729 | )     
|                                      |                                                                                                 | Loss on extinguishment of debt                                                  |                                                                  |                                                            | 28,585 |              |          |              | 3,063  |        |         |        |      |        |        |         |       |       
|                                      |                                                                                                 | Cumulative effect of a change in accounting
    principle for intangible assets |                                                                  |                                                            |       |              |          |              |       |        |         |        |      |        |        |         | 75,480 |       
|                                      |                                                                                                 | Loss on disposal of fixed assets                                                |                                                                  |                                                            |       |              |          |              | 19     |        |         |        |      |        |        |         | 21     |       
|                                      |                                                                                                 | Gain on sale of radio stations                                                  |                                                                  |                                                            | (55    | )            |          |              |       |        |         |        |      |        |        |         |       |       
|                                      |                                                                                                 | Depreciation and amortization                                                   |                                                                  |                                                            | 13,120 |              |          |              | 17,671 |        |         |        | 4,530 |        |        |         | 3,005  |       
|                                      |                                                                                                 | Provision for (reduction of) doubtful accounts                                  |                                                                  |                                                            | 4,048  |              |          |              | 4,344  |        |         |        | 1,641 |        |        |         | (1,493 | )     
|                                      |                                                                                                 | Amortization of debt discount                                                   |                                                                  |                                                            | 61     |              |          |              | 290    |        |         |        | 225   |        |        |         | 970    |       
|                                      |                                                                                                 | Amortization of deferred financing costs                                        |                                                                  |                                                            | 1,069  |              |          |              | 1,370  |        |         |        | 321   |        |        |         | 1,281  |       
|                                      |                                                                                                 | Accretion of interest to principal on other
    long-term debt                  |                                                                  |                                                            | 151    |              |          |              |       |        |         |        |      |        |        |         |       |       
|                                      |                                                                                                 | (Decrease) increase in deferred income taxes                                    |                                                                  |                                                            | (6,749 | )            |          |              | (5,498 | )      |         |        | (915  | )      |        |         | 22,696 |       
|                                      |                                                                                                 | Decrease in deferred commitment fee                                             |                                                                  |                                                            | (190   | )            |          |              | (702   | )      |         |        | (175  | )      |        |         | (701   | )     
|                                      |                                                                                                 | Changes in operating assets and liabilities, net
    of acquisitions:           |                                                                  |                                                            |        |              |          |              |        |        |         |        |       |        |        |         |        |       
|                                      |                                                                                                 |                                                                                 | Increase in receivables                                          |                                                            |        | (4,316       | )        |              |        | (2,273 | )       |        |       | (1,905 | )      |         |        | (1,160 | )     
|                                      |                                                                                                 |                                                                                 | (Increase) decrease in other current assets                      |                                                            |        | (2,150       | )        |              |        | 1,013  |         |        |       | (191   | )      |         |        | (552   | )     
|                                      |                                                                                                 |                                                                                 | Decrease (increase) in other assets                              |                                                            |        | 7            |          |              |        | (61    | )       |        |       | (7     | )      |         |        | 55     |       
|                                      |                                                                                                 |                                                                                 | (Decrease) increase in accounts payable and
    accrued expenses |                                                            |        | (239         | )        |              |        | 1,202  |         |        |       | (1,621 | )      |         |        | 1,579  |       
|                                      |                                                                                                 |                                                                                 | Increase (decrease) in accrued interest                          |                                                            |        | 7,092        |          |              |        | 2,585  |         |        |       | (8,302 | )      |         |        | (90    | )     
|                                      |                                                                                                 |                                                                                 |                                                                  |                                                            |        |              |          |              |        |        |         |        |       |        |        |        
|                                      |                                                                                                 |                                                                                 |                                                                  | Total adjustments                                          |        |              | 40,466   |              |        |        | 23,520  |        |       |        | (6,293 | )       |        |        | 99,362 | 
|                                      |                                                                                                 |                                                                                 |                                                                  |                                                            |        |              |          |              |        |        |         |        |       |        |        |        
|                                      |                                                                                                 |                                                                                 |                                                                  | Net cash (used in) provided by continuing
    operations   |        |              | 29,860   |              |        |        | 15,932  |        |       |        | (7,520 | )       |        |        | 9,516  | 
|                                      |                                                                                                 |                                                                                 |                                                                  | Net cash (used in) provided by discontinued
    operations |        |              | (1,188   | )            |        |        | 1,091   |        |       |        | 143    |         |        |        | 1,150  | 
|                                      |                                                                                                 |                                                                                 |                                                                  |                                                            |        |              |          |              |        |        |         |        |       |        |        |        
|                                      |                                                                                                 |                                                                                 |                                                                  | Net cash (used in) provided by operating
    activities    |        |              | 28,672   |              |        |        | 17,023  |        |       |        | (7,377 | )       |        |        | 10,666 | 
|                                      |                                                                                                 |                                                                                 |                                                                  |                                                            |        |              |          |              |        |        |         |        |       |        |        |        
|Cash flows from investing activities: |                                                                                                 |                                                                                 |                                                                  |                                                            |        |              |          |              |        |        |         |        |       |        |        |        
|                                      | Proceeds from sale of radio stations, net of
    disposal costs of $10 in 2000 and $466 in 2002 |                                                                                 |                                                                  | 690                                                        |        |              |          |             |        |        |         |       |       |        |        | 34,534  |       
|                                      | Additions to property and equipment                                                             |                                                                                 |                                                                  | (3,680                                                     | )      |              |          | (4,297       | )      |        |         | (800   | )     |        |        | (3,991  | )     
|                                      | Additions to property and equipment of
    discontinued operations                              |                                                                                 |                                                                  | (113                                                       | )      |              |          | (1,298       | )      |        |         | (30    | )     |        |        | (3      | )     
|                                      | Acquisition of radio stations, net of cash
    acquired of $1,048 in 2000                       |                                                                                 |                                                                  | (80,826                                                    | )      |              |          | (3,413       | )      |        |         |       |       |        |        |        |       
|                                      | Advances on purchase price of radio stations                                                    |                                                                                 |                                                                  | (114,121                                                   | )      |              |          | (25,473      | )      |        |         | (7     | )     |        |        | (21,275 | )     
|                                      | Advances on purchase price of radio stations of
    discontinued operations                     |                                                                                 |                                                                  | (7,000                                                     | )      |              |          | (700         | )      |        |         |       |       |        |        |        |       
|                                      |                                                                                                 |                                                                                 |                                                                  |                                                            |        |              |          |              |        |        |         |        |       |        |        |        
|                                      |                                                                                                 |                                                                                 |                                                                  | Net cash (used in) provided by investing
    activities    |        |              | (205,050 | )            |        |        | (35,181 | )      |       |        | (837   | )       |        |        | 9,265  | 
|                                      |                                                                                                 |                                                                                 |                                                                  |                                                            |        |              |          |              |        |        |         |        |       |        |        |        

F-6



---



##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH
FLOWS  (Continued)

Fiscal years ended September 24, 2000 and
September 30, 2001,


the three-month transitional period ended
December 30, 2001


and the fiscal year ended December 29,
2002


|                                                 |                                                                                                                |                                                          |        |               |         |              |        |              |        |  |        |        |        |   |        |        |        |  
|------------------------------------------------ | -------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | ------ | ------------- | ------- | ------------ | ------ | ------------ | ------ |  | ------ | ------ | ------ | - | ------ | ------ | ------ | -
|                                                 |                                                                                                                | Fiscal year                                              |        | Fiscal year   |         | Three-month  |        | Fiscal year 
|                                                 |                                                                                                                | September 24,                                            |        | September 30, |         | December 30, |        | December 29,
|                                                 |                                                                                                                | 2000                                                     |        | 2001          |         | 2001         |        | 2002        
|                                                 |                                                                                                                |                                                          |        |               |         |              |        |             
|                                                 |                                                                                                                |                                                         
|                                                 |                                                                                                                | (In thousands, except per share data)                   
|Cash flows from financing activities:            |                                                                                                                |                                                          |        |               |         |              |        |              |        |  |        |        |        |   |        |       
|                                                 | Retirement of senior unsecured notes                                                                           |                                                          | $      | (190,295      | )       |              |        |             |        |  |        |       |        |   |        |       |       
|                                                 | Retirement of Series A senior exchangeable
    preferred stock                                                 |                                                          |        | (265,613      | )       |              |        |             |        |  |        |       |        |   |        |       |       
|                                                 | Proceeds from Class A common stock                                                                             |                                                          |        | 388,071       |         |              |        |             |        |  |        |       |        |   |        |       |       
|                                                 | Proceeds from Class A stock options exercised                                                                  |                                                          |        |              |         |              |        |             |        |  |        |       |        |   |        | 150    |       
|                                                 | Repayments of other long-term debt                                                                             |                                                          |        | (4,511        | )       |              |        | (171         | )      |  |        | (46    | )      |   |        | (291   | )     
|                                                 | Proceeds from senior notes, net of financing
    costs of $8,503 in 2000 and $3,630 in 2001                    |                                                          |        | 227,051       |         |              |        | 84,039       |        |  |        |       |        |   |        |       |       
|                                                 | Proceeds from senior credit facilities, net of
    financing costs of $3,200                                   |                                                          |        | 61,800        |         |              |        |             |        |  |        |       |        |   |        |       |       
|                                                 | Repayment of senior credit facilities                                                                          |                                                          |        |              |         |              |        | (65,000      | )      |  |        |       |        |   |        |       |       
|                                                 | Increase in deferred financing costs                                                                           |                                                          |        |              |         |              |        | (369         | )      |  |        |       |        |   |        |       |       
|                                                 | Repayments of loans receivable from stockholders                                                               |                                                          |        | 2,459         |         |              |        |             |        |  |        |       |        |   |        |       |       
|                                                 |                                                                                                                |                                                          |        |               |         |              |        |              |        |  |        |        |        |   |        |       
|                                                 |                                                                                                                | Net cash provided by (used in) financing
    activities  |        |               | 218,962 |              |        |              | 18,499 |  |        |        | (46    | ) |        |        | (141   | )
|                                                 |                                                                                                                |                                                          |        |               |         |              |        |              |        |  |        |        |        |   |        |       
|                                                 |                                                                                                                | Net increase (decrease) in cash and cash
    equivalents |        |               | 42,584  |              |        |              | 341    |  |        |        | (8,260 | ) |        |        | 19,790 |  
|Cash and cash equivalents at beginning of period |                                                                                                                |                                                          | 16,975 |               |         |              | 59,559 |              |        |  | 59,900 |        |        |   | 51,640 |       
|                                                 |                                                                                                                |                                                          |        |               |         |              |        |              |        |  |        |        |        |   |        |       
|Cash and cash equivalents at end of period       |                                                                                                                | $                                                        | 59,559 |               |         |              | 59,900 |              |        |  | 51,640 |        |        |   | 71,430 |       
|                                                 |                                                                                                                |                                                          |        |               |         |              |        |              |        |  |        |        |        |   |        |       
|Supplemental cash flows information:             |                                                                                                                |                                                          |        |               |         |              |        |              |        |  |        |        |        |   |        |       
|                                                 | Interest paid during the period                                                                                |                                                          | $      | 17,408        |         |              |        | 29,754       |        |  |        | 16,230 |        |   |        | 32,663 |       
|                                                 |                                                                                                                |                                                          |        |               |         |              |        |              |        |  |        |        |        |   |        |       
|                                                 | Net income taxes paid (received) during the
    period                                                         |                                                          | $      | 2,408         |         |              |        | (137         | )      |  |        | 283    |        |   |        | (13    | )     
|                                                 |                                                                                                                |                                                          |        |               |         |              |        |              |        |  |        |        |        |   |        |       
|Noncash investing and financing activities:      |                                                                                                                |                                                          |        |               |         |              |        |              |        |  |        |        |        |   |        |       
|                                                 | Issuance of warrants towards the acquisition of a
    radio station                                            |                                                          | $      |              |         |              |        |             |        |  |        |       |        |   |        | 8,922  |       
|                                                 |                                                                                                                |                                                          |        |               |         |              |        |              |        |  |        |        |        |   |        |       
|                                                 | Issuance of note as payment towards purchase
    price of building                                             |                                                          | $      | 3,700         |         |              |        |             |        |  |        |       |        |   |        |       |       
|                                                 |                                                                                                                |                                                          |        |               |         |              |        |              |        |  |        |        |        |   |        |       
|                                                 | Discount on senior notes                                                                                       |                                                          | $      |              |         |              |        | 12,331       |        |  |        |       |        |   |        |       |       
|                                                 |                                                                                                                |                                                          |        |               |         |              |        |              |        |  |        |        |        |   |        |       
|                                                 | Deferred tax liability recorded for difference in
    assigned values and tax basis of radio stations acquired |                                                          | $      | 22,201        |         |              |        | 10,100       |        |  |        |       |        |   |        |       |       
|                                                 |                                                                                                                |                                                          |        |               |         |              |        |              |        |  |        |        |        |   |        |       
|                                                 | Issuance of Class A common stock for
    acquisition of radio stations                                         |                                                          | $      |              |         |              |        | 8,643        |        |  |        |       |        |   |        |       |       
|                                                 |                                                                                                                |                                                          |        |               |         |              |        |              |        |  |        |        |        |   |        |       
|                                                 | Issuance of Class A common stock for
    acquisition of discontinued operations KTCY-FM                        |                                                          | $      |              |         |              |        | 33,906       |        |  |        |       |        |   |        |       |       
|                                                 |                                                                                                                |                                                          |        |               |         |              |        |              |        |  |        |        |        |   |        |       

See accompanying notes to consolidated financial
statements

F-7



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.

AND SUBSIDIARIES







NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


December 30, 2001 and December 29,
2002


(1) Organization and Nature of
Business

Spanish Broadcasting System, Inc., a Delaware
corporation, and subsidiaries (the Company) owns and/or operates
24 radio stations serving seven of the top-ten U.S. Hispanic
markets, which include Los Angeles, New York, Puerto Rico,
Miami, Chicago, San Francisco, and San Antonio markets. Two
radio stations are programmed by an unrelated third-party
through a time brokerage agreement. The Company also programs
one Spanish-language radio station serving the Los Angeles
market under a time brokerage agreement (see note 3). As part of
its operating business, the Company operates LaMusica.com, a
bilingual Spanish-English Internet Web-site providing content
related to Latin music, entertainment, news and culture.

The primary source of revenue is the sale of
advertising time on the Companys radio stations to local
and national advertisers. Revenue is affected primarily by the
advertising rates that the Companys radio stations are
able to charge, as well as the overall demand for radio
advertising time in each respective market. Seasonal net
broadcasting revenue fluctuations are common in the radio
broadcasting industry and are due to fluctuations in advertising
expenditures by local and national advertisers. Typically for
the radio broadcasting industry, the first calendar quarter
generally produces the lowest revenue.

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.

On November 6, 2001, the Board of Directors
approved a resolution to change the Companys fiscal
year-end from the last Sunday in September of each calendar year
to the last Sunday in December of each calendar year. The
Company filed a transition report on Form 10-Q covering the
transitional period from October 1, 2001 through
December 30, 2001 (transitional period) in accordance with
SEC Rules and Regulations, Financial Reporting Releases 102.5,
Issuers Change of Fiscal Year. The audited
financial statements for the transitional period are included in
the accompanying consolidated financial statements.

The Company reports revenue and expenses on a
broadcast calendar basis. Broadcast calendar basis
means a period ending on the last Sunday of each reporting
period. For fiscal years ended September 24, 2000,
September 30, 2001 and December 29, 2002, the Company
reported 52 weeks, 53 weeks and 52 weeks of revenues
and expenses, respectively. For the three-month transitional
period ended December 30, 2001, the Company reported
13 weeks of revenues and expenses.

(b) Revenue Recognition

The Company recognizes broadcasting revenue as
advertisements are aired on its radio stations, which are
subject to meet certain conditions such as persuasive evidence
that an agreement exists, a fixed and determinable price and
reasonable assurance of collection. Agency commissions are
calculated based on a stated percentage applied to gross billing
revenue. Advertisers remit the gross billing amount to the
agency then the agency remits gross billings less their
commission to the Company when the advertisement is not

F-8



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

placed directly by the advertiser. Payments
received in advance of being earned are recorded as unearned
revenue.

(c) Property and
Equipment

Property and equipment are stated at cost, less
accumulated depreciation and amortization. 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) Impairment or Disposal of
Long-Lived Assets

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, which addresses financial accounting
and reporting for the impairment and disposal of long-lived
assets. SFAS No. 144 requires that long-lived assets be
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset.
If the carrying amount of an asset exceeds its estimated future
cash flows, an impairment charge is recognized in the amount by
which the carrying amount of the asset exceeds the estimated
fair value of the asset. SFAS No. 144 also requires
companies to separately report discontinued operations and
extends the reporting requirements to a component of an entity
that either has been disposed of (by sale, abandonment, or in a
distribution to owners) or is classified as held for sale.
Assets to be disposed of are reported at the lower of the
carrying amount or estimated fair value less costs to sell. The
Company adopted SFAS No. 144 on December 31, 2001. See
note 4 for the sale of station.

(e) Intangible Assets

Intangible assets primarily represent the portion
of the purchase price of station acquisitions allocated to FCC
licenses of those stations. The Company has concluded that its
FCC licenses qualify as indefinite-life intangible assets under
SFAS No. 142. The Company at least annually assesses the
recoverability of the carrying amount of intangible assets,
including goodwill, in accordance with SFAS No. 142,
Goodwill and Other Intangible Assets. These annual
assessments are based on a discounted cash flow model
incorporating various market assumptions and types of signals,
and assume the FCC licenses are acquired and operated by a
third-party. Under SFAS No. 142, goodwill is deemed to be
impaired if the net book value of the reporting unit exceeds its
estimated fair value. The Company has determined that it has one
reporting unit under SFAS No. 142. See note 15 for New
Accounting Pronouncements and Cumulative Effect of Accounting
Change.

(f) Deferred Financing
Costs

Deferred financing costs relate to the
refinancing of the Companys debt in October 1999 and
additional debt financing obtained in July 2000 and June 2001
(see notes 8 and 9). During fiscal years ended
September 24, 2000 and September 30, 2001, the Company
recognized extraordinary losses due to write-offs of deferred
financing costs related to debt financing obtained in June 1994,
March 1997 and July 2000 (see notes 8 and 9).

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

F-9



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(g) Barter Transactions

Barter transactions represent advertising time
exchanged for promotional items, advertising, supplies,
equipment and services. Revenue 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. Barter revenue amounted to $4.2
million, $15.5 million, and $13.1 million for the fiscal years
ended September 24, 2000, September 30, 2001 and
December 29, 2002, respectively. Barter revenue amounted to $4.1
million for the three-month transitional period ended
December 30, 2001. Barter expense amounted to $4.2 million,
$15.9 million, and $12.2 million for the fiscal years ended
September 24, 2000, September 30, 2001 and December
29, 2002, respectively. Barter expense amounted to $4.4 million
for the three-month transitional period ended December 30,
2001.

Unearned barter revenue consists of the excess of
the aggregate fair value of goods or services received by the
Company, over the aggregate fair value of advertising time
delivered by the Company. Unearned barter revenue totaled
approximately $1.5 million and $0.8 million at December 30,
2001 and December 29, 2002, respectively. These amounts are
included in accounts payable and accrued expenses in the
accompanying consolidated balance sheets.

During fiscal year ended September 24, 2000,
the Company entered into a barter transaction with an Internet
Service Provider (ISP) whereby the ISP agreed to 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. This barter agreement concluded in the fiscal year
ended December 29, 2002.

(h) Cash and Cash
Equivalents

Cash and cash equivalents consist of cash, money
market accounts and certificates of deposit at various
commercial banks. All cash equivalents have original maturities
of 90 days or less.

(i) Income Taxes

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

F-10



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

to be remitted on a monthly basis over a
three-year period, through January 2000. During fiscal year
ended September 24, 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 accounting principles generally accepted in the
United States of America 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 Business and
Credit Risks

The Companys operations are conducted in
several markets across the country. The Companys New York
and Miami markets account for more than half of net revenue for
the fiscal years ended September 24, 2000,
September 30, 2001 and December 29, 2002 and for the
three-month transitional period ended December 30, 2001.
The Companys credit risk is spread across a large number
of customers, none of which account for a significant volume of
revenue or outstanding receivables. The Company does not
normally require collateral on credit sales; however, a credit
analysis is performed before extending substantial credit to any
customer. The Company establishes an allowance for doubtful
accounts based on customers payment history and perceived
credit risks.

(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. 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
income 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
periods presented since their effect would be anti-dilutive.
Common stock equivalents for the fiscal years ended
September 24, 2000, September 30, 2001 and
December 29, 2002 amounted to 104,291, 44,327 and 198,157,
respectively. Common stock equivalents for the three-month
transitional period ended December 30, 2001 amounted to
109,081. The following table summarizes the net loss applicable
to common stockholders and the net loss per common share for the
fiscal

F-11



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

years ended September 24, 2000 and
September 30, 2001, for the three-month transitional period
ended December 30, 2001 and for the fiscal year ended
December 29, 2002 (in thousands, except per share data):

|                                                                                                                                                              |                                                                                                                                                |                                                                                                                                                       |                                            |                           |         |              |        |              |        |        |        |       |        |        |         |       |         |         |       |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------- | ------- | ------------ | ------ | ------------ | ------ | ------ | ------ | ----- | ------ | ------ | ------- | ----- | ------- | ------- | ----- | -
|                                                                                                                                                              |                                                                                                                                                | Fiscal year                                                                                                                                           |                                            | Fiscal year               |         | Three-month  |        | Fiscal year 
|                                                                                                                                                              |                                                                                                                                                | September 24,                                                                                                                                         |                                            | September 24,             |         | December 30, |        | December 30,
|                                                                                                                                                              |                                                                                                                                                | 2000                                                                                                                                                  |                                            | 2001                      |         | 2001         |        | 2002        
|                                                                                                                                                              |                                                                                                                                                |                                                                                                                                                       |                                            |                           |         |              |        |             
|Income (loss) from continuing operations before
    discontinued operations, extraordinary item and cumulative
    effect of a change in accounting principle |                                                                                                                                                | $                                                                                                                                                     | 6,577                                      |                           |         |              | (5,195 | )            |        |        | (1,121 | )     |        |        | (46,287 | )    
|                                                                                                                                                              | Less accretion of preferred stock                                                                                                              |                                                                                                                                                       |                                            | 9,897                     |         |              |        |             |        |        |        |      |        |        |         |      |        
|                                                                                                                                                              | Less dividends on preferred stock                                                                                                              |                                                                                                                                                       |                                            | 18,475                    |         |              |        |             |        |        |        |      |        |        |         |      |        
|                                                                                                                                                              |                                                                                                                                                |                                                                                                                                                       |                                            |                           |         |              |        |              |        |        |        |       |        |        |         |      
|                                                                                                                                                              |                                                                                                                                                | Loss from continuing operations before
    discontinued operations, extraordinary item, and cumulative
    effect of a change in accounting principle |                                            |                           | (21,795 | )            |        |              | (5,195 | )      |        |       | (1,121 | )      |         |       | (46,287 | )      
|Discontinued operations                                                                                                                                       |                                                                                                                                                |                                                                                                                                                       | (32                                        | )                         |         |              | (497   | )            |        |        | (106   | )     |        |        | 1,729   |      
|Extraordinary item                                                                                                                                            |                                                                                                                                                |                                                                                                                                                       | (17,151                                    | )                         |         |              | (1,896 | )            |        |        |       |       |        |        |        |      
|Cumulative effect of a change in accounting
    principle, net of tax                                                                                         |                                                                                                                                                |                                                                                                                                                       |                                           |                           |         |              |       |              |        |        |       |       |        |        | (45,288 | )    
|                                                                                                                                                              |                                                                                                                                                |                                                                                                                                                       |                                            |                           |         |              |        |              |        |        |        |       |        |        |         |      
|                                                                                                                                                              |                                                                                                                                                |                                                                                                                                                       | Net loss applicable to common stockholders |                           | $       | (38,978      | )      |              |        | (7,588 | )      |       |        | (1,227 | )       |       |         | (89,846 | )    
|                                                                                                                                                              |                                                                                                                                                |                                                                                                                                                       |                                            |                           |         |              |        |              |        |        |        |       |        |        |         |      
|Weighted average common shares outstanding (basic
    and diluted)                                                                                            |                                                                                                                                                |                                                                                                                                                       | 58,163                                     |                           |         |              | 64,096 |              |        |        | 64,658 |       |        |        | 64,670  |      
|Basic and diluted loss per common share:                                                                                                                      |                                                                                                                                                |                                                                                                                                                       |                                            |                           |         |              |        |              |        |        |        |       |        |        |         |      
|                                                                                                                                                              | Net loss per common share before discontinued
    operations, extraordinary item and cumulative effect of a change
    in accounting principle |                                                                                                                                                       | $                                          | (0.38                     | )       |              |        | (0.08        | )      |        |        | (0.02 | )      |        |         | (0.72 | )      
|                                                                                                                                                              | Net (loss) income per common share for
    discontinued operations                                                                             |                                                                                                                                                       |                                            |                          |         |              |        | (0.01        | )      |        |        |      |        |        |         | 0.03  |        
|                                                                                                                                                              | Net loss per common share for extraordinary item                                                                                               |                                                                                                                                                       |                                            | (0.29                     | )       |              |        | (0.03        | )      |        |        |      |        |        |         |      |        
|                                                                                                                                                              | Net loss per common share for cumulative effect
    of a change in accounting principle                                                        |                                                                                                                                                       |                                            |                          |         |              |        |             |        |        |        |      |        |        |         | (0.70 | )      
|                                                                                                                                                              |                                                                                                                                                |                                                                                                                                                       |                                            |                           |         |              |        |              |        |        |        |       |        |        |         |      
|                                                                                                                                                              |                                                                                                                                                |                                                                                                                                                       |                                            | Net loss per common share |         | $            | (0.67  | )            |        |        | (0.12  | )     |        |        | (0.02   | )     |         |         | (1.39 | )
|                                                                                                                                                              |                                                                                                                                                |                                                                                                                                                       |                                            |                           |         |              |        |              |        |        |        |       |        |        |         |      

(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 and other current assets, 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.

The estimated fair value of the Companys
senior notes are as follows (in millions):

|                                 |  |                   |       |                   |  |          |       |            |  |   |       |  |  |  |       | 
|-------------------------------- |  | ----------------- | ----- | ----------------- |  | -------- | ----- | ---------- |  | - | ----- |  |  |  | ----- | 
|                                 |  |                   |       |                  
|                                 |  | December 30, 2001 |       | December 29, 2002
|                                 |  |                   |       |                  
|                                 |  | Gross             |       |                   |  | Gross    |       |           
|                                 |  | carrying          |       |                   |  | carrying |       |           
|                                 |  | amount            |       | Fair value        |  | amount   |       | Fair value
|                                 |  |                   |       |                   |  |          |       |           
|9 5/8% Senior subordinated notes |  | $                 | 335.0 |                   |  |          | 331.7 |            |  | $ | 335.0 |  |  |  | 346.7 | 

F-12



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The fair value estimates of the senior notes 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

During fiscal year September 24, 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 and the
expanded disclosure requirements of SFAS No. 148,
Accounting for Stock-Based Compensation 
Transition and Disclosure. See notes 12(c) and 18.

(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 stockholders. The Company believes it has only
one reportable segment.

(3) Acquisitions

On January 14, 2000, Spanish Broadcasting
System of Puerto Rico., Inc., a Delaware corporation, and a
wholly owned subsidiary of the Company, completed the purchase
from AMFM Operating Inc. (AMFM) of all of the outstanding
capital stock of nine subsidiaries of AMFM (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 Primedia Station Group owns and operates eight radio
stations in Puerto Rico: WIOA-FM, WIOB-FM, WIOC-FM, WODA-FM
(formerly WCOM-FM), WZMT-FM, WZNT-FM, WNOD-FM (formerly
WOYE-FM), and WEGM-FM (formerly WCTA-FM).

F-13



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                                      |  |   |         |  
|------------------------------------- |  | - | ------- | -
|Account receivable                    |  | $ | 2,500   |  
|Prepaid expenses and other            |  |   | 150     |  
|Property and equipment                |  |   | 2,200   |  
|FCC licenses                          |  |   | 89,547  |  
|Goodwill                              |  |   | 22,201  |  
|Accounts payable and accrued expenses |  |   | (2,292  | )
|Income taxes payable                  |  |   | (1,279  | )
|Deferred taxes payable                |  |   | (22,201 | )
|                                      |  |   |         |  
|                                      |  | $ | 90,826  |  
|                                      |  |   |         |  



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 year September 24, 2000, 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 would have occurred had the acquisitions been
    made as of those dates or of results which may occur in the
    future.

|                                                                                            |  |               |         |  
|------------------------------------------------------------------------------------------- |  | ------------- | ------- | -
|                                                                                            |  | Year ended   
|                                                                                            |  | September 24,
|Pro forma disclosures (in thousands, except per share data)                                 |  | 2000         
|                                                                                            |  |              
|                                                                                            |  | (unaudited)  
|Net revenue from continuing operations                                                      |  | $             | 125,161 |  
|Income from continuing operations before
    discontinued operations and extraordinary item |  |               | 6,845   |  
|Net loss applicable to common stockholders                                                  |  |               | (38,820 | )
|Net loss per common share                                                                   |  |               | (0.67   | )

On May 8, 2000, the Company 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, the owner
of radio stations KZAB-FM (formerly KFSG-FM) and KZBA-FM
(formerly KFSB-FM) serving the Los Angeles, California market,
KPTI-FM (formerly KXJO-FM) serving the San Francisco, California
market and KSAH-AM serving the San Antonio, Texas market. On
May 8, 2000, the Company also entered into (1) an
asset purchase agreement with New World Broadcasters Corp., a
Texas corporation and an affiliate of RCI (New World), to
acquire radio station KTCY-FM serving the Dallas, Texas market,
and (2) a stock purchase agreement with New World and 910
Broadcasting Corp., a Texas corporation and a wholly owned
subsidiary of New World (910 Broadcasting), to acquire all the
outstanding capital stock of 910 Broadcasting, the owner and
operator of radio station KXEB-AM serving the Dallas, Texas
market (the KXEB-AM Stock Purchase Agreement).

On November 10, 2000, the Company completed
the purchase of all the outstanding capital stock of RCI and the
purchase of radio station KTCY-FM for total consideration of
$167.8 million, consisting of $42.6 million of Class A
common stock and $125.2 million in cash, including closing costs
of $2.8 million. As of September 24, 2000, the Company had
made advances of $121.7 million in cash towards the purchase
price. The consideration paid for these acquisitions was
determined through arms-length negotiations among the
Company, RCI, the shareholders of RCI and New World. The Company
financed these acquisitions with previously unissued shares of
Class A common stock, cash on hand and borrowings under a
then effective senior credit facility. Substantially all of the
purchase price for these acquisitions was allocated to FCC

F-14



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

licenses and goodwill (included in intangible
assets), with $10.1 million allocated to deferred tax liability
in the accompanying consolidated balance sheets.

Due to the lack of continuity in the operations
of the radio stations acquired in the purchase of all the
capital stock of RCI (the RCI Stations), prior to and after
RCIs acquisition of the RCI Stations, at which time the
Company began operating the RCI Stations under time brokerage
agreements until closing on November 10, 2000, the Company
has not included separate historical financial statements or pro
forma financial information relating to the acquisition of the
RCI Stations.

The Company programmed KXEB-AM under a
time-brokerage agreement with New World and 910 Broadcasting
Corp. from May 8, 2000 to July 31, 2001. On July 3,
2001, New World and 910 Broadcasting sent a notice to the
Company in which they purported to terminate the KXEB-AM Stock
Purchase Agreement. On August 1, 2001, the Company filed a
complaint in the United States District Court for the Southern
District of New York against New World and 910 Broadcasting for
breach of the stock purchase agreement and time brokerage
agreement. On that same day, the Company also filed a motion for
a preliminary injunction preventing New World and 910
Broadcasting from selling KXEB-AM pending the resolution of the
action. On August 27, 2001, New World and 910 Broadcasting
filed their answer and counterclaim, asserting claims for breach
of contract, conversion and tortuous interference with
pre-contractual relations, seeking damages in excess of
approximately $10.0 million. On May 14, 2002, the parties
signed a Stipulation and Order of Settlement, which was entered
by the Court on June 10, 2002, dismissing with prejudice
all claims and counterclaims in the action. Pursuant to this
Stipulation and Order of Settlement, on June 10, 2002, the
Court awarded New World and 910 Broadcasting approximately $0.7
million, which was recorded in other expense, net in the
consolidated statement of operations for the fiscal year ended
December 29, 2002.

On November 2, 2000, the Company entered
into an asset purchase agreement (the Asset Purchase Agreement)
with the International Church of the FourSquare Gospel
(ICFG) to acquire the assets of radio station KXOL-FM
serving Los Angeles, California at a purchase price of $250.0
million and made a non-refundable deposit of $5.0 million to be
credited towards the purchase price at closing. The Asset
Purchase Agreement contains customary representations and
warranties, and the closing of the acquisition is subject to the
satisfaction of certain customary conditions, including receipt
of regulatory approval from the Federal Communications
Commission and expiration of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended. On March 13, 2001, the Company entered into an
Addendum to the Asset Purchase Agreement and two Time Brokerage
Agreements with ICFG pursuant to which the Company is permitted
to broadcast its programming over radio station KXOL-FM (the
TBA) and ICFG was permitted to broadcast its programming over
radio stations KFSG-FM (currently KZAB-FM) and KFSB-FM
(currently KZBA-FM) (the 93.5 TBA). In connection with the
Addendum to the Asset Purchase Agreement and the TBA, the
Company made an additional non-refundable deposit of $20.0
million, which will be credited towards the purchase price at
closing. On April 30, 2001, the Company commenced
broadcasting its programming under the TBA and ICFG commenced
broadcasting its programming under the 93.5 TBA.

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

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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the TBA will continue until the earlier to occur
of (i) the KXOL Closing or (ii) the termination of the
amended Asset Purchase Agreement.

Pursuant to the Second Amendment, on
February 8, 2002 the Company granted ICFG a warrant
exercisable for an aggregate of 2,000,000 shares of its
Class A common stock at an exercise price of $10.50 per
share. This warrant is exercisable for a period of thirty-six
months from the date of issuance after which it will expire if
not exercised. To date, this warrant has not been exercised. The
Company assigned the warrant a fair market value of
approximately $8.9 million based on the Black-Scholes option
pricing model in accordance with SFAS No. 123,
Accounting for Stock-Based Compensation. The fair
market value of this warrant was recorded as an increase to
intangible assets and additional paid-in capital on the date of
grant. Under the Second Amendment, the Company must also grant
to ICFG additional warrants if ICFG ceases to broadcast its
programming under the 93.5 TBA. On February 5, 2003, the
Company received notice from ICFG that they will cease to
broadcast its programming under the 93.5 TBA effective
February 28, 2003. Therefore, on March 31, 2003, and
on the last day of each calendar month thereafter, the Company
will issue to ICFG warrants exercisable for 100,000 shares of
its Class A common stock at an exercise price equal to the
closing price of its shares on the last trading day of such
respective month, until the earlier to occur of (i) the
KXOL Closing or (ii) the termination of the amended Asset
Purchase Agreement. These warrants will also be exercisable for
a period of thirty-six months after the date of issuance after
which they will expire if not exercised. The fair market value
of these warrants, as calculated under the Black-Scholes option
pricing model, will be recorded as a programming expense.

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

The Companys consolidated results of
operations include the results of WIOA-FM, WIOB-FM, WIOC-FM,
WODA (formerly WCOM-FM), WZMT-FM, WZNT-FM, WNOD-FM (formerly
WOYE-FM), WEGM-FM, KZAB-FM (formerly KFSG-FM), KZBA-FM (formerly
KFSB-FM), KPTI-FM (formerly KXJO-FM), KSAH-AM and KTCY-FM 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. In addition, the Companys
consolidated results of operations include the results of
KXOL-FM which is under a TBA and the results of KXEB-AM which
was under a TBA through July 2001.

(4) Sale of Stations

On February 2, 2000, the Company completed
the sale of WVMQ-FM in Key West and WZMQ-FM in Key Largo,
Florida 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 been classified under other income as
gain on sale of stations in the accompanying consolidated
statements of operations.

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

F-16



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

consisting of $31.4 million of intangible assets
and $1.3 million of property and equipment. The Company
recognized a gain of approximately $1.8 million, net of closing
costs and taxes.

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

(5) Intangible Assets

Intangible assets consist of the following at
December 30, 2001 and December 29, 2002 (in thousands):

|                                        |  |      |         |      |  |              |         |  |  |  |            | 
|--------------------------------------- |  | ---- | ------- | ---- |  | ------------ | ------- |  |  |  | ---------- | 
|                                        |  |      |         |      |  | Estimated   
|                                        |  | 2001 |         | 2002 |  | useful lives
|                                        |  |      |         |      |  |             
|FCC licenses                            |  | $    | 476,624 |      |  |              | 413,560 |  |  |  | Indefinite | 
|Goodwill and other                      |  |      | 32,707  |      |  |              | 32,707  |  |  |  | Indefinite | 
|Deposits on acquisitions of FCC license |  |      | 26,180  |      |  |              | 56,377  |  |  |  |            | 
|                                        |  |      |         |      |  |              |         |  |  |  |            | 
|                                        |  | $    | 535,511 |      |  |              | 502,644 |  |  |  |            | 
|                                        |  |      |         |      |  |              |         |  |  |  |            | 

The Company adopted the provisions of SFAS
No. 142 effective December 31, 2001, which requires
that goodwill and intangible assets with indefinite useful lives
to no longer be amortized. The Company concluded that its FCC
licenses qualify as indefinite-life assets under SFAS
No. 142. After performing the transitional impairment
evaluation of its indefinite-life intangible assets, the Company
determined that the carrying value of certain indefinite-life
intangible assets exceeded their respective fair market values.
As a result, the Company recorded a noncash charge for the
cumulative effect of a change in accounting principle of $45.3
million, net of income tax benefit of $30.2 million. Under SFAS
No. 142, goodwill is deemed to be impaired if the net book
value of the reporting unit exceeds its estimated fair value.
The Company has determined that it has one reporting unit under
SFAS No. 142 and that there was no impairment of goodwill
as a result of adopting SFAS No. 142.

(6) Property and Equipment, Net

Property and equipment, net consists of the
following at December 30, 2001 and December 29, 2002
(in thousands):

|                                               |  |      |         |      |  |              |         |   |  |  |            | 
|---------------------------------------------- |  | ---- | ------- | ---- |  | ------------ | ------- | - |  |  | ---------- | 
|                                               |  |      |         |      |  | Estimated   
|                                               |  | 2001 |         | 2002 |  | useful lives
|                                               |  |      |         |      |  |             
|Land                                           |  | $    | 2,587   |      |  |              | 2,587   |   |  |  |           | 
|Building and building improvements             |  |      | 19,679  |      |  |              | 19,935  |   |  |  | 20 years   | 
|Tower and antenna systems                      |  |      | 3,467   |      |  |              | 4,205   |   |  |  | 7-15 years | 
|Studio and technical equipment                 |  |      | 7,388   |      |  |              | 8,240   |   |  |  | 10 years   | 
|Furniture and fixtures                         |  |      | 2,797   |      |  |              | 2,926   |   |  |  | 3-10 years | 
|Transmitter equipment                          |  |      | 3,492   |      |  |              | 4,703   |   |  |  | 7-10 years | 
|Leasehold improvements                         |  |      | 2,306   |      |  |              | 2,518   |   |  |  | 5-13 years | 
|Computer equipment and software                |  |      | 3,105   |      |  |              | 3,591   |   |  |  | 5 years    | 
|Other                                          |  |      | 1,108   |      |  |              | 1,266   |   |  |  | 5 years    | 
|                                               |  |      |         |      |  |              |         |   |  |  |            | 
|                                               |  |      | 45,929  |      |  |              | 49,971  |   |  |  |            | 
|Less accumulated depreciation and amortization |  |      | (22,505 | )    |  |              | (25,489 | ) |  |  |            | 
|                                               |  |      |         |      |  |              |         |   |  |  |            | 
|                                               |  | $    | 23,424  |      |  |              | 24,482  |   |  |  |            | 
|                                               |  |      |         |      |  |              |         |   |  |  |            | 

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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During fiscal year September 24, 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 10).

(7) Accounts Payable and Accrued
Expenses

Accounts payable and accrued expenses at
December 30, 2001 and December 29, 2002 consist of the
following (in thousands):

|                                     |  |      |        |      |  |  |        | 
|------------------------------------ |  | ---- | ------ | ---- |  |  | ------ | 
|                                     |  | 2001 |        | 2002
|                                     |  |      |        |     
|Accounts payable  trade             |  | $    | 400    |      |  |  | 598    | 
|Accounts payable  barter            |  |      | 1,533  |      |  |  | 828    | 
|Accrued compensation and commissions |  |      | 7,052  |      |  |  | 7,344  | 
|Accrued professional fees            |  |      | 1,730  |      |  |  | 1,551  | 
|Accrued music license fees           |  |      | 149    |      |  |  | 841    | 
|Accrued legal contingencies          |  |      | 596    |      |  |  | 1,290  | 
|Accrued taxes                        |  |      |       |      |  |  | 778    | 
|Other accrued expenses               |  |      | 2,305  |      |  |  | 2,461  | 
|                                     |  |      |        |      |  |  |        | 
|                                     |  | $    | 13,765 |      |  |  | 15,691 | 
|                                     |  |      |        |      |  |  |        | 

(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, 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. On October 17, 1997, the Company made a tender offer to
purchase for cash any and all of the 12 1/2% Notes. The
Company paid $15.7 million to the noteholders who responded to
the tender offer and purchased $13.2 million in principal amount
of 12 1/2% Notes for $15.0 million plus accrued interest of
$0.7 million in November 1997.

On November 2, 1999, the Company repurchased
$93.8 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 unamortized
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.

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.

F-18



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 unamortized 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 November 2, 1999, concurrently with the
Companys IPO of Class A common stock (see note 12),
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.

On June 8, 2001, the Company sold $100.0
million of 9 5/8% senior subordinated notes due 2009 (the
2001 Notes) through a Rule 144A debt offering from which
the Company received proceeds of approximately $85.0 million,
after payment of underwriting commissions and a $12.3 million
delayed draw special fee payment and discount given in
connection with the issuance. In connection with this
transaction, the Company capitalized financing costs of $3.6
million. The terms of the 2001 Notes were substantially the same
as the 1999 Notes.

In connection with the issuance and sale of the
2001 Notes in the Rule 144A debt offering, the Company
entered into a registration rights agreement with the initial
purchaser in the offering pursuant to which the Company agreed
to file a registration statement to permit holders of the 2001
Notes to exchange such notes for notes newly registered under
the Securities Act of 1933. In addition, this exchange offer
also allowed for the exchange of the full outstanding amount of
the 1999 Notes. The exchange offer was consummated on
December 5, 2001, with an aggregate amount of $335.0
million of 2001 Notes and 1999 Notes being exchanged and only a
minimal amount of the 1999 Notes remaining outstanding.

The Companys ability to incur additional
indebtedness is limited by the terms of the respective
indentures under its senior subordinated notes. In addition,
these indentures place restrictions on the Company with respect
to the sale of assets, liens, investments, dividends, debt
repayments, capital expenditures, transactions with affiliates
and mergers, among other things.

(9) 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 included a six-year $25.0 million
revolving credit line and $125.0 million of term loans. In
connection with this transaction, the Company capitalized
financing costs of $3.6 million related to the Senior Facility.

On June 8, 2001, the Company repaid $66.2
million of the outstanding indebtedness and accrued interest
under the Senior Facility, which the Company then terminated.
The Company realized a loss on the early extinguishment of debt
of approximately $1.9 million, net of income taxes of
approximately $1.2 million. This loss relates to the write-off
of the related unamortized deferred financing costs, and is
classified as an extraordinary item in the accompanying
consolidated statements of operations.

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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(10) Other Long-Term Debt

Other long-term debt consists of the following at
December 30, 2001 and December 29, 2002 (in thousands):

|                                                                                                                                                                            |  |      |       |      |  |  |       | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | 
|                                                                                                                                                                            |  | 2001 |       | 2002
|                                                                                                                                                                            |  |      |       |     
|Obligation under capital lease with related party
    payable in monthly installments of $9,000, including interest at
    6.25%, commencing June 1992. See notes 11 and 13 |  | $    | 823   |      |  |  | 765   | 
|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                 |  |      | 3,524 |      |  |  | 3,391 | 
|                                                                                                                                                                            |  |      |       |      |  |  |       | 
|                                                                                                                                                                            |  |      | 4,347 |      |  |  | 4,156 | 
|Less current portion                                                                                                                                                        |  |      | 191   |      |  |  | 208   | 
|                                                                                                                                                                            |  |      |       |      |  |  |       | 
|                                                                                                                                                                            |  | $    | 4,156 |      |  |  | 3,948 | 
|                                                                                                                                                                            |  |      |       |      |  |  |       | 

The scheduled maturities of other long-term debt
are as follows at December 29, 2002 (in thousands):

|                             |            |        |       |       | 
|---------------------------- | ---------- | ------ | ----- | ----- | 
|                             |            | Amount
|                             |            |       
|Fiscal year ending December: |            |        |       |      
|                             | 2003       |        | $     | 208   | 
|                             | 2004       |        |       | 227   | 
|                             | 2005       |        |       | 3,154 | 
|                             | 2006       |        |       | 75    | 
|                             | 2007       |        |       | 79    | 
|                             | Thereafter |        |       | 413   | 
|                             |            |        |       |      
|                             |            | $      | 4,156 |      
|                             |            |        |       |      

(11) Related-Party Transactions

The Company leased an apartment from its Chief
Executive Officer (CEO) and Chairman of the Board of
Directors (Chairman) for annual rentals totaling $0.1 million.
In September 2002, the Company terminated its apartment lease.
In addition, the Company occupies a building under a capital
lease agreement with certain stockholders. See note 13(a). The
building lease expires in 2012 and calls for an annual base rent
of approximately $0.1 million.

On September 24, 1999, the Company entered
into letters of understanding with its then Chairman (Former
Chairman) and Secretary (Former Secretary). These letters
outlined the mutual intentions of the Company and these
individuals in connection with the Companys IPO, and were
contingent upon the completion of the IPO. See note 12(b). These
letters provided for the following:



| |   |                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The sale by these individuals of $14.0 million of
    their Class B common stock in the IPO;                                                                                                                                   
|
| |  | 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 Former Chairman, the
    Companys two radio stations located in the Florida Keys
    for $0.7 million (see note 4);                                                                              

F-20



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |   |                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The repayment by the Former 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
    Former Chairman in November 1999;
|
| |  | An agreement by the Former Chairman to assume
    responsibility for a boat leased by the Company. Responsibility
    for this boat was assumed by the Former Chairman in November
    1999; and                                                                                  
|
| |  | The use by the Former Chairman of a car and
    driver, and by the Former Secretary of a car, to be provided by
    the Company.                                                                                                                                                  

During fiscal year December 29, 2002, the
Company paid approximately $0.1 million of its share of expenses
to a company, which is owned by the Former Chairman for a
special event that was co-sponsored by the Company.

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 and Chairman. 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.

During fiscal years September 30, 2001 and
December 29, 2002, the Company had sales of approximately
$0.2 million and $0.1 million, respectively, to a company that
is owned by a member of the Companys Board of Directors.
During the three-month transitional period ended
December 30, 2001, the Company had sales of approximately
$0.1 million.

During fiscal years September 24, 2000,
September 30, 2001 and December 29, 2002, one of the
Companys board of director members was a partner in a law
firm that provides services to the Company, for which the
Company paid approximately $4.7 million, $4.2 million and $4.2
million, respectively, for legal services performed.
Additionally, during the three-month transitional period ended
December 30, 2001, the Company paid approximately $1.3
million. The Company had outstanding payables to the law firm
for approximately $0.9 million and $0.3 million, respectively,
as of December 30, 2001 and December 29, 2002.

(12) 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
151,000,000 comprised of 100,000,000 shares of Class A
common stock, 50,000,000 shares of Class B common stock and
1,000,000 shares of Preferred Stock, and the par values of both
the Class A common stock and Class B common stock were
changed from $0.01 per share to $0.0001 per share. In addition,
Class B common stockholders are entitled to 10 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 nonaffiliate 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

F-21



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 November 2, 1999, the Company closed on
its IPO of 25,055,510 shares of Class A common stock,
raising net proceeds, including proceeds from the exercise of
the over-allotment option granted to the underwriters, of $389.4
million after payment of underwriter commissions. Concurrently
with this IPO, the Company sold $235.0 million aggregate
principal amount of the 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 [see note 13(b)]. In addition, the CEO
repaid a stockholder 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 nonemployee
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

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 5 to 10 years from date of grant. Options granted
under the 1999 NQ Plan will vest 20% upon grant, and 20% 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.

F-22



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

A summary of the status of the Companys
stock option plans, as of September 24, 2000,
September 30, 2001, December 30, 2001 and December 29,
2002, and changes during the fiscal years then ended and
three-month period ended December 30, 2001, is presented
below (in thousands, except per share data):

|                                  |           |        |       |                |   |   |       |       | 
|--------------------------------- | --------- | ------ | ----- | -------------- | - | - | ----- | ----- | 
|                                  |           |        |       | Weighted      
|                                  |           |        |       | average       
|                                  |           | Shares |       | exercise price
|                                  |           |        |       |               
|Outstanding at September 26, 1999 |           |        |      |                |   | $ |      |      
|                                  | Granted   |        |       | 1,594          |   |   |       | 18.69 | 
|                                  | Exercised |        |       |               |   |   |       |      | 
|                                  | Forfeited |        |       | (40            | ) |   |       | 20.00 | 
|                                  |           |        |       |                |   |   |       |      
|Outstanding at September 24, 2000 |           |        | 1,554 |                |   | $ | 18.66 |      
|                                  |           |        |       |                |   |   |       |      
|                                  | Granted   |        |       | 477            |   |   |       | 7.06  | 
|                                  | Exercised |        |       |               |   |   |       |      | 
|                                  | Forfeited |        |       | (234           | ) |   |       | 19.48 | 
|                                  |           |        |       |                |   |   |       |      
|Outstanding at September 30, 2001 |           |        | 1,797 |                |   | $ | 15.47 |      
|                                  |           |        |       |                |   |   |       |      
|                                  | Granted   |        |       | 245            |   |   |       | 7.66  | 
|                                  | Exercised |        |       |               |   |   |       |      | 
|                                  | Forfeited |        |       | (47            | ) |   |       | 16.49 | 
|                                  |           |        |       |                |   |   |       |      
|Outstanding at December 30, 2001  |           |        | 1,995 |                |   | $ | 14.49 |      
|                                  |           |        |       |                |   |   |       |      
|                                  | Granted   |        |       | 312            |   |   |       | 8.35  | 
|                                  | Exercised |        |       | (24            | ) |   |       | 6.36  | 
|                                  | Forfeited |        |       | (118           | ) |   |       | 14.48 | 
|                                  |           |        |       |                |   |   |       |      
|Outstanding at December 29, 2002  |           |        | 2,165 |                |   | $ | 13.69 |      
|                                  |           |        |       |                |   |   |       |      

The following table summarizes information about
stock options outstanding and exercisable at December 30,
2001 (in thousands, except per share data):

|             |             |             |       |             |     |          |     |             |     |          |       |       |      |  |       |     |     |   |       |       |      | 
|------------ | ----------- | ----------- | ----- | ----------- | --- | -------- | --- | ----------- | --- | -------- | ----- | ----- | ---- |  | ----- | --- | --- | - | ----- | ----- | ---- | 
|             |             |             |       | Weighted    |     |          |     |             |     |         
|             |             |             |       | average     |     |          |     |             |     |         
|             |             |             |       | remaining   |     | Weighted |     |             |     | Weighted
|Range of     |             |             |       | contractual |     | average  |     |             |     | average 
|exercise     |             | Number      |       | life        |     | exercise |     | Number      |     | exercise
|prices       |             | outstanding |       | (years)     |     | price    |     | exercisable |     | price   
|             |             |             |       |             |     |          |     |             |     |         
|$ 0 to $4.99 |             |             | 100   |             |     |          | 8.9 |             |     | $        | 4.81  |       |      |  | 40    |     |     | $ | 4.81  |      
|             |             | 5 to 9.99   |       |             | 597 |          |     |             | 8.4 |          |       |       | 7.76 |  |       |     | 279 |   |       |       | 8.26 | 
|             | 10 to 14.99 |             |       | 219         |     |          |     | 3.7         |     |          |       | 10.00 |      |  |       | 146 |     |   |       | 10.00 |     
|             | 15 to 19.99 |             |       |            |     |          |     |            |     |          |       |      |      |  |       |    |     |   |       |      |     
|             | 20 to 24.99 |             |       | 1,079       |     |          |     | 7.3         |     |          |       | 20.02 |      |  |       | 704 |     |   |       | 20.01 |     
|             |             |             |       |             |     |          |     |             |     |          |       |       |      |  |       |     |     |   |       |      
|             |             |             | 1,995 |             |     |          | 7.3 |             |     | $        | 14.49 |       |      |  | 1,169 |     |     | $ | 15.44 |      
|             |             |             |       |             |     |          |     |             |     |          |       |       |      |  |       |     |     |   |       |      

F-23



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table summarizes information about
stock options outstanding and exercisable at December 29,
2002 (in thousands, except per share data):

|             |             |             |       |             |     |          |     |             |     |          |       |       |      |  |       |     |     |   |       |       |      | 
|------------ | ----------- | ----------- | ----- | ----------- | --- | -------- | --- | ----------- | --- | -------- | ----- | ----- | ---- |  | ----- | --- | --- | - | ----- | ----- | ---- | 
|             |             |             |       | Weighted    |     |          |     |             |     |         
|             |             |             |       | average     |     |          |     |             |     |         
|             |             |             |       | remaining   |     | Weighted |     |             |     | Weighted
|Range of     |             |             |       | contractual |     | average  |     |             |     | average 
|exercise     |             | Number      |       | life        |     | exercise |     | Number      |     | exercise
|prices       |             | outstanding |       | (years)     |     | price    |     | exercisable |     | price   
|             |             |             |       |             |     |          |     |             |     |         
|$ 0 to $4.99 |             |             | 100   |             |     |          | 7.9 |             |     | $        | 4.81  |       |      |  | 60    |     |     | $ | 4.81  |      
|             |             | 5 to 9.99   |       |             | 809 |          |     |             | 8.6 |          |       |       | 7.77 |  |       |     | 469 |   |       |       | 7.73 | 
|             | 10 to 14.99 |             |       | 219         |     |          |     | 2.7         |     |          |       | 10.00 |      |  |       | 219 |     |   |       | 10.00 |     
|             | 15 to 19.99 |             |       | 18          |     |          |     | 9.4         |     |          |       | 15.48 |      |  |       | 16  |     |   |       | 15.48 |     
|             | 20 to 24.99 |             |       | 1,019       |     |          |     | 6.7         |     |          |       | 20.02 |      |  |       | 821 |     |   |       | 20.02 |     
|             |             |             |       |             |     |          |     |             |     |          |       |       |      |  |       |     |     |   |       |      
|             |             |             | 2,165 |             |     |          | 7.1 |             |     | $        | 13.69 |       |      |  | 1,585 |     |     | $ | 14.38 |      
|             |             |             |       |             |     |          |     |             |     |          |       |       |      |  |       |     |     |   |       |      

The Company applies APB Opinion No. 25 and
related interpretations in accounting for its stock option
plans. No stock-based employee compensation cost is reflected in
net income (loss), as all options granted under these plans had
an exercise price equal to the market value of the underlying
common stock on the date of grant. The fair value of each option
granted to employees is estimated on the date of grant using the
Black-Scholes option-pricing model with the following
assumptions at:

|                        |  |               |         |               |  |              |         |              |  |  |         |  |  |  |         | 
|----------------------- |  | ------------- | ------- | ------------- |  | ------------ | ------- | ------------ |  |  | ------- |  |  |  | ------- | 
|                        |  | September 24, |         | September 30, |  | December 30, |         | December 29,
|                        |  | 2000          |         | 2001          |  | 2001         |         | 2002        
|                        |  |               |         |               |  |              |         |             
|Expected life           |  |               | 5 years |               |  |              | 5 years |              |  |  | 7 years |  |  |  | 7 years | 
|Dividends               |  |               | None    |               |  |              | None    |              |  |  | None    |  |  |  | None    | 
|Risk-free interest rate |  |               | 5.65%   |               |  |              | 3.94%   |              |  |  | 4.93%   |  |  |  | 3.36%   | 
|Expected volatility     |  |               | 100%    |               |  |              | 88%     |              |  |  | 87%     |  |  |  | 88%     | 

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 (in thousands,
except per share data):

|                                            |                                                                                                                                     |               |   |               |   |              |  |              |   |  |  |        |   |  |  |         |  
|------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | ------------- | - | ------------- | - | ------------ |  | ------------ | - |  |  | ------ | - |  |  | ------- | -
|                                            |                                                                                                                                     | Fiscal year   |   | Fiscal year   |   | Three-month  |  | Fiscal year 
|                                            |                                                                                                                                     | September 24, |   | September 30, |   | December 30, |  | December 29,
|                                            |                                                                                                                                     | 2000          |   | 2001          |   | 2001         |  | 2002        
|                                            |                                                                                                                                     |               |   |               |   |              |  |             
|Net loss applicable to common stockholders: |                                                                                                                                     |               |   |               |   |              |  |              |   |  |  |        |   |  |  |        
|                                            | As reported                                                                                                                         |               | $ | (38,978       | ) |              |  | (7,588       | ) |  |  | (1,227 | ) |  |  | (89,846 | )
|                                            | Deduct: total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of tax |               |   | (9,767        | ) |              |  | (3,152       | ) |  |  | (1,181 | ) |  |  | (5,384  | )
|                                            |                                                                                                                                     |               |   |               |   |              |  |              |   |  |  |        |   |  |  |        
|                                            | Pro forma                                                                                                                           |               |   | (48,745       | ) |              |  | (10,740      | ) |  |  | (2,408 | ) |  |  | (95,230 | )
|                                            |                                                                                                                                     |               |   |               |   |              |  |              |   |  |  |        |   |  |  |        
|Net loss per common share:                  |                                                                                                                                     |               |   |               |   |              |  |              |   |  |  |        |   |  |  |        
|                                            | As reported                                                                                                                         |               | $ | (0.67         | ) |              |  | (0.12        | ) |  |  | (0.02  | ) |  |  | (1.39   | )
|                                            | Pro forma                                                                                                                           |               |   | (0.84         | ) |              |  | (0.17        | ) |  |  | (0.04  | ) |  |  | (1.47   | )

F-24



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(13) 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
December 30, 2001 and December 29, 2002 is as follows
(in thousands):

|                              |  |      |       |      |  |  |       |  
|----------------------------- |  | ---- | ----- | ---- |  |  | ----- | -
|                              |  | 2001 |       | 2002
|                              |  |      |       |     
|Building under capital lease  |  | $    | 1,230 |      |  |  | 1,230 |  
|Less accumulated depreciation |  |      | (589  | )    |  |  | (651  | )
|                              |  |      |       |      |  |  |       |  
|                              |  | $    | 641   |      |  |  | 579   |  
|                              |  |      |       |      |  |  |       |  

The Company leases office space and facilities
and certain equipment under operating leases, one of which is
with a related party (see note 11), that expire at various dates
through 2035. Certain leases provide for base rental payments
plus escalation charges for real estate taxes and operating
expenses.

At December 29, 2002, future minimum lease
payments under such leases are as follows (in thousands):

|                              |            |                                         |       |           |       |  |   |        |        | 
|----------------------------- | ---------- | --------------------------------------- | ----- | --------- | ----- |  | - | ------ | ------ | 
|                              |            |                                         |       | Operating
|                              |            | Capital lease                           |       | leases   
|                              |            |                                         |       |          
|Fiscal year ending September: |            |                                         |       |           |       |  |   |       
|                              | 2003       |                                         | $     | 149       |       |  | $ | 3,001  |       
|                              | 2004       |                                         |       | 149       |       |  |   | 2,857  |       
|                              | 2005       |                                         |       | 149       |       |  |   | 2,695  |       
|                              | 2006       |                                         |       | 149       |       |  |   | 2,164  |       
|                              | 2007       |                                         |       | 149       |       |  |   | 1,972  |       
|                              | Thereafter |                                         |       | 658       |       |  |   | 11,093 |       
|                              |            |                                         |       |           |       |  |   |       
|                              |            | Total minimum lease payments            |       |           | 1,403 |  |   | $      | 23,782 | 
|                              |            |                                         |       |           |       |  |   |       
|Less executory costs          |            |                                         | (386  | )         |       |  |   |       
|                              |            |                                         |       |           |       |  |   |       
|                              |            |                                         | 1,017 |           |       |  |   |       
|Less interest at 6.25%        |            |                                         | (252  | )         |       |  |   |       
|                              |            |                                         |       |           |       |  |   |       
|                              |            | Present value of minimum lease payments |       | $         | 765   |  |   |        |        | 
|                              |            |                                         |       |           |       |  |   |       

Total rent expense for the fiscal years ended
September 24, 2000, September 30, 2001 and December
2002 amounted to $1.5 million, $2.8 million and $3.4 million,
respectively. Total rent expense for the three-month
transitional period ended December 30, 2001 amounted to
$0.6 million.

The Company has agreements to sublease its radio
frequencies and portions of its tower sites. Such agreements
provide for payments through 2006. The future minimum rental
income to be received under these agreements as of
December 29, 2002 is as follows (in thousands):

|                             |      |   |     |     | 
|---------------------------- | ---- | - | --- | --- | 
|Fiscal year ending December: |      |   |     |    
|                             | 2003 |   | $   | 205 | 
|                             | 2004 |   |     | 130 | 
|                             | 2005 |   |     | 121 | 
|                             | 2006 |   |     | 40  | 
|                             |      |   |     |    
|                             |      | $ | 496 |    
|                             |      |   |     |    

F-25



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(b) Employment
Agreements

At December 29, 2002, 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 (in thousands):

|                             |      |   |        |        | 
|---------------------------- | ---- | - | ------ | ------ | 
|Fiscal year ending December: |      |   |        |       
|                             | 2003 |   | $      | 10,214 | 
|                             | 2004 |   |        | 8,130  | 
|                             | 2005 |   |        | 3,761  | 
|                             |      |   |        |       
|                             |      | $ | 22,105 |       
|                             |      |   |        |       

Included in the future payments schedule above is
a five-year employment agreement with the Companys CEO.
The agreement provides for an annual base salary of not less
than $1.0 million, and a cash bonus equal to 7.5% of the dollar
increase in same station broadcast cash flow, as defined, for
any fiscal year, including acquired stations on a pro forma
basis. Under the terms of the agreement, the Board of Directors
in its sole discretion may increase the CEOs annual base
salary and cash bonus. The total cash bonus awarded to the CEO
for fiscal year ended September 24, 2000,
September 30, 2001 and December 29, 2002 was $1.0
million, $0.8 million and $0.8 million, respectively, of which
$0.3 million is included in accounts payable and accrued
expenses in the accompanying consolidated balance sheet as of
December 29, 2002.

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

(c) 401(k) Profit-Sharing
Plan

In September 1999, the Company adopted a
tax-qualified employee savings and retirement plan (the 401(k)
Plan). The Company can make matching and/or profit sharing
contribution to the 401(k) Plan on behalf of all participants at
its sole discretion. 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.

(14) Contingencies

As the owner, lessee, or operator of various real
properties and facilities, the Company is subject to various
federal, state, and local environmental laws and regulations.
Historically, compliance with these laws and regulations has not
had a material adverse effect on the Companys business.
There can be no assurance, however, that compliance with
existing or new environmental laws and regulations will not
require the Company to make significant expenditures of funds.

In connection with the sale of WXLX-AM in 1997,
the Company 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, the Company retains potential exposure to possible
environmental liabilities relating to the transmitter site (the
Transmitter Property). On September 12, 2002, the landlords
of the property, Frank F. Viola, Thomas C. Viola Trust and Louis
Viola Company (collectively, the Landlord), received a notice
from the New Jersey Meadowlands Commission (the Meadowlands
Commission) indicating that it was planning to redevelop the
site which includes the Transmitter Property and offering
compensation to the Landlord for the purchase of the Transmitter
Property. The Meadowlands Commission also indicated that it
would not seek reimbursement from the Landlord for the costs of
landfill closure or for the remediation of environmental
conditions that resulted from the operation of the landfill. The
Landlord did not accept the offer of the Meadowlands

F-26



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Commission. On December 4, 2002, the
Meadowlands Commission filed a condemnation proceeding in the
Superior Court of New Jersey, Bergen County, against the
Landlord, and named the Company as an additional defendant. The
Company believes it has meritorious defenses against any claim
arising from this matter, however, it is impossible to assess
the ultimate outcome of this matter at this time. No amounts
have been accrued in the consolidated financial statements for
any contingent liability relating to the Transmitter Property.

On March 19, 2002, the Environmental Quality
Board, Mayagüez, Puerto Rico Regional Office (EQB),
inspected the Companys transmitter site in Maricao, Puerto
Rico. Based on the inspection, EQB issued a letter to the
Company on March 26, 2002 noting the following potential
violations: (1) alleged violation of EQBs Regulation
for the Control of Underground Injection through construction
and operation of a septic tank (for sanitary use only) at each
of the two antenna towers without the required permits,
(2) alleged violation of EQBs Regulation for the
Control of Atmospheric Pollution through construction and
operation of an emergency generator of more than 10hp at each
transmitter tower without the required permits and
(3) alleged failure to show upon request an EQB approved
emergency plan detailing preventative measures and post-event
steps that the Company will take in the event of an oil spill.
To date, no penalties or other sanctions have been imposed
against the Company relating to these matters. The Company does
not have sufficient information to assess the potential exposure
to liability, and no amounts have been accrued in the
consolidated financial statements relating to this contingent
liability.

(15) Cumulative Effect of Accounting
Change

In July 2001, the Financial Accounting Standards
Board (FASB) issued (SFAS) No. 142, Goodwill and
Other Intangible Assets. SFAS No. 142 requires that
goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least
annually in accordance with the provisions of SFAS No. 142.
The Company has concluded that its intangible assets, comprised
primarily of FCC licenses, qualify as indefinite-life intangible
assets under SFAS No. 142.

The Company adopted the provisions of SFAS
No. 142 effective December 31, 2001. After performing
the transitional impairment evaluation of its indefinite-life
intangible assets, the Company determined that the carrying
value of certain indefinite-life intangible assets acquired from
AMFM in January 2000, and certain indefinite-life intangible
assets acquired from Rodriguez Communications, Inc. and New
World Broadcasters Corp., in November 2000, exceeded their
respective fair market values. Fair market values of the
Companys FCC licenses were determined through the use of a
third-party valuation. These valuations were performed on the
FCC licenses, which exclude the franchise values of the stations
(i.e. going concern value). These valuations were based on a
discounted cash flow model incorporating various market
assumptions and types of signals, and assumed the FCC licenses
were acquired and operated by a third-party. As a result, the
Company recorded a noncash charge for the cumulative effect of a
change in accounting principle of $45.3 million, net of income
tax benefit of $30.2 million. Under SFAS No. 142, goodwill
is deemed to be impaired if the net book value of the reporting
unit exceeds its estimated fair value. The Company has
determined that it has one reporting unit under SFAS
No. 142 and that there was no impairment of goodwill as a
result of adopting SFAS No. 142.

Additionally, since amortization of its
indefinite-life intangible assets ceased for financial statement
purposes under SFAS No. 142, the Company could not be
assured that the reversals of the deferred tax liabilities
relating to those indefinite-life intangible assets would occur
within the Companys net operating loss carry-forward
period. Therefore, on December 31, 2001, the Company
recognized a noncash charge totaling $55.4 million to income tax
expense to establish a valuation allowance against the
Companys deferred tax assets, primarily consisting of net
operating loss carry-forwards.

F-27



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

As of the Companys adoption of SFAS
No. 142 effective December 31, 2001, the Company had
unamortized goodwill in the amount of $32.7 million, and
unamortized identifiable intangible assets in the amount of
$543.2 million, all of which was subjected to the transition
provision of SFAS No. 142. Amortization expense related to
goodwill and identifiable intangible assets was $10.7 million,
$15.6 and $4.0 million for the fiscal year ended
September 24, 2000, September 30, 2001 and the
three-month transitional period ended December 30, 2001,
respectively. The following table presents adjusted financial
results for the fiscal year ended September 24, 2000 and
September 30, 2001, and for the three-month transitional
period ended December 30, 2001 and for the fiscal year
ended December 29, 2002, respectively, on a basis
consistent with the new accounting principle.

|                                                                                    |                                                                         |                            |         |               |         |              |        |              |        |   |        |        |        |   |         |        |        | 
|----------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | -------------------------- | ------- | ------------- | ------- | ------------ | ------ | ------------ | ------ | - | ------ | ------ | ------ | - | ------- | ------ | ------ | 
|                                                                                    |                                                                         | Fiscal year                |         | Fiscal year   |         | Three-month  |        | Fiscal year 
|                                                                                    |                                                                         | September 24,              |         | September 30, |         | December 30, |        | December 29,
|                                                                                    |                                                                         | 2000                       |         | 2001          |         | 2001         |        | 2002        
|                                                                                    |                                                                         |                            |         |               |         |              |        |             
|Reported net loss applicable to common
    stockholders:                            |                                                                         | $                          | (38,978 | )             |         |              | (7,588 | )            |        |   | (1,227 | )      |        |   | (89,846 | )     
|                                                                                    | Add back: cumulative effect of accounting
    principle, net of tax (1) |                            |         |              |         |              |        |             |        |   |        |       |        |   |         | 45,288 |       
|                                                                                    | Add back: income tax valuation allowance (2)                            |                            |         |              |         |              |        |             |        |   |        |       |        |   |         | 55,358 |       
|                                                                                    | Add back: amortization of goodwill and intangible
    assets (3)        |                            |         | 10,659        |         |              |        | 15,635       |        |   |        | 3,983  |        |   |         |       |       
|                                                                                    | Income tax expense adjustment (3)                                       |                            |         | (9,248        | )       |              |        | (11,369      | )      |   |        | (5,702 | )      |   |         |       |       
|                                                                                    |                                                                         |                            |         |               |         |              |        |              |        |   |        |        |        |   |         |       
|                                                                                    |                                                                         | Adjusted (loss) net income |         | $             | (37,567 | )            |        |              | (3,322 | ) |        |        | (2,946 | ) |         |        | 10,800 | 
|                                                                                    |                                                                         |                            |         |               |         |              |        |              |        |   |        |        |        |   |         |       
|Basic and diluted (loss) income per share:                                          |                                                                         |                            |         |               |         |              |        |              |        |   |        |        |        |   |         |       
|Reported net loss per share:                                                        |                                                                         | $                          | (0.67   | )             |         |              | (0.12  | )            |        |   | (0.02  | )      |        |   | (1.39   | )     
|Cumulative effect per share of a change in
    accounting principle, net of tax (1) |                                                                         |                            |        |               |         |              |       |              |        |   |       |        |        |   | 0.70    |       
|Income tax valuation allowance per share (2)                                        |                                                                         |                            |        |               |         |              |       |              |        |   |       |        |        |   | 0.86    |       
|Amortization of goodwill and intangible assets
    per share (3)                    |                                                                         |                            | 0.18    |               |         |              | 0.24   |              |        |   | 0.06   |        |        |   |        |       
|Income tax adjustment per share (3)                                                 |                                                                         |                            | (0.16   | )             |         |              | (0.17  | )            |        |   | (0.09  | )      |        |   |        |       
|                                                                                    |                                                                         |                            |         |               |         |              |        |              |        |   |        |        |        |   |         |       
|Adjusted net (loss) income per share                                                |                                                                         | $                          | (0.65   | )             |         |              | (0.05  | )            |        |   | (0.05  | )      |        |   | 0.17    |       
|                                                                                    |                                                                         |                            |         |               |         |              |        |              |        |   |        |        |        |   |         |       






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As a result of the adoption of SFAS No. 142
    on December 31, 2001, the Company incurred a noncash
    transitional charge of $45.3 million, net of income tax benefit
    of $30.2 million, due to the cumulative effect of the change in
    accounting principle.                                                                                                                                                                 
|(2) | As a result of adopting SFAS No. 142 on
    December 31, 2001, the Company incurred a noncash income
    tax expense of $55.4 million to establish a valuation allowance
    against deferred tax assets on the date of adoption.                                                                                                                                                                                                      
|(3) | The adjusted financial results for the fiscal
    years ended September 24, 2000 and September 30, 2001
    and the three-month transitional period ended December 30,
    2001 add back noncash goodwill and intangible assets
    amortization of $10.7 million, $15.6 million and $4.0 million,
    respectively, and reflect adjusted income tax expense assuming
    that SFAS No. 142 was effective as of September 26,
    1999.

The Company performed an annual impairment review
of its indefinite-life intangible assets and goodwill during the
fourth quarter of fiscal year 2003 and determined that there was
no impairment of intangible assets and goodwill.

F-28



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(16) Income Taxes

The components of the provision for income tax
expense (benefit) included in the consolidated statements
of operations are as follows for the fiscal years ended
September 24, 2000 and September 30, 2001, and for the
three-month transitional period ended December 30, 2001 and
for the fiscal year ended December 29, 2002 (in thousands):

|                                       |         |                                    |         |               |        |              |        |              |        |   |      |      |      |   |         |        |        | 
|-------------------------------------- | ------- | ---------------------------------- | ------- | ------------- | ------ | ------------ | ------ | ------------ | ------ | - | ---- | ---- | ---- | - | ------- | ------ | ------ | 
|                                       |         | Fiscal year                        |         | Fiscal year   |        | Three-month  |        | Fiscal year 
|                                       |         | September 24,                      |         | September 30, |        | December 30, |        | December 29,
|                                       |         | 2000                               |         | 2001          |        | 2001         |        | 2002        
|                                       |         |                                    |         |               |        |              |        |             
|Current:                               |         |                                    |         |               |        |              |        |              |        |   |      |      |      |   |         |       
|                                       | Federal |                                    | $       |              |        |              |        | 150          |        |   |      |     |      |   |         |       |       
|                                       | State   |                                    |         | 250           |        |              |        | 971          |        |   |      | 282  |      |   |         | 250    |       
|                                       | Foreign |                                    |         |              |        |              |        |             |        |   |      |     |      |   |         | 725    |       
|                                       |         |                                    |         |               |        |              |        |              |        |   |      |      |      |   |         |       
|                                       |         |                                    | 250     |               |        |              | 1,121  |              |        |   | 282  |      |      |   | 975     |       
|                                       |         |                                    |         |               |        |              |        |              |        |   |      |      |      |   |         |       
|Deferred:                              |         |                                    |         |               |        |              |        |              |        |   |      |      |      |   |         |       
|                                       | Federal |                                    |         | 3,815         |        |              |        | (2,693       | )      |   |      | (801 | )    |   |         | 46,321 |       
|                                       | State   |                                    |         | 870           |        |              |        | (1,638       | )      |   |      | (114 | )    |   |         | 6,567  |       
|                                       |         |                                    |         |               |        |              |        |              |        |   |      |      |      |   |         |       
|                                       |         |                                    | 4,685   |               |        |              | (4,331 | )            |        |   | (915 | )    |      |   | 52,888  |       
|                                       |         |                                    |         |               |        |              |        |              |        |   |      |      |      |   |         |       
|                                       |         | Total for continuing operations    |         |               | 4,935  |              |        |              | (3,210 | ) |      |      | (633 | ) |         |        | 53,863 | 
|Discontinued operations                |         |                                    | (20     | )             |        |              | (306   | )            |        |   | (61  | )    |      |   | 3,649   |       
|                                       |         |                                    |         |               |        |              |        |              |        |   |      |      |      |   |         |       
|Extraordinary items                    |         |                                    | (11,434 | )             |        |              | (1,167 | )            |        |   |     |      |      |   |        |       
|                                       |         |                                    |         |               |        |              |        |              |        |   |      |      |      |   |         |       
|Cumulative effect of accounting change |         |                                    |        |               |        |              |       |              |        |   |     |      |      |   | (30,192 | )     
|                                       |         |                                    |         |               |        |              |        |              |        |   |      |      |      |   |         |       
|                                       |         | Total income tax expense (benefit) |         | $             | (6,519 | )            |        |              | (4,683 | ) |      |      | (694 | ) |         |        | 27,320 | 
|                                       |         |                                    |         |               |        |              |        |              |        |   |      |      |      |   |         |       

For fiscal years ended September 24, 2000,
September 30, 2001 and December 29, 2002 and three-month
transitional period ended December 30, 2001, no net
operating loss carryforwards were utilized.

The tax effect of temporary differences and
carryforwards that give rise to deferred tax assets and deferred
tax liabilities at December 30, 2001 and December 29,
2002 is as follows (in thousands):

|                          |                                          |                                                                  |                            |              |     |        |        |        |   |        | 
|------------------------- | ---------------------------------------- | ---------------------------------------------------------------- | -------------------------- | ------------ | --- | ------ | ------ | ------ | - | ------ | 
|                          |                                          | December 30,                                                     |                            | December 29,
|                          |                                          | 2001                                                             |                            | 2002        
|                          |                                          |                                                                  |                            |             
|Deferred tax assets:      |                                          |                                                                  |                            |              |     |        |        |       
|                          | Net operating loss carryforwards         |                                                                  | $                          | 44,027       |     |        |        | 50,366 |  
|                          | Foreign net operating loss carryforwards |                                                                  |                            | 2,704        |     |        |        | 6,233  |  
|                          | Allowance for doubtful accounts          |                                                                  |                            | 4,891        |     |        |        | 3,406  |  
|                          | Unearned revenue                         |                                                                  |                            | 613          |     |        |        | 331    |  
|                          | AMT credit                               |                                                                  |                            | 1,015        |     |        |        | 1,015  |  
|                          | Fixed assets                             |                                                                  |                            | 2,027        |     |        |        | 1,002  |  
|                          | Other                                    |                                                                  |                            | 81           |     |        |        | 1,254  |  
|                          |                                          |                                                                  |                            |              |     |        |        |       
|                          |                                          |                                                                  | 55,358                     |              |     |        | 63,607 |       
|                          | Less valuation allowance                 |                                                                  |                            | 17,396       |     |        |        | 67,126 |  
|Deferred tax liabilities: |                                          |                                                                  |                            |              |     |        |        |       
|                          | Amortization of FCC licenses             |                                                                  |                            | 69,668       |     |        |        | 54,532 |  
|                          |                                          | Less deferred tax liability included in assets
    held for sale |                            |              | 821 |        |        |        |  |       
|                          |                                          |                                                                  |                            |              |     |        |        |       
|                          |                                          |                                                                  | Net deferred tax liability |              | $   | 30,885 |        |        |   | 58,051 | 
|                          |                                          |                                                                  |                            |              |     |        |        |       

F-29



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Total income tax expense (benefit) from
continuing operations differed from the amounts computed by
applying the U.S. federal income tax rate of 35% for the fiscal
years ended September 24, 2000 and September 30, 2001,
and for the three-month transitional period ended
December 30, 2001 and for the fiscal year ended
December 29, 2002, as a result of the following:

|                                             |  |               |       |               |  |              |       |              |  |  |       |    |  |  |       |  
|-------------------------------------------- |  | ------------- | ----- | ------------- |  | ------------ | ----- | ------------ |  |  | ----- | -- |  |  | ----- | -
|                                             |  | Fiscal year   |       | Fiscal year   |  | Three-month  |       | Fiscal year 
|                                             |  | September 24, |       | September 30, |  | December 30, |       | December 29,
|                                             |  | 2000          |       | 2001          |  | 2001         |       | 2002        
|                                             |  |               |       |               |  |              |       |             
|Computed expected tax                      |  |               | (35.0 | )%            |  |              | (35.0 | )%           |  |  | (35.0 | )% |  |  | 35.0  | %
|expense (benefit) State income taxes, net of |  |               | (4.6  | )%            |  |              | (4.8  | )%           |  |  | (5.4  | )% |  |  | 5.5   | %
|federal income tax benefit Foreign taxes     |  |               |      |               |  |              |      |              |  |  |      |    |  |  | 9.6   | %
|Change in valuation allowance                |  |               |      |               |  |              |      |              |  |  |      |    |  |  | 656.0 | %
|Nondeductible expenses                       |  |               | 1.0%  |               |  |              | 2.6%  |              |  |  | 5.4%  |    |  |  | 3.5   | %
|Other                                        |  |               | 0.6%  |               |  |              | (1.0  | )%           |  |  | (1.0  | )% |  |  | 1.0   | %
|                                             |  |               |       |               |  |              |       |              |  |  |       |    |  |  |       |  
|                                             |  |               | (38.0 | )%            |  |              | (38.2 | )%           |  |  | (36.0 | )% |  |  | 710.6 | %
|                                             |  |               |       |               |  |              |       |              |  |  |       |    |  |  |       |  

The valuation allowance for deferred tax assets
increased by $49.7 million during the year ended
December 29, 2002. As a result of adopting SFAS No. 142 on
December 31, 2001, amortization of intangible assets ceased
for financial statement purposes. As a result, the Company could
not be assured that the reversals of the deferred tax
liabilities relating to those intangible assets would occur
within the Companys net operating loss carry-forward
period. Therefore, on the date of adoption, the Company
recognized a non-cash charge totaling $55.4 million to income
tax expense to establish a valuation allowance for the full
amount of its deferred tax assets due to uncertainties
surrounding its ability to utilize some or all of its deferred
tax assets, primarily consisting of net operating losses, as
well as other temporary differences between book and tax
accounting.

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. If the
realization of deferred tax assets in the future is considered
more likely than not, an adjustment to the deferred tax assets
would increase net income in the period such determination is
made.

Based upon the level of historical taxable income
and projections for future taxable income over the periods which
the deferred tax assets are deductible, at this time, management
believes it is more likely than not that the Company will not
realize the benefits of these deductible differences. As a
result, the Company has established a full valuation allowance
on its deferred tax assets.

At December 29, 2002, the Company has
domestic net operating loss carryforwards of approximately
$125.9 million available to offset future taxable income
expiring in 2007 through 2022.

In addition, at December 29, 2002, the
Company has foreign net operating loss carryforwards of
approximately $15.5 million available to offset future taxable
income expiring in December 2006 through 2009.

F-30



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(17) Litigation

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

On November 28, 2001, a complaint was filed
against the Company in the United States District Court for the
Southern District of New York and was amended on April 19,
2002. The amended complaint alleges that the named plaintiff,
Mitchell Wolf, purchased shares of the Companys
Class A common stock pursuant to the October 27, 1999
prospectus and registration statement relating to the
Companys initial public offering which closed on
November 2, 1999 (the IPO). The complaint was brought on
behalf of Mr. Wolf and an alleged class of similarly
situated purchasers, against the Company, eight underwriters
and/or their successors-in-interest who led or otherwise
participated in the IPO (collectively, the Underwriters), two
members of the Companys senior management team, one of
whom is the Chairman of the Board of Directors, and an
additional director (collectively, the Individuals). To date,
the complaint, while served upon the Company, has not been
served upon the Individuals, and no counsel has appeared for
them.

This case is one of more than 300 similar cases
brought by similar counsel against more than 300 issuers, 40
underwriters, and 1,000 individual defendants alleging, in
general, violations of federal securities laws in connection
with initial public offerings, in particular, failing to
disclose that the underwriter defendants allegedly solicited and
received additional, excessive and undisclosed commissions from
certain investors in exchange for which they allocated to those
investors material portions of the restricted shares issued in
connection with each offering. All of these cases, including the
one involving the Company, have been assigned for consolidated
pretrial purposes to one judge of the United States District
Court for the Southern District of New York. The issuer
defendants in the consolidated case (Issuer Defendants) filed
motions to dismiss the consolidated cases. These motions to
dismiss covered issues common among all Issuer Defendants in the
consolidated case. As a result of these motions, the Individuals
were dismissed from one of the claims against them, specifically
the Section 10b-5 claim.

The Issuer Defendants are in the process of
making multiple motions as a follow-up to the initial motion to
dismiss. They drafted a motion for reconsideration to the Court,
listing the reasons why various categories of Issuer Defendants
should have been dismissed from certain claims. If the motion
succeeds, the Company will be dismissed from one count in the
complaint, specifically, the Section 10b-5 claim, and the
Individuals will be dismissed from another count in the
complaint, a Section 20(a) claim. The Issuer Defendants
plan to file the motion for reconsideration in the near future.
In addition to the motion for reconsideration, the Issuer
Defendants will file individual second round motions concerning
procedural defects that warrant dismissing certain defendants
from the case. The Company believes that the grounds applicable
to it will be set forth in the general motion to reconsider.
With respect to discovery, at this point plaintiffs have chosen
to focus on the underwriter defendants, and have not made any
formal requests for the production of documents from the Issuer
Defendants. The Company believes that we would have a valid
claim against the Underwriters for indemnification in the event
that the plaintiffs were to be awarded damages as a result of
this lawsuit.

On June 14, 2001, an action was filed in the
Circuit Court of the Eleventh Judicial Circuit in and for
Miami-Dade County, Florida, by Julio Rumbaut against the
Company, alleging that he was entitled to compensation for work
performed for the Company and a commission for the pending
purchase of a radio station by the Company. Mr. Rumbaut
subsequently amended his theory of damages and claimed
approximately $8.0 million in damages, plus attorneys
fees, and pre-judgment interest. On July 29, 2002, a final
judgment was entered in favor of Mr. Rumbaut for a total of
$1.5 million, but on August 29, 2002, the final judgment
was amended to reflect an award of $1.2 million, consisting of
compensation for executive services of $0.2 million and $1.0
million for the plaintiffs contribution towards the
pending purchase of a radio station. On October 11, 2002,
the Company made a payment of $1.4 million into an escrow
account for the final

F-31



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

judgment and postjudgment interest, pending
appeal. On October 23, 2002, the Court awarded
Mr. Rumbaut prejudgment interest in the amount of $0.2
million. On January 10, 2003, the Court awarded
Mr. Rumbaut $0.1 million in litigation costs and on
January 21, 2003, awarded him $1.7 million for
attorneys fees. On February 19, 2003, the Company
made a payment of $2.0 million into an escrow account for the
attorneys fees awarded and postjudgment interest. The
Company has filed a notice of appeal and is considering
additional legal options. After consulting with legal counsel,
the Company believes it is probable that the attorney fees
awarded will be reduced upon appeal and we estimate that the
Company will pay no more than $0.7 million of the $2.0 million
in escrow. The Company has accrued for this judgment in the
consolidated financial statements for the fiscal year ended
December 29, 2002.

On June 12, 2002, the Company filed a
lawsuit in the United States District Court for the Southern
District of Florida against Clear Channel Communications (Clear
Channel) and Hispanic Broadcasting Corporation (HBC), and filed
an amended compliant on July 31, 2002. The lawsuit asserts
federal and state antitrust law violations and other state law
claims and alleges that Clear Channel and HBC have adversely
affected its ability to raise capital, depressed its share
price, impugned its reputation, made station acquisitions more
difficult and interfered with its business opportunities and
contractual arrangements. In the amended complaint, the Company
sought actual damages in excess of $500.0 million, which are to
be trebled under anti-trust law.

Both defendants moved to dismiss the amended
complaint, and on January 31, 2003, the Court granted
defendants motions for failure to adequately allege
antitrust injury and dismissed the federal court claims with
prejudice and dismissed the state court claims for lack of
federal court jurisdiction in light of the dismissal of the
federal court claims. The Company has filed a motion for
reconsideration of that opinion and asked for leave to file a
proposed second amended complaint, which contains additional
economic analysis and factual detail based upon the depositions
of Clear Channels CEO and CFO and HBCs CFO and
document production in the action, and which seeks damages in an
amount to be determined at trial. That motion has been fully
briefed and is awaiting decision by the trial court.

(18) New Accounting
Pronouncements

In April 2002, the FASB issued SFAS No. 145,
Rescission of FASB Statements No. 4, 44, and 64, Amendment
of FASB Statement No. 13, and Technical
Corrections(SFAS No. 145). SFAS No. 145 rescinds
FASB Statement No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that
Statement, FASB Statement No. 44, Accounting for
Intangible Assets of Motor Carriers and FASB Statement
No. 64, Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements. SFAS No. 145 amends FASB
No. 13, Accounting for Leases and other
existing authoritative pronouncements to make various technical
corrections and clarify meanings, or describes their
applicability under changed conditions. SFAS No. 145 will
be effective for fiscal years beginning after May 15, 2002.
The adoption of SFAS No. 145 will require that the
Companys extraordinary loss recognized on the
extinguishments of debt in 2000 and 2001 be reclassified to
income or loss from continuing operations in its consolidated
financial statements for the year-end December 31, 2003.

In November 2002, the FASB issued Interpretation
No. 45 (FIN 45), Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. FIN 45 requires
a guarantor to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in
issuing the guarantee. The expanded disclosure requirements are
required for financial statements ending after December 15,
2002, while the liability recognition provisions are applicable
to certain guaranteed obligations modified or issued after
December 31, 2002. The adoption of FIN 45 did not have a
significant impact on the Companys consolidated financial
statements.

F-32



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure. This pronouncement
amends SFAS No. 123 to provide alternative methods of transition
for an entity that voluntarily changes to the fair value-based
method of accounting for stock-based compensation. SFAS
No. 148 also expands the disclosure requirements with
respect to stock-based compensation. The Company does not intend
to change to the fair value method of accounting. The required
expanded disclosure is included in the December 29, 2002
financial statements and notes thereto.

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

(19) Quarterly Results of Operations
(UNAUDITED)

As disclosed in Note 4, the quarterly date
in the tables below have been reclassified to reflect the sale
of KTCY-FM as a discontinued operations.

The following is a summary of the quarterly
results of operations for the fiscal year ended
September 30, 2001 and three-month transitional period
ended December 30, 2001 (in thousands, except per share
data):

|                                                                                                                                                                 |                                             |               |        |                |  |               |        |               |   |              |        |        |   |  |        |        |   |  |        |        |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------- | ------ | -------------- |  | ------------- | ------ | ------------- | - | ------------ | ------ | ------ | - |  | ------ | ------ | - |  | ------ | ------ | -
|                                                                                                                                                                 |                                             |               |        |                |  |               |        | Fourth        |   | Transitional
|                                                                                                                                                                 |                                             | First quarter |        | Second quarter |  | Third quarter |        | quarter       |   | period      
|                                                                                                                                                                 |                                             | December 31,  |        | March 25,      |  | June 24,      |        | September 30, |   | December 30,
|                                                                                                                                                                 |                                             | 2000          |        | 2001           |  | 2001          |        | 2001          |   | 2001        
|                                                                                                                                                                 |                                             |               |        |                |  |               |        |               |   |             
|Net revenue from continuing operations                                                                                                                           |                                             | $             | 36,208 |                |  |               | 24,331 |               |   | $            | 34,987 |        |   |  | 35,022 |        |   |  | 33,030 |       
|Income (loss) from continuing operations
    before discontinued operations, extraordinary item and
    cumulative effect of a change in accounting principle    |                                             |               | 637    |                |  |               | (3,776 | )             |   |              | (440   | )      |   |  | (1,616 | )      |   |  | (1,121 | )     
|Discontinued operations, net of tax                                                                                                                              |                                             |               | (41    | )              |  |               | (385   | )             |   |              | (50    | )      |   |  | (21    | )      |   |  | (106   | )     
|Extraordinary loss, net of tax                                                                                                                                   |                                             |               |       |                |  |               |       |               |   |              | (1,896 | )      |   |  |       |        |   |  |       |       
|                                                                                                                                                                 |                                             |               |        |                |  |               |        |               |   |              |        |        |   |  |        |        |   |  |        |       
|                                                                                                                                                                 | Net income (loss)                           |               |        | 596            |  |               |        | (4,161        | ) |              |        | (2,386 | ) |  |        | (1,637 | ) |  |        | (1,227 | )
|                                                                                                                                                                 |                                             |               |        |                |  |               |        |               |   |              |        |        |   |  |        |        |   |  |        |       
|Basic and diluted earnings (loss) per share
    before discontinued operations, extraordinary item and
    cumulative effect of a change in accounting principle |                                             |               | 0.01   |                |  |               | (0.05  | )             |   |              | (0.01  | )      |   |  | (0.03  | )      |   |  | (0.02  | )     
|Discontinued operations per share                                                                                                                                |                                             |               |       |                |  |               | (0.01  | )             |   |              |       |        |   |  |       |        |   |  |       |       
|Extraordinary loss per share                                                                                                                                     |                                             |               |       |                |  |               |       |               |   |              | (0.03  | )      |   |  |       |        |   |  |       |       
|                                                                                                                                                                 |                                             |               |        |                |  |               |        |               |   |              |        |        |   |  |        |        |   |  |        |       
|                                                                                                                                                                 | Basic and diluted earnings (loss) per share |               |        | 0.01           |  |               |        | (0.06         | ) |              |        | (0.04  | ) |  |        | (0.03  | ) |  |        | (0.02  | )
|                                                                                                                                                                 |                                             |               |        |                |  |               |        |               |   |              |        |        |   |  |        |        |   |  |        |       

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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following is a summary of the quarterly
results of operations for the fiscal year ended
December 29, 2002 (in thousands, except per share data):

|                                                                                                                                                                 |                                             |               |         |                |   |               |        |              |  |  |        |     |   |  |        |        |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------- | ------- | -------------- | - | ------------- | ------ | ------------ |  |  | ------ | --- | - |  | ------ | ------ | -
|                                                                                                                                                                 |                                             |               |         |                |   |               |        | Fourth      
|                                                                                                                                                                 |                                             | First quarter |         | Second quarter |   | Third quarter |        | quarter     
|                                                                                                                                                                 |                                             | March 31,     |         | June 30,       |   | September 29, |        | December 29,
|                                                                                                                                                                 |                                             | 2002          |         | 2002           |   | 2002          |        | 2002        
|                                                                                                                                                                 |                                             |               |         |                |   |               |        |             
|Net revenue from continuing operations                                                                                                                           |                                             | $             | 28,902  |                |   |               | 39,383 |              |  |  | 36,237 |     |   |  | 35,723 |       
|(Loss) income from continuing operations before
    discontinued operations, extraordinary item and cumulative
    effect of a change in accounting principle    |                                             |               | (55,170 | )              |   |               | 12,853 |              |  |  | (1,886 | )   |   |  | (2,084 | )     
|Discontinued operations, net of tax                                                                                                                              |                                             |               | (17     | )              |   |               | (30    | )            |  |  | 1,793  |     |   |  | (17    | )     
|Cumulative effect of a change in accounting
    principle                                                                                                        |                                             |               | (45,288 | )              |   |               |       |              |  |  |       |     |   |  |       |       
|                                                                                                                                                                 |                                             |               |         |                |   |               |        |              |  |  |        |     |   |  |        |       
|                                                                                                                                                                 | Net (loss) income                           |               |         | (100,475       | ) |               |        | 12,823       |  |  |        | (93 | ) |  |        | (2,101 | )
|                                                                                                                                                                 |                                             |               |         |                |   |               |        |              |  |  |        |     |   |  |        |       
|Basic and diluted (loss) earnings per share
    before discontinued operations, extraordinary item and
    cumulative effect of a change in accounting principle |                                             |               | (0.86   | )              |   |               | 0.20   |              |  |  | (0.03  | )   |   |  | (0.03  | )     
|Discontinued operations per share                                                                                                                                |                                             |               |        |                |   |               |       |              |  |  | 0.03   |     |   |  |       |       
|Cumulative effect of a change in accounting
    principle per share                                                                                              |                                             |               | (0.70   | )              |   |               |       |              |  |  |       |     |   |  |       |       
|                                                                                                                                                                 |                                             |               |         |                |   |               |        |              |  |  |        |     |   |  |        |       
|                                                                                                                                                                 | Basic and diluted (loss) earnings per share |               |         | (1.56          | ) |               |        | 0.20         |  |  |        |    |   |  |        | (0.03  | )
|                                                                                                                                                                 |                                             |               |         |                |   |               |        |              |  |  |        |     |   |  |        |       

(20) Subsequent Events

On December 31, 2002, the Company entered
into an asset purchase agreement (the Chicago Asset Purchase
Agreement) with Big City Radio, Inc. and Big City Radio-Chi, LLC
to acquire the assets of radio stations WDEK-FM, WKIE-FM, and
WKIF-FM, serving the Chicago, Illinois market, at a purchase
price of $22.0 million. The Chicago Asset Purchase Agreement
contains customary representations and warranties, and the
closing of the Companys acquisition is subject to the
satisfaction of certain customary conditions. The Company
intends to fund the acquisition of these radio stations from
cash on hand. Although the Company intends to complete this
transaction in the second quarter of the fiscal year 2003, there
can be no assurance that the acquisition of these radio stations
will be completed.

On December 31, 2002, the Company also
entered into a time brokerage agreement (the Chicago Time
Brokerage Agreement) with Big City Radio-Chi, LLC pursuant to
which the Company has been broadcasting its programming over
radio stations WDEK-FM, WKIE-FM, and WKIF-FM since
January 6, 2003. The Chicago Time Brokerage Agreement will
terminate upon the earlier to occur of (i) the termination
of the Chicago Asset Purchase Agreement or (ii) the closing
of the purchase of the assets of these radio stations.

(21) Financial Information for Guarantors
and Non-Guarantors (UNAUDITED)

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

F-34



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

financial statements since the parent is a
holding company with no independent assets or operations other
than its investments in its subsidiaries. In December 1999, the
Company transferred the FCC licenses of WRMA-FM, WXDJ-FM,
WLEY-FM, WSKQ-FM, KLEY-FM, WPAT-FM, WCMA-FM, WZET-FM (formerly
WSMA-FM), WMEG-FM, WCMQ-FM, and KLAX-FM, to special purpose
subsidiaries that were formed solely for the purpose of holding
each respective FCC license. In addition, all FCC licenses
acquired subsequent to December 1999 are held by special purpose
subsidiaries. These subsidiaries are nonguarantors of the senior
subordinated notes. Condensed consolidating unaudited financial
information for the Company and its guarantor and nonguarantor
subsidiaries is as follows (in thousands):

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

F-35



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                            |                                            |                         |          |              |  |              |          |        |  |  |         |         |   |  |          |         | 
|------------------------------------------- | ------------------------------------------ | ----------------------- | -------- | ------------ |  | ------------ | -------- | ------ |  |  | ------- | ------- | - |  | -------- | ------- | 
|                                            |                                            |                        
|                                            |                                            | As of December 29, 2002
|                                            |                                            |                        
|                                            |                                            | Parent and              |          | Non-         |  |             
|Condensed Consolidating                     |                                            | Guarantor               |          | Guarantor    |  |             
|Balance Sheets                              |                                            | Subsidiaries            |          | Subsidiaries |  | Eliminations |          | Total 
|                                            |                                            |                         |          |              |  |              |          |       
|Cash and cash equivalents                   |                                            | $                       | 69,253   |              |  |              | 2,177    |        |  |  |        |         |   |  | 71,430   |        
|Receivable, net                             |                                            |                         | 23,837   |              |  |              | 1,679    |        |  |  |        |         |   |  | 25,516   |        
|Other current assets                        |                                            |                         | 1,875    |              |  |              | 377      |        |  |  |        |         |   |  | 2,252    |        
|                                            |                                            |                         |          |              |  |              |          |        |  |  |         |         |   |  |          |        
|                                            | Current assets                             |                         |          | 94,965       |  |              |          | 4,233  |  |  |         |        |   |  |          | 99,198  | 
|Property and equipment, net                 |                                            |                         | 17,005   |              |  |              | 7,477    |        |  |  |        |         |   |  | 24,482   |        
|Intangible assets                           |                                            |                         | 66,189   |              |  |              | 436,455  |        |  |  |        |         |   |  | 502,644  |        
|Deferred financing costs, net               |                                            |                         | 8,759    |              |  |              |         |        |  |  |        |         |   |  | 8,759    |        
|Investment in subsidiaries and intercompany |                                            |                         | 428,740  |              |  |              | (371,554 | )      |  |  | (57,186 | )       |   |  |         |        
|Other assets                                |                                            |                         | 200      |              |  |              | 1        |        |  |  |        |         |   |  | 201      |        
|                                            |                                            |                         |          |              |  |              |          |        |  |  |         |         |   |  |          |        
|                                            | Total assets                               |                         | $        | 615,858      |  |              |          | 76,612 |  |  |         | (57,186 | ) |  |          | 635,284 | 
|                                            |                                            |                         |          |              |  |              |          |        |  |  |         |         |   |  |          |        
|Current portion of long-term debt           |                                            | $                       | 62       |              |  |              | 146      |        |  |  |        |         |   |  | 208      |        
|Accounts payable and accrued expenses       |                                            |                         | 12,333   |              |  |              | 3,358    |        |  |  |        |         |   |  | 15,691   |        
|Accrued interest                            |                                            |                         | 5,226    |              |  |              |         |        |  |  |        |         |   |  | 5,226    |        
|Deferred commitment fee                     |                                            |                         | 581      |              |  |              |         |        |  |  |        |         |   |  | 581      |        
|                                            |                                            |                         |          |              |  |              |          |        |  |  |         |         |   |  |          |        
|                                            | Current liabilities                        |                         |          | 18,202       |  |              |          | 3,504  |  |  |         |        |   |  |          | 21,706  | 
|Long-term debt                              |                                            |                         | 324,857  |              |  |              | 3,245    |        |  |  |        |         |   |  | 328,102  |        
|Deferred income taxes                       |                                            |                         | 45,374   |              |  |              | 12,677   |        |  |  |        |         |   |  | 58,051   |        
|                                            |                                            |                         |          |              |  |              |          |        |  |  |         |         |   |  |          |        
|                                            | Total liabilities                          |                         |          | 388,433      |  |              |          | 19,426 |  |  |         |        |   |  |          | 407,859 | 
|Common stock                                |                                            |                         | 6        |              |  |              | 1        |        |  |  | (1      | )       |   |  | 6        |        
|Additional paid-in capital                  |                                            |                         | 444,594  |              |  |              | 94,691   |        |  |  | (94,691 | )       |   |  | 444,594  |        
|Accumulated deficit                         |                                            |                         | (217,175 | )            |  |              | (37,506  | )      |  |  | 37,506  |         |   |  | (217,175 | )      
|                                            |                                            |                         |          |              |  |              |          |        |  |  |         |         |   |  |          |        
|                                            | Stockholders equity                       |                         |          | 227,425      |  |              |          | 57,186 |  |  |         | (57,186 | ) |  |          | 227,425 | 
|                                            |                                            |                         |          |              |  |              |          |        |  |  |         |         |   |  |          |        
|                                            | Total liabilities and stockholders equity |                         | $        | 615,858      |  |              |          | 76,612 |  |  |         | (57,186 | ) |  |          | 635,284 | 
|                                            |                                            |                         |          |              |  |              |          |        |  |  |         |         |   |  |          |        

|                                    |                                                    |                                              |         |              |         |              |        |         |        |   |        |     |       |  |         |        |         |  
|----------------------------------- | -------------------------------------------------- | -------------------------------------------- | ------- | ------------ | ------- | ------------ | ------ | ------- | ------ | - | ------ | --- | ----- |  | ------- | ------ | ------- | -
|                                    |                                                    |                                             
|                                    |                                                    | For the fiscal year ended September 24, 2000
|                                    |                                                    |                                             
|                                    |                                                    | Parent and                                   |         | Non-         |         |             
|Condensed Consolidating             |                                                    | Guarantor                                    |         | Guarantor    |         |             
|Statement of Operations             |                                                    | Subsidiaries                                 |         | Subsidiaries |         | Eliminations |        | Total  
|                                    |                                                    |                                              |         |              |         |              |        |        
|Net revenue                         |                                                    | $                                            | 112,454 |              |         |              | 8,786  |         |        |   |       |     |       |  | 121,240 |       
|Station operating expenses          |                                                    |                                              | 47,209  |              |         |              | 8,872  |         |        |   |       |     |       |  | 56,081  |       
|Corporate expenses                  |                                                    |                                              | 20,730  |              |         |              | 322    |         |        |   | (322   | )   |       |  | 20,730  |       
|Depreciation and amortization       |                                                    |                                              | 2,039   |              |         |              | 11,081 |         |        |   |       |     |       |  | 13,120  |       
|                                    |                                                    |                                              |         |              |         |              |        |         |        |   |        |     |       |  |         |       
|                                    | Operating income (loss) from continuing operations |                                              |         | 42,476       |         |              |        | (11,489 | )      |   |        | 322 |       |  |         | 31,309 |        
|Interest expense, net               |                                                    |                                              | (16,141 | )            |         |              | (3,354 | )       |        |   |       |     |       |  | (19,495 | )     
|Other income (expense), net         |                                                    |                                              | (7,957  | )            |         |              | 7,977  |         |        |   | (322   | )   |       |  | (302    | )     
|Equity in net loss of subsidiaries  |                                                    |                                              | 6,921   |              |         |              |       |         |        |   | (6,921 | )   |       |  |        |       
|Income tax expense (benefit)        |                                                    |                                              | 4,880   |              |         |              | 55     |         |        |   |       |     |       |  | 4,935   |       
|Discontinued operations, net of tax |                                                    |                                              | (32     | )            |         |              |       |         |        |   |       |     |       |  | (32     | )     
|Extraordinary item, net of tax      |                                                    |                                              | (17,151 | )            |         |              |       |         |        |   |       |     |       |  | (17,151 | )     
|                                    |                                                    |                                              |         |              |         |              |        |         |        |   |        |     |       |  |         |       
|                                    |                                                    | Net (loss) income                            |         | $            | (10,606 | )            |        |         | (6,921 | ) |        |     | 6,921 |  |         |        | (10,606 | )
|                                    |                                                    |                                              |         |              |         |              |        |         |        |   |        |     |       |  |         |       

F-36



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                    |                                                    |                                              |         |              |        |              |        |         |        |   |        |     |       |  |         |        |        |  
|----------------------------------- | -------------------------------------------------- | -------------------------------------------- | ------- | ------------ | ------ | ------------ | ------ | ------- | ------ | - | ------ | --- | ----- |  | ------- | ------ | ------ | -
|                                    |                                                    |                                             
|                                    |                                                    | For the fiscal year ended September 30, 2001
|                                    |                                                    |                                             
|                                    |                                                    | Parent and                                   |         | Non-         |        |             
|Condensed Consolidating             |                                                    | Guarantor                                    |         | Guarantor    |        |             
|Statement of Operations             |                                                    | Subsidiaries                                 |         | Subsidiaries |        | Eliminations |        | Total  
|                                    |                                                    |                                              |         |              |        |              |        |        
|Net revenue                         |                                                    | $                                            | 117,752 |              |        |              | 12,796 |         |        |   |       |     |       |  | 130,548 |       
|Station operating expenses          |                                                    |                                              | 69,169  |              |        |              | 11,553 |         |        |   |       |     |       |  | 80,722  |       
|Corporate expenses                  |                                                    |                                              | 10,515  |              |        |              | 480    |         |        |   | (480   | )   |       |  | 10,515  |       
|Depreciation and amortization       |                                                    |                                              | 1,429   |              |        |              | 16,242 |         |        |   |       |     |       |  | 17,671  |       
|                                    |                                                    |                                              |         |              |        |              |        |         |        |   |        |     |       |  |         |       
|                                    | Operating income (loss) from continuing operations |                                              |         | 36,639       |        |              |        | (15,479 | )      |   |        | 480 |       |  |         | 21,640 |       
|Interest expense, net               |                                                    |                                              | (25,045 | )            |        |              | (5,497 | )       |        |   |       |     |       |  | (30,542 | )     
|Other income (expense), net         |                                                    |                                              | (10,972 | )            |        |              | 11,949 |         |        |   | (480   | )   |       |  | 497     |       
|Equity in net loss of subsidiaries  |                                                    |                                              | 8,523   |              |        |              |       |         |        |   | (8,523 | )   |       |  |        |       
|Income tax expense (benefit)        |                                                    |                                              | (2,706  | )            |        |              | (504   | )       |        |   |       |     |       |  | (3,210  | )     
|Discontinued operations, net of tax |                                                    |                                              | (497    | )            |        |              |       |         |        |   |       |     |       |  | (497    | )     
|Extraordinary item, net of tax      |                                                    |                                              | (1,896  | )            |        |              |       |         |        |   |       |     |       |  | (1,896  | )     
|                                    |                                                    |                                              |         |              |        |              |        |         |        |   |        |     |       |  |         |       
|                                    |                                                    | Net (loss) income                            |         | $            | (7,588 | )            |        |         | (8,523 | ) |        |     | 8,523 |  |         |        | (7,588 | )
|                                    |                                                    |                                              |         |              |        |              |        |         |        |   |        |     |       |  |         |       

|                                    |                                                    |                                                           |        |              |        |              |        |        |        |   |        |     |       |  |        |       |        |  
|----------------------------------- | -------------------------------------------------- | --------------------------------------------------------- | ------ | ------------ | ------ | ------------ | ------ | ------ | ------ | - | ------ | --- | ----- |  | ------ | ----- | ------ | -
|                                    |                                                    |                                                          
|                                    |                                                    | For the three-month transitional period December 30, 2001
|                                    |                                                    |                                                          
|                                    |                                                    | Parent and                                                |        | Non-         |        |             
|Condensed Consolidating             |                                                    | Guarantor                                                 |        | Guarantor    |        |             
|Statement of Operations             |                                                    | Subsidiaries                                              |        | Subsidiaries |        | Eliminations |        | Total 
|                                    |                                                    |                                                           |        |              |        |              |        |       
|Net revenue                         |                                                    | $                                                         | 30,038 |              |        |              | 2,992  |        |        |   |       |     |       |  | 33,030 |      
|Station operating expenses          |                                                    |                                                           | 18,664 |              |        |              | 1,656  |        |        |   |       |     |       |  | 20,320 |      
|Corporate expenses                  |                                                    |                                                           | 2,387  |              |        |              | 120    |        |        |   | (120   | )   |       |  | 2,387  |      
|Depreciation and amortization       |                                                    |                                                           | 337    |              |        |              | 4,193  |        |        |   |       |     |       |  | 4,530  |      
|                                    |                                                    |                                                           |        |              |        |              |        |        |        |   |        |     |       |  |        |      
|                                    | Operating income (loss) from continuing operations |                                                           |        | 8,650        |        |              |        | (2,977 | )      |   |        | 120 |       |  |        | 5,793 |       
|Interest expense, net               |                                                    |                                                           | (6,820 | )            |        |              | (1,377 | )      |        |   |       |     |       |  | (8,197 | )    
|Other income (expense), net         |                                                    |                                                           | (2,297 | )            |        |              | 3,067  |        |        |   | (120   | )   |       |  | 650    |      
|Equity in net loss of subsidiaries  |                                                    |                                                           | 1,344  |              |        |              |       |        |        |   | (1,344 | )   |       |  |       |      
|Income tax expense (benefit)        |                                                    |                                                           | (690   | )            |        |              | 57     |        |        |   |       |     |       |  | (633   | )    
|Discontinued operations, net of tax |                                                    |                                                           | (106   | )            |        |              |       |        |        |   |       |     |       |  | (106   | )    
|                                    |                                                    |                                                           |        |              |        |              |        |        |        |   |        |     |       |  |        |      
|                                    |                                                    | Net (loss) income                                         |        | $            | (1,227 | )            |        |        | (1,344 | ) |        |     | 1,344 |  |        |       | (1,227 | )
|                                    |                                                    |                                                           |        |              |        |              |        |        |        |   |        |     |       |  |        |      

F-37



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                                                      |                                             |                                             |         |              |   |              |        |         |   |  |         |        |  |  |         |         |  
|--------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------------- | ------- | ------------ | - | ------------ | ------ | ------- | - |  | ------- | ------ |  |  | ------- | ------- | -
|                                                                      |                                             |                                            
|                                                                      |                                             | For the fiscal year ended December 29, 2002
|                                                                      |                                             |                                            
|                                                                      |                                             | Parent and                                  |         | Non-         |   |             
|Condensed Consolidating                                               |                                             | Guarantor                                   |         | Guarantor    |   |             
|Statement of Operations                                               |                                             | Subsidiaries                                |         | Subsidiaries |   | Eliminations |        | Total  
|                                                                      |                                             |                                             |         |              |   |              |        |        
|Net revenue                                                           |                                             | $                                           | 128,798 |              |   |              | 11,447 |         |   |  |        |        |  |  | 140,245 |        
|Station operating expenses                                            |                                             |                                             | 72,339  |              |   |              | 8,941  |         |   |  |        |        |  |  | 81,280  |        
|Corporate expenses                                                    |                                             |                                             | 13,546  |              |   |              | 480    |         |   |  | (480    | )      |  |  | 13,546  |        
|Depreciation and amortization                                         |                                             |                                             | 2,315   |              |   |              | 690    |         |   |  |        |        |  |  | 3,005   |        
|                                                                      |                                             |                                             |         |              |   |              |        |         |   |  |         |        |  |  |         |        
|                                                                      | Operating income from continuing operations |                                             |         | 40,598       |   |              |        | 1,336   |   |  |         | 480    |  |  |         | 42,414  |  
|Interest expense, net                                                 |                                             |                                             | (28,745 | )            |   |              | (5,373 | )       |   |  |        |        |  |  | (34,118 | )      
|Other income (expense), net                                           |                                             |                                             | (242    | )            |   |              | 2      |         |   |  | (480    | )      |  |  | (720    | )      
|Equity in net loss of subsidiaries                                    |                                             |                                             | 19,586  |              |   |              |       |         |   |  | (19,586 | )      |  |  |        |        
|Income tax expense (benefit)                                          |                                             |                                             | 53,227  |              |   |              | 636    |         |   |  |        |        |  |  | 53,863  |        
|Discontinued operations, net of tax                                   |                                             |                                             | 1,729   |              |   |              |       |         |   |  |        |        |  |  | 1,729   |        
|Cumulative effect of a change in accounting
    principle, net of tax |                                             |                                             | 30,373  |              |   |              | 14,915 |         |   |  |        |        |  |  | 45,288  |        
|                                                                      |                                             |                                             |         |              |   |              |        |         |   |  |         |        |  |  |         |        
|                                                                      | Net (loss) income                           |                                             | $       | (89,846      | ) |              |        | (19,586 | ) |  |         | 19,586 |  |  |         | (89,846 | )
|                                                                      |                                             |                                             |         |              |   |              |        |         |   |  |         |        |  |  |         |        

|                                     |  |                                              |          |              |  |              |        |       |  |  |   |  |  |  |          |  
|------------------------------------ |  | -------------------------------------------- | -------- | ------------ |  | ------------ | ------ | ----- |  |  | - |  |  |  | -------- | -
|                                     |  |                                             
|                                     |  | For the fiscal year ended September 24, 2000
|                                     |  |                                             
|                                     |  | Parent and                                   |          | Non-         |  |             
|Condensed Consolidating              |  | Guarantor                                    |          | Guarantor    |  |             
|Statement of Cash Flows              |  | Subsidiaries                                 |          | Subsidiaries |  | Eliminations |        | Total
|                                     |  |                                              |          |              |  |              |        |      
|Cash flows from operating activities |  | $                                            | 29,953   |              |  |              | (1,281 | )     |  |  |  |  |  |  | 28,672   |  
|                                     |  |                                              |          |              |  |              |        |       |  |  |   |  |  |  |          |  
|Cash flows from investing activities |  | $                                            | (203,059 | )            |  |              | (1,991 | )     |  |  |  |  |  |  | (205,050 | )
|                                     |  |                                              |          |              |  |              |        |       |  |  |   |  |  |  |          |  
|Cash flows from financing activities |  | $                                            | 218,123  |              |  |              | 839    |       |  |  |  |  |  |  | 218,962  |  
|                                     |  |                                              |          |              |  |              |        |       |  |  |   |  |  |  |          |  

|                                     |  |                                              |         |              |  |              |        |       |  |  |   |  |  |  |         |  
|------------------------------------ |  | -------------------------------------------- | ------- | ------------ |  | ------------ | ------ | ----- |  |  | - |  |  |  | ------- | -
|                                     |  |                                             
|                                     |  | For the fiscal year ended September 30, 2001
|                                     |  |                                             
|                                     |  | Parent and                                   |         | Non-         |  |             
|Condensed Consolidating              |  | Guarantor                                    |         | Guarantor    |  |             
|Statement of Cash Flows              |  | Subsidiaries                                 |         | Subsidiaries |  | Eliminations |        | Total
|                                     |  |                                              |         |              |  |              |        |      
|Cash flows from operating activities |  | $                                            | 14,801  |              |  |              | 2,222  |       |  |  |  |  |  |  | 17,023  |  
|                                     |  |                                              |         |              |  |              |        |       |  |  |   |  |  |  |         |  
|Cash flows from investing activities |  | $                                            | (33,552 | )            |  |              | (1,629 | )     |  |  |  |  |  |  | (35,181 | )
|                                     |  |                                              |         |              |  |              |        |       |  |  |   |  |  |  |         |  
|Cash flows from financing activities |  | $                                            | 18,614  |              |  |              | (115   | )     |  |  |  |  |  |  | 18,499  |  
|                                     |  |                                              |         |              |  |              |        |       |  |  |   |  |  |  |         |  

|                                     |  |                                         |        |              |  |              |       |       |  |  |   |  |  |  |        |  
|------------------------------------ |  | --------------------------------------- | ------ | ------------ |  | ------------ | ----- | ----- |  |  | - |  |  |  | ------ | -
|                                     |  |                                        
|                                     |  | For the three-month transitional period
|                                     |  | December 30, 2001                      
|                                     |  |                                        
|                                     |  | Parent and                              |        | Non-         |  |             
|Condensed Consolidating              |  | Guarantor                               |        | Guarantor    |  |             
|Statement of Cash Flows              |  | Subsidiaries                            |        | Subsidiaries |  | Eliminations |       | Total
|                                     |  |                                         |        |              |  |              |       |      
|Cash flows from operating activities |  | $                                       | (8,947 | )            |  |              | 1,570 |       |  |  |  |  |  |  | (7,377 | )
|                                     |  |                                         |        |              |  |              |       |       |  |  |   |  |  |  |        |  
|Cash flows from investing activities |  | $                                       | (916   | )            |  |              | 79    |       |  |  |  |  |  |  | (837   | )
|                                     |  |                                         |        |              |  |              |       |       |  |  |   |  |  |  |        |  
|Cash flows from financing activities |  | $                                       | (15    | )            |  |              | (31   | )     |  |  |  |  |  |  | (46    | )
|                                     |  |                                         |        |              |  |              |       |       |  |  |   |  |  |  |        |  

|                                     |  |                                             |        |              |  |              |      |       |  |  |   |  |  |  |        |  
|------------------------------------ |  | ------------------------------------------- | ------ | ------------ |  | ------------ | ---- | ----- |  |  | - |  |  |  | ------ | -
|                                     |  |                                            
|                                     |  | For the fiscal year ended December 29, 2002
|                                     |  |                                            
|                                     |  | Parent and                                  |        | Non-         |  |             
|Condensed Consolidating              |  | Guarantor                                   |        | Guarantor    |  |             
|Statement of Cash Flows              |  | Subsidiaries                                |        | Subsidiaries |  | Eliminations |      | Total
|                                     |  |                                             |        |              |  |              |      |      
|Cash flows from operating activities |  | $                                           | 11,023 |              |  |              | (357 | )     |  |  |  |  |  |  | 10,666 |  
|                                     |  |                                             |        |              |  |              |      |       |  |  |   |  |  |  |        |  
|Cash flows from investing activities |  | $                                           | 9,497  |              |  |              | (232 | )     |  |  |  |  |  |  | 9,265  |  
|                                     |  |                                             |        |              |  |              |      |       |  |  |   |  |  |  |        |  
|Cash flows from financing activities |  | $                                           | (8     | )            |  |              | (133 | )     |  |  |  |  |  |  | (141   | )
|                                     |  |                                             |        |              |  |              |      |       |  |  |   |  |  |  |        |  

F-38



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##### Table of Contents



SPANISH BROADCASTING SYSTEMS, INC.

AND SUBSIDIARIES


FINANCIAL STATEMENT SCHEDULE 
VALUATION AND QUALIFYING ACCOUNTS

Fiscal years ended September 24, 2000 and
September 30, 2001,


for the three-month transitional period
December 30, 2001


and for the fiscal year ended
December 29, 2002


(In thousands)

|                                                       |                                       |              |   |                 |  |                |  |               |   |               |  |   |  |  |  |       |  |  |  |        | 
|------------------------------------------------------ | ------------------------------------- | ------------ | - | --------------- |  | -------------- |  | ------------- | - | ------------- |  | - |  |  |  | ----- |  |  |  | ------ | 
|                                                       |                                       | Column B     |   |                 |  |                |  |               |   |              
|                                                       |                                       | Balance      |   |                 |  |                |  |               |   | Column E     
|                                                       |                                       | beginning of |   | Charged to cost |  | Charged to     |  | Column D      |   | Balance at   
|Column A Description                                   |                                       | period       |   | and expense     |  | other accounts |  | deductions(1) |   | end of period
|                                                       |                                       |              |   |                 |  |                |  |               |   |              
|Fiscal year ended September 24, 2000:                  |                                       |              |   |                 |  |                |  |               |   |               |  |   |  |  |  |       |  |  |  |       
|                                                       | Allowance for doubtful accounts       |              | $ | 6,366           |  |                |  | 4,077         |   |               |  |  |  |  |  | 2,361 |  |  |  | 8,082  | 
|                                                       | Valuation allowance on deferred taxes |              | $ | 17,396          |  |                |  |              |   |               |  |  |  |  |  |      |  |  |  | 17,396 | 
|Fiscal year ended September 30, 2001:                  |                                       |              |   |                 |  |                |  |               |   |               |  |   |  |  |  |       |  |  |  |       
|                                                       | Allowance for doubtful accounts       |              | $ | 8,082           |  |                |  | 4,587         |   |               |  |  |  |  |  | 2,849 |  |  |  | 9,820  | 
|                                                       | Valuation allowance on deferred taxes |              | $ | 17,396          |  |                |  |              |   |               |  |  |  |  |  |      |  |  |  | 17,396 | 
|Three-month transitional period December 30,
    2001: |                                       |              |   |                 |  |                |  |               |   |               |  |   |  |  |  |       |  |  |  |       
|                                                       | Allowance for doubtful accounts       |              | $ | 9,820           |  |                |  | 1,725         |   |               |  |  |  |  |  | 256   |  |  |  | 11,289 | 
|                                                       | Valuation allowance on deferred taxes |              | $ | 17,396          |  |                |  |              |   |               |  |  |  |  |  |      |  |  |  | 17,396 | 
|Fiscal year ended December 29, 2002:                   |                                       |              |   |                 |  |                |  |               |   |               |  |   |  |  |  |       |  |  |  |       
|                                                       | Allowance for doubtful accounts       |              | $ | 11,289          |  |                |  | (1,488        | ) |               |  |  |  |  |  | 1,286 |  |  |  | 8,515  | 
|                                                       | Valuation allowance on deferred taxes |              | $ | 17,396          |  |                |  | 49,730        |   |               |  |  |  |  |  |      |  |  |  | 67,126 | 






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

F-39



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##### Table of Contents



b.Exhibits

| |      |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---- |  |  |  | - |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 Purchasers 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).                                                                                                                                                                                                                                                                                          
|
| | 4.9  |  |  |  |  |  |  | Indenture with respect to 9 5/8% Senior
    Subordinated Notes due 2009 with the Bank of New York as
    Trustee, dated June 8, 2001 (incorporated by reference to the
    Companys Registration Statement on Form S-3, filed on June
    25, 2001 (the 2001 Form S-3).                                                                                                                                                                       
|
| | 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 and
    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 Raúl
    Alarcón, Jr. (incorporated by reference to the
    Companys 1999 Registration Statement).                                                                                                                                                                                                                                   

58



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##### Table of Contents



| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----- |  |  |  | - |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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. García
    (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 Díaz-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
    Jesús 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 |  |  |  |  |  |  | Ground Lease dated December 18, 1995 between
    Louis Viola Company and SBS-J (incorporated by reference to the
    1996 Current Report).                                                                                                                                                                                                                                                                                                                                                                
|
| | 10.11 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                                                                      
|
| | 10.12 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                               
|
| | 10.13 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                  
|
| | 10.14 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                              
|
| | 10.15 |  |  |  |  |  |  | Lease Agreement dated June 1, 1992 among
    Raúl Alarcón, Sr., Raúl Alarcón, Jr., and
    SBS-Fla (incorporated by reference to Exhibit 10.30 of the 1994
    Registration Statement).                                                                                                                                                                                                                                                                                                                   
|
| | 10.16 |  |  |  |  |  |  | Agreement of Lease dated as of March 1, 1996. No.
    WT-174-A119 1067 between The Port Authority of New Jersey and
    SBS of Greater New York, Inc. as assignee of Park Radio
    (incorporated by reference to the 1996 Current Report).                                                                                                                                                                                                                                                               
|
| | 10.17 |  |  |  |  |  |  | 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)).                                                             
|
| | 10.18 |  |  |  |  |  |  | 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)).
|
| | 10.19 |  |  |  |  |  |  | Extension of lease of a Condominium Unit
    (Metropolitan Tower Condominium) between Raúl Alarcón,
    Jr. (Landlord) and Spanish Broadcasting System, Inc.
    (Tenant) (incorporated by reference to the
    Companys 1998 Annual Report on Form 10-K).                                                                                                                                                                                                                                           
|
| | 10.20 |  |  |  |  |  |  | Indemnification Agreement with Raúl
    Alarcón, Jr. dated as of November 2, 1999 (incorporated by
    reference to the 1999 Current Report).                                                                                                                                                                                                                                                                                                                                                             
|
| | 10.21 |  |  |  |  |  |  | Indemnification Agreement with Román
    Martínez IV dated as of November 2, 1999 (incorporated by
    reference to the 1999 Current Report).                                                                                                                                                                                                                                                                                                                                                             

59



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| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ----- |  |  |  | - |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.22 |  |  |  |  |  |  | Indemnification Agreement with Jason L. Shrinsky
    dated as of November 2, 1999 (incorporated by reference to the
    1999 Current Report).                                                                                                                                                                                                                                                                                                                                              
|
| | 10.23 |  |  |  |  |  |  | Spanish Broadcasting System 1999 Stock Option
    Plan (incorporated by reference to the Companys 1999
    Registration Statement).                                                                                                                                                                                                                                                                                                                                                       
|
| | 10.24 |  |  |  |  |  |  | Spanish Broadcasting System 1999 Company Stock
    Option Plan for Nonemployee Directors (incorporated by reference
    to the Companys 1999 Registration Statement).                                                                                                                                                                                                                                                                                                                     
|
| | 10.25 |  |  |  |  |  |  | Form of Lock-Up Letter Agreement (incorporated by
    reference in the Companys 1999 Registration Statement).                                                                                                                                                                                                                                                                                                                                                                             
|
| | 10.26 |  |  |  |  |  |  | Option Grant not under the Stock Option Plans
    with Arnold Sheiffer, dated October 27, 1999 (incorporated by
    reference to the 1999 Current Report).                                                                                                                                                                                                                                                                                                                                 
|
| | 10.27 |  |  |  |  |  |  | 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).                                                                                                                                                 
|
| | 10.28 |  |  |  |  |  |  | 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)).
|
| | 10.29 |  |  |  |  |  |  | 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 (incorporated by reference
    to Exhibit 10.44 of the Companys Annual Report on Form
    10-K for fiscal year 2000 (the 2000 Form 10-K).                                        
|
| | 10.30 |  |  |  |  |  |  | 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 (incorporated by
    reference to Exhibit 10.45 of the Companys 2000 Form 10-K).                                                                                                                                                                                     
|
| | 10.31 |  |  |  |  |  |  | Employment Agreement dated August 31, 2000,
    between William Tanner and the Company (incorporated by
    reference to Exhibit 10.47 of the Companys 2000 Form 10-K).                                                                                                                                                                                                                                                                                                                   
|
| | 10.32 |  |  |  |  |  |  | Deed of Constitution of Mortgage, Cadena
    Estereotempo, Inc., as Mortgagor, and Banco Bilbao Vizcaya
    Puerto Rico, as Mortgagee (incorporated by reference to Exhibit
    10.49 of the Companys 2000 Form 10-K).                                                                                                                                                                                                                                                                    
|
| | 10.33 |  |  |  |  |  |  | Lease Agreement by and between the Company and
    Irradio Holdings, Ltd. made as of December 14, 2000
    (incorporated by reference to Exhibit 10.50 of the
    Companys 2000 Form 10-K).                                                                                                                                                                                                                                                                                               
|
| | 10.34 |  |  |  |  |  |  | First Addendum to Lease between the Company and
    Irradio Holdings, Ltd. as of December 14, 2000 (incorporated by
    reference to Exhibit 10.51 of the Companys 2000 Form 10-K).                                                                                                                                                                                                                                                                                                       
|
| | 10.35 |  |  |  |  |  |  | Asset Purchase Agreement dated as of November 2,
    2000 by and between International Church of the Foursquare
    Gospel and the Company (incorporated by reference to Exhibit
    10.1 of the Companys 2000 Form 10-K).                                                                                                                                                                                                                                                                
|
| | 10.36 |  |  |  |  |  |  | Addendum to Asset Purchase Agreement, dated March
    13, 2001, by and between International Church of the FourSquare
    Gospel and the Company (incorporated by reference to Exhibit
    10.2 of the Companys Quarterly Report on Form 10-Q filed
    on May 9, 2001 (5/9/01 Quarterly Report)).                                                                                                                                                                                      
|
| | 10.37 |  |  |  |  |  |  | Time Brokerage Agreement, dated March 13, 2001,
    by and between International Church of the FourSquare Gospel and
    the Company (incorporated by reference to Exhibit 10.3 of the
    Companys 5/9/01 Quarterly Report).                                                                                                                                                                                                                                                             
|
| | 10.38 |  |  |  |  |  |  | 93.5 Time Brokerage Agreement, dated March 13,
    2001, by and between Spanish Broadcasting System Southwest, Inc.
    and International Church of the FourSquare Gospel (incorporated
    by reference to Exhibit 10.4 of the Companys 5/9/01
    Quarterly Report).                                                                                                                                                                                                                    

60



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| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                                                                              
| | ----- |  |  |  | - |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.39 |  |  |  |  |  |  | Radio Network Affiliation Agreement, dated April
    5, 2001, between Clear Channel Broadcasting, Inc. and SBS of San
    Francisco, Inc. (incorporated by reference to Exhibit 10.5 of
    the Companys 5/9/01 Quarterly Report).                                                                                                                                                                          
|
| | 10.40 |  |  |  |  |  |  | First Amendment to Credit Agreement, dated as of
    March 5, 2001, by and among the Company, the lenders party to
    the Credit Agreement dated as of July 6, 2000 and Lehman
    Commercial Paper, Inc. (incorporated by reference to Exhibit
    10.1 of the Companys 5/9/01 Quarterly Report).                                                                                                         
|
| | 10.41 |  |  |  |  |  |  | Purchase Agreement dated May 24, 2001 between the
    Company and Lehman Brothers Inc. with respect to 9 5/8%
    Senior Subordinated Notes due 2009 (incorporated by reference to
    the Companys 2001 Form S-3).                                                                                                                                                                                         
|
| | 10.42 |  |  |  |  |  |  | Registration Rights Agreement dated June 8, 2001
    between the Company and Lehman Brothers Inc. with respect to
    9 5/8% Senior Subordinated Notes due 2009 (incorporated be
    reference to the Companys 2001 Form S-3).                                                                                                                                                                              
|
| | 10.43 |  |  |  |  |  |  | Indemnification Agreement with Castor Fernandez
    dated as of August 9, 2001 (incorporated by reference to
    Exhibit 10.47 of the Companys Annual Report on
    Form 10-K filed December 31, 2002).                                                                                                                                                                                                     
|
| | 10.44 |  |  |  |  |  |  | Form of Indemnification Agreement with Carl
    Parmer dated as of August 9, 2001 (incorporated by reference to
    Exhibit 10.48 of the Companys Annual Report on
    Form 10-K filed December 31, 2002).                                                                                                                                                                                                  
|
| | 10.45 |  |  |  |  |  |  | Stock Option Agreement dated as of January 15,
    2001 between the Company and Joseph A. García (incorporated
    by reference to Exhibit 10.49 of the Companys Annual
    Report on Form 10-K filed December 31, 2002).                                                                                                                                                                                   
|
| | 10.46 |  |  |  |  |  |  | Stock Option Agreement dated as of October 29,
    2001 between Spanish Broadcasting System, Inc. and Castor
    Fernandez (incorporated by reference to Exhibit 10.50 to the
    Companys Annual Report on Form 10-K filed December 31,
    2001).                                                                                                                                                         
|
| | 10.47 |  |  |  |  |  |  | Form of Stock Option Agreement dated as of
    October 29, 2001 between Spanish Broadcasting System, Inc. and
    Carl Parmer (incorporated by reference to Exhibit 10.51 to the
    Companys Annual Report on Form 10-K filed December 31,
    2001).                                                                                                                                                      
|
| | 10.48 |  |  |  |  |  |  | Amendment dated as of February 8, 2002 to Asset
    Purchase Agreement dated as of November 2, 2000 by and between
    International Church of the FourSquare Gospel and Spanish
    Broadcasting System, Inc., as amended by an Addendum dated March
    13, 2001 (incorporated by reference to Exhibit 10.1 to the
    Companys Quarterly Transition Report on Form 10-Q filed
    February 13, 2002).    
|
| | 10.49 |  |  |  |  |  |  | Amendment No. 1 dated as of February 8, 2002 to
    Time Brokerage Agreement dated as of March 13, 2001 by and
    between International Church of the FourSquare Gospel, as
    Licensee and Spanish Broadcasting System, Inc., as Time Broker
    (incorporated by reference to Exhibit 10.2 to the Companys
    Quarterly Transition Report on Form 10-Q filed February 13,
    2002).                   
|
| | 10.50 |  |  |  |  |  |  | Amendment No. 1 dated as of February 8, 2002 to
    the 93.5 Time Brokerage Agreement dated as of March 13, 2001 by
    and between Spanish Broadcasting System SouthWest, Inc., as
    Licensee and International Church of the FourSquare Gospel, as
    Time Broker (incorporated by reference to Exhibit 10.3 to the
    Companys Quarterly Transition Report on Form 10-Q filed
    February 13, 2002).
|
| | 10.51 |  |  |  |  |  |  | Warrant dated February 8, 2002 by the Company in
    favor of International Church of the FourSquare Gospel
    (incorporated by reference to Exhibit 10.1 to the Companys
    Quarterly Report on Form 10-Q filed May 2, 2002).                                                                                                                                                                            
|
| | 10.52 |  |  |  |  |  |  | Stock Option Agreement dated as of January 16,
    2002 between the Company and Joseph A. García (incorporated
    by reference to Exhibit 10.1 to the Companys Quarterly
    Report on Form 10-Q filed May 2, 2002).                                                                                                                                                                                       
|
| | 10.53 |  |  |  |  |  |  | Asset Purchase Agreement dated June 4, 2002 by
    and among the Company, KTCY Licensing, Inc. and Entravision -
    Texas Limited Partnership (incorporated by reference to Exhibit
    10.1 to the Companys Quarterly Report on Form 10-Q filed
    August 14, 2002).                                                                                                                                     

61



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| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                      
| | ----- |  |  |  | - |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.54 |  |  |  |  |  |  | Time Brokerage Agreement dated as of June 4, 2002
    between KTCY Licensing, Inc. as Licensee and Entravision
    Communications Corporation as Programmer (incorporated by
    reference to Exhibit 10.2 to the Companys Quarterly Report
    on Form 10-Q filed August 14, 2002).
|
| | 10.55 |  |  |  |  |  |  | Companys 1999 Stock Option Plan as amended
    on May 6, 2002 (incorporated by reference to Exhibit 10.3 to the
    Companys Quarterly Report on Form 10-Q filed August 14,
    2002).                                                                                             
|
| | 10.56 |  |  |  |  |  |  | Companys 1999 Stock Option Plan for
    Non-Employee Directors as amended on May 6, 2002 (incorporated
    by reference to Exhibit 10.4 to the Companys Quarterly
    Report on Form 10-Q filed August 14, 2002).                                                                  
|
| | 10.57 |  |  |  |  |  |  | Stock Option Agreement dated as of August 30,
    2002 between the Company and William B. Tanner (incorporated by
    reference to Exhibit 10.1 to the Companys Quarterly Report
    on Form 10-Q filed November 13, 2002).                                                         
|
| | 10.58 |  |  |  |  |  |  | Stock Option Agreement dated as of October 29,
    2002 between the Company and Raúl Alarcón, Jr.
    (incorporated by reference to Exhibit 10.2 to the Companys
    Quarterly Report on Form 10-Q filed November 13, 2002).                                                        
|
| | 10.59 |  |  |  |  |  |  | Asset Purchase Agreement dated as of December 31,
    2002 by and among Spanish Broadcasting System of Illinois, Inc.,
    Big City Radio, Inc. and Big City Radio-CHI, L.L.C.                                                                                                       
|
| | 10.60 |  |  |  |  |  |  | Time Brokerage Agreement dated as of December 31,
    2002 between Big City Radio-CHI, L.L.C. as Licensee and Spanish
    Broadcasting System of Illinois, Inc. as Programmer.                                                                                                       
|
| | 10.61 |  |  |  |  |  |  | Guaranty Agreement dated as of December 31, 2002
    by the Company in favor of Big City Radio, Inc. and Big City
    Radio-CHI, L.L.C.                                                                                                                                              
|
| | 21.1  |  |  |  |  |  |  | List of Subsidiaries of the Company.                                                                                                                                                                                                                                                 
|
| | 99.1  |  |  |  |  |  |  | Chief Executive Officers Certification
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                            
|
| | 99.2  |  |  |  |  |  |  | Chief Financial Officers Certification
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                            

(c) Reports on Form 8-K

We did not file any current reports on
Form 8-K during the last quarter of fiscal year 2002.

62



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SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on the 28th day of
March, 2003.



| |                                  
| | ---------------------------------
| | Spanish Broadcasting System, Inc.



| |     |                      
| | --- | ---------------------
| | By: | /s/ RAÚL ALARCÓN, JR.

| |                                                                                       
| | --------------------------------------------------------------------------------------
| |                                                                                       
| | Name: Raúl Alarcón, 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 and in the
capacities indicated on the 28th day of March, 2003.

|                                                   |  |                                                                                                                      
|-------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------
|Signature                                          |  |                                                                                                                      
|                                                   |  |                                                                                                                      
|/s/ RAÚL ALARCÓN, JR.Raúl Alarcón, Jr.             |  | Chairman of the Board of Directors, Chief
    Executive Officer and President (principal executive officer)          
|                                                  
|/s/ JOSEPH A. GARCíAJoseph A. García               |  | Executive Vice President, Chief Financial
    Officer, and Secretary (principal financial and accounting
    officer)
|                                                  
|/s/ PABLO RAÚL ALARCÓN, SR.Pablo Raúl Alarcón, Sr. |  | Director                                                                                                             
|                                                  
|/s/ JASON L. SHRINSKYJason L. Shrinsky             |  | Director                                                                                                             
|                                                  
|/s/ CARL PARMERCarl Parmer                         |  | Director                                                                                                             

63



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##### Table of Contents






CERTIFICATIONS

I, Raúl Alarcón, Jr., certify that:

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

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

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

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



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

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



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

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

|                     |  |                                                                                                                                                                                                          
|-------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Date: March 28, 2003 |  | /s/ RAÚL ALARCÓN, JR.
    -----------------------------------------------------
    Name: Raúl Alarcón, Jr.
    Title:  Chairman of the Board of Directors,
    Chief Executive Officer and
    President

64



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##### Table of Contents



I, Joseph A. García, certify that:

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

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

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

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



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

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



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

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

|                     |  |                                                                                                                                                                                              
|-------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Date: March 28, 2003 |  | /s/ JOSEPH A. GARCíA
    -----------------------------------------------------
    Name: Joseph A. García
    Title:  Chief Financial Officer,
    Executive Vice President and
    Secretary

65



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##### Table of Contents






EXHIBIT INDEX

Exhibits

| |      |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---- |  |  |  | - |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 Purchaser s 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).                                                                                                                                                                                                                                                                                          
|
| | 4.9  |  |  |  |  |  |  | Indenture with respect to 9 5/8% Senior
    Subordinated Notes due 2009 with the Bank of New York as
    Trustee, dated June 8, 2001 (incorporated by reference to the
    Companys Registration Statement on Form S-3, filed on June
    25, 2001 (the 2001 Form S-3).                                                                                                                                                                       
|
| | 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 and
    certain Management Stockholders named therein (incorporated by
    reference to the 1994 Registration Statement).                                                                                                                                                                                                            

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| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ----- |  |  |  | - |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.4  |  |  |  |  |  |  | Amended and Restated Employment Agreement dated
    as of October 25, 1999, by and between the Company and Raúl
    Alarcón, 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. García
    (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 Díaz-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
    Jesús 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 |  |  |  |  |  |  | Ground Lease dated December 18, 1995 between
    Louis Viola Company and SBS-J (incorporated by reference to the
    1996 Current Report).                                                                                                                                                                                                                                                                                                                                                                
|
| | 10.11 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                                                                      
|
| | 10.12 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                               
|
| | 10.13 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                  
|
| | 10.14 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                              
|
| | 10.15 |  |  |  |  |  |  | Lease Agreement dated June 1, 1992 among
    Raúl Alarcón, Sr., Raúl Alarcón, Jr., and
    SBS-Fla (incorporated by reference to Exhibit 10.30 of the 1994
    Registration Statement).                                                                                                                                                                                                                                                                                                                   
|
| | 10.16 |  |  |  |  |  |  | Agreement of Lease dated as of March 1, 1996. No.
    WT-174-A119 1067 between The Port Authority of New Jersey and
    SBS of Greater New York, Inc. as assignee of Park Radio
    (incorporated by reference to the 1996 Current Report).                                                                                                                                                                                                                                                               
|
| | 10.17 |  |  |  |  |  |  | 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)).                                                             
|
| | 10.18 |  |  |  |  |  |  | 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)).
|
| | 10.19 |  |  |  |  |  |  | Extension of lease of a Condominium Unit
    (Metropolitan Tower Condominium) between Raúl Alarcón,
    Jr. (Landlord) and Spanish Broadcasting System, Inc.
    (Tenant) (incorporated by reference to the
    Companys 1998 Annual Report on Form 10-K).                                                                                                                                                                                                                                           
|
| | 10.20 |  |  |  |  |  |  | Indemnification Agreement with Raúl
    Alarcón, Jr. dated as of November 2, 1999 (incorporated by
    reference to the 1999 Current Report).                                                                                                                                                                                                                                                                                                                                                             

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| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ----- |  |  |  | - |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.21 |  |  |  |  |  |  | Indemnification Agreement with Román
    Martínez IV dated as of November 2, 1999 (incorporated by
    reference to the 1999 Current Report).                                                                                                                                                                                                                                                                                                                                              
|
| | 10.22 |  |  |  |  |  |  | Indemnification Agreement with Jason L. Shrinsky
    dated as of November 2, 1999 (incorporated by reference to the
    1999 Current Report).                                                                                                                                                                                                                                                                                                                                              
|
| | 10.23 |  |  |  |  |  |  | Spanish Broadcasting System 1999 Stock Option
    Plan (incorporated by reference to the Companys 1999
    Registration Statement).                                                                                                                                                                                                                                                                                                                                                       
|
| | 10.24 |  |  |  |  |  |  | Spanish Broadcasting System 1999 Company Stock
    Option Plan for Nonemployee Directors (incorporated by reference
    to the Companys 1999 Registration Statement).                                                                                                                                                                                                                                                                                                                     
|
| | 10.25 |  |  |  |  |  |  | Form of Lock-Up Letter Agreement (incorporated by
    reference in the Companys 1999 Registration Statement).                                                                                                                                                                                                                                                                                                                                                                             
|
| | 10.26 |  |  |  |  |  |  | Option Grant not under the Stock Option Plans
    with Arnold Sheiffer, dated October 27, 1999 (incorporated by
    reference to the 1999 Current Report).                                                                                                                                                                                                                                                                                                                                 
|
| | 10.27 |  |  |  |  |  |  | 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).                                                                                                                                                 
|
| | 10.28 |  |  |  |  |  |  | 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)).
|
| | 10.29 |  |  |  |  |  |  | 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 (incorporated by reference
    to Exhibit 10.44 of the Companys Annual Report on Form
    10-K for fiscal year 2000 (the 2000 Form 10-K).                                        
|
| | 10.30 |  |  |  |  |  |  | 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 (incorporated by
    reference to Exhibit 10.45 of the Companys 2000 Form 10-K).                                                                                                                                                                                     
|
| | 10.31 |  |  |  |  |  |  | Employment Agreement dated August 31, 2000,
    between William Tanner and the Company (incorporated by
    reference to Exhibit 10.47 of the Companys 2000 Form 10-K).                                                                                                                                                                                                                                                                                                                   
|
| | 10.32 |  |  |  |  |  |  | Deed of Constitution of Mortgage, Cadena
    Estereotempo, Inc., as Mortgagor, and Banco Bilbao Vizcaya
    Puerto Rico, as Mortgagee (incorporated by reference to Exhibit
    10.49 of the Companys 2000 Form 10-K).                                                                                                                                                                                                                                                                    
|
| | 10.33 |  |  |  |  |  |  | Lease Agreement by and between the Company and
    Irradio Holdings, Ltd. made as of December 14, 2000
    (incorporated by reference to Exhibit 10.50 of the
    Companys 2000 Form 10-K).                                                                                                                                                                                                                                                                                               
|
| | 10.34 |  |  |  |  |  |  | First Addendum to Lease between the Company and
    Irradio Holdings, Ltd. as of December 14, 2000 (incorporated by
    reference to Exhibit 10.51 of the Companys 2000 Form 10-K).                                                                                                                                                                                                                                                                                                       
|
| | 10.35 |  |  |  |  |  |  | Asset Purchase Agreement dated as of November 2,
    2000 by and between International Church of the Foursquare
    Gospel and the Company (incorporated by reference to Exhibit
    10.1 of the Companys 2000 Form 10-K).                                                                                                                                                                                                                                                                
|
| | 10.36 |  |  |  |  |  |  | Addendum to Asset Purchase Agreement, dated March
    13, 2001, by and between International Church of the FourSquare
    Gospel and the Company (incorporated by reference to Exhibit
    10.2 of the Companys Quarterly Report on Form 10-Q filed
    on May 9, 2001 (5/9/01 Quarterly Report)).                                                                                                                                                                                      
|
| | 10.37 |  |  |  |  |  |  | Time Brokerage Agreement, dated March 13, 2001,
    by and between International Church of the FourSquare Gospel and
    the Company (incorporated by reference to Exhibit 10.3 of the
    Companys 5/9/01 Quarterly Report).                                                                                                                                                                                                                                                             

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| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                                                                              
| | ----- |  |  |  | - |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.38 |  |  |  |  |  |  | 93.5 Time Brokerage Agreement, dated March 13,
    2001, by and between Spanish Broadcasting System Southwest, Inc.
    and International Church of the FourSquare Gospel (incorporated
    by reference to Exhibit 10.4 of the Companys 5/9/01
    Quarterly Report).                                                                                                                                      
|
| | 10.39 |  |  |  |  |  |  | Radio Network Affiliation Agreement, dated April
    5, 2001, between Clear Channel Broadcasting, Inc. and SBS of San
    Francisco, Inc. (incorporated by reference to Exhibit 10.5 of
    the Companys 5/9/01 Quarterly Report).                                                                                                                                                                          
|
| | 10.40 |  |  |  |  |  |  | First Amendment to Credit Agreement, dated as of
    March 5, 2001, by and among the Company, the lenders party to
    the Credit Agreement dated as of July 6, 2000 and Lehman
    Commercial Paper, Inc. (incorporated by reference to Exhibit
    10.1 of the Companys 5/9/01 Quarterly Report).                                                                                                         
|
| | 10.41 |  |  |  |  |  |  | Purchase Agreement dated May 24, 2001 between the
    Company and Lehman Brothers Inc. with respect to 9 5/8%
    Senior Subordinated Notes due 2009 (incorporated by reference to
    the Companys 2001 Form S-3).                                                                                                                                                                                         
|
| | 10.42 |  |  |  |  |  |  | Registration Rights Agreement dated June 8, 2001
    between the Company and Lehman Brothers Inc. with respect to
    9 5/8% Senior Subordinated Notes due 2009 (incorporated be
    reference to the Companys 2001 Form S-3).                                                                                                                                                                              
|
| | 10.43 |  |  |  |  |  |  | Indemnification Agreement with Castor Fernandez
    dated as of August 9, 2001 (incorporated by reference to
    Exhibit 10.47 to the Companys Annual Report on
    Form 10-K filed December 31, 2001).                                                                                                                                                                                                     
|
| | 10.44 |  |  |  |  |  |  | Form of Indemnification Agreement with Carl
    Parmer dated as of August 9, 2001 (incorporated by reference to
    Exhibit 10.48 to the Companys Annual Report on
    Form 10-K filed December 31, 2001).                                                                                                                                                                                                  
|
| | 10.45 |  |  |  |  |  |  | Stock Option Agreement dated as of January 15,
    2001 between the Company and Joseph A. García (incorporated
    by reference to Exhibit 10.49 to the Companys Annual
    Report on Form 10-K filed December 31, 2001).                                                                                                                                                                                   
|
| | 10.46 |  |  |  |  |  |  | Stock Option Agreement dated as of October 29,
    2001 between Spanish Broadcasting System, Inc. and Castor
    Fernandez (incorporated by reference to Exhibit 10.50 to the
    Companys Annual Report on Form 10-K filed December 31,
    2001).                                                                                                                                                         
|
| | 10.47 |  |  |  |  |  |  | Form of Stock Option Agreement dated as of
    October 29, 2001 between Spanish Broadcasting System, Inc. and
    Carl Parmer (incorporated by reference to Exhibit 10.51 to the
    Companys Annual Report on Form 10-K filed December 31,
    2001).                                                                                                                                                      
|
| | 10.48 |  |  |  |  |  |  | Amendment dated as of February 8, 2002 to Asset
    Purchase Agreement dated as of November 2, 2000 by and between
    International Church of the FourSquare Gospel and Spanish
    Broadcasting System, Inc., as amended by an Addendum dated March
    13, 2001 (incorporated by reference to Exhibit 10.1 to the
    Companys Quarterly Transition Report on Form 10-Q filed
    February 13, 2002).    
|
| | 10.49 |  |  |  |  |  |  | Amendment No. 1 dated as of February 8, 2002 to
    Time Brokerage Agreement dated as of March 13, 2001 by and
    between International Church of the FourSquare Gospel, as
    Licensee and Spanish Broadcasting System, Inc., as Time Broker
    (incorporated by reference to Exhibit 10.2 to the Companys
    Quarterly Transition Report on Form 10-Q filed February 13,
    2002).                   
|
| | 10.50 |  |  |  |  |  |  | Amendment No. 1 dated as of February 8, 2002 to
    the 93.5 Time Brokerage Agreement dated as of March 13, 2001 by
    and between Spanish Broadcasting System SouthWest, Inc., as
    Licensee and International Church of the FourSquare Gospel, as
    Time Broker (incorporated by reference to Exhibit 10.3 to the
    Companys Quarterly Transition Report on Form 10-Q filed
    February 13, 2002).
|
| | 10.51 |  |  |  |  |  |  | Warrant dated February 8, 2002 by the Company in
    favor of International Church of the FourSquare Gospel
    (incorporated by reference to Exhibit 10.1 to the Companys
    Quarterly Report on Form 10-Q filed May 2, 2002).                                                                                                                                                                            
|
| | 10.52 |  |  |  |  |  |  | Stock Option Agreement dated as of January 16,
    2002 between the Company and Joseph A. García (incorporated
    by reference to Exhibit 10.1 to the Companys Quarterly
    Report on Form 10-Q filed May 2, 2002).                                                                                                                                                                                       

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| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                      
| | ----- |  |  |  | - |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.53 |  |  |  |  |  |  | Asset Purchase Agreement dated June 4, 2002 by
    and among the Company, KTCY Licensing, Inc. and Entravision -
    Texas Limited Partnership (incorporated by reference to Exhibit
    10.1 to the Companys Quarterly Report on Form 10-Q filed
    August 14, 2002).             
|
| | 10.54 |  |  |  |  |  |  | Time Brokerage Agreement dated as of June 4, 2002
    between KTCY Licensing, Inc. as Licensee and Entravision
    Communications Corporation as Programmer (incorporated by
    reference to Exhibit 10.2 to the Companys Quarterly Report
    on Form 10-Q filed August 14, 2002).
|
| | 10.55 |  |  |  |  |  |  | Companys 1999 Stock Option Plan as amended
    on May 6, 2002 (incorporated by reference to Exhibit 10.3 to the
    Companys Quarterly Report on Form 10-Q filed August 14,
    2002).                                                                                             
|
| | 10.56 |  |  |  |  |  |  | Companys 1999 Stock Option Plan for
    Non-Employee Directors as amended on May 6, 2002 (incorporated
    by reference to Exhibit 10.4 to the Companys Quarterly
    Report on Form 10-Q filed August 14, 2002).                                                                  
|
| | 10.57 |  |  |  |  |  |  | Stock Option Agreement dated as of August 30,
    2002 between the Company and William B. Tanner (incorporated by
    reference to Exhibit 10.1 to the Companys Quarterly Report
    on Form 10-Q filed November 13, 2002).                                                         
|
| | 10.58 |  |  |  |  |  |  | Stock Option Agreement dated as of October 29,
    2002 between the Company and Raúl Alarcón, Jr.
    (incorporated by reference to Exhibit 10.2 to the Companys
    Quarterly Report on Form 10-Q filed November 13, 2002).                                                        
|
| | 10.59 |  |  |  |  |  |  | Asset Purchase Agreement dated as of December 31,
    2002 by and among Spanish Broadcasting System of Illinois, Inc.,
    Big City Radio, Inc. and Big City Radio-CHI, L.L.C.                                                                                                       
|
| | 10.60 |  |  |  |  |  |  | Time Brokerage Agreement dated as of December 31,
    2002 between Big City Radio-CHI, L.L.C. as Licensee and Spanish
    Broadcasting System of Illinois, Inc. as Programmer.                                                                                                       
|
| | 10.61 |  |  |  |  |  |  | Guaranty Agreement dated as of December 31, 2002
    by the Company in favor of Big City Radio, Inc. and Big City
    Radio-CHI, L.L.C.                                                                                                                                              
|
| | 21.1  |  |  |  |  |  |  | List of Subsidiaries of the Company.                                                                                                                                                                                                                                                 
|
| | 99.1  |  |  |  |  |  |  | Chief Executive Officers Certification
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                            
|
| | 99.2  |  |  |  |  |  |  | Chief Financial Officers Certification
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                            

70