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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




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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 31,
    2003
|                                               
|or                                             
|                                               
|o                                               |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|                                               
|For the transition period
    from          to 

Commission file number 000-27823

(SBS Logo)

Spanish Broadcasting
System, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                                                                           |  |                                         
|-------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                                                                   |  | 13-3827791                              
|(State or other jurisdiction
    of incorporation or organization)                                                         |  | (I.R.S. Employer
    Identification No.)
|2601 South Bayshore Drive, PH II
    Coconut Grove, Florida 33133(Address of principal executive
    offices 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 30, 2003, the last business day
of the Companys most recently completed second fiscal
quarter, the Company had 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, outstanding. As of June 30, 2003,
the aggregate market value of the Class A common stock held
by non-affiliates of the Company was approximately
$298.8 million and the aggregate market value of the
Class B common stock held by non-affiliates of the Company
was approximately $4.3 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 30, 2003 of $8.08 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 10, 2004, 39,587,355 shares
of Class A common stock, par value $.0001 per share,
and 25,105,150 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

|                                          |          |  |                                                                                                                      |      |  |    | 
|----------------------------------------- | -------- |  | -------------------------------------------------------------------------------------------------------------------- | ---- |  | -- | 
|                                          |          |  |                                                                                                                      | Page
|                                          |          |  |                                                                                                                      |     
|                                          |          |  |                                                                                                                      |      |  |   
|PART I                                    |          |  |                                                                                                                      |     
|                                          | ITEM 1.  |  | Business                                                                                                             |      |  | 1  | 
|                                          | ITEM 2.  |  | Properties                                                                                                           |      |  | 25 | 
|                                          | ITEM 3.  |  | Legal Proceedings                                                                                                    |      |  | 26 | 
|                                          | ITEM 4.  |  | Submission of Matters to a
    Vote of Security Holders                                                              |      |  | 27 | 
|                                          |          |  |                                                                                                                      |      |  |   
|PART II                                   |          |  |                                                                                                                      |     
|                                          | ITEM 5.  |  | Market For Registrants
    Common Equity, Related Stockholder Matters and Issuer Purchases
    of Equity Securities |      |  | 28 | 
|                                          | ITEM 6.  |  | Selected Financial Data                                                                                              |      |  | 29 | 
|                                          | ITEM 7.  |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations                            |      |  | 33 | 
|                                          | ITEM 7A. |  | Quantitative and Qualitative
    Disclosures About Market Risk                                                       |      |  | 47 | 
|                                          | ITEM 8.  |  | Financial Statements and
    Supplementary Data                                                                      |      |  | 48 | 
|                                          | ITEM 9.  |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure                             |      |  | 48 | 
|                                          | ITEM 9A. |  | Controls and Procedures                                                                                              |      |  | 48 | 
|                                          |          |  |                                                                                                                      |      |  |   
|PART III                                  |          |  |                                                                                                                      |     
|                                          | ITEM 10. |  | Directors and Executive
    Officers of the Registrant                                                               |      |  | 48 | 
|                                          | ITEM 11. |  | Executive Compensation                                                                                               |      |  | 51 | 
|                                          | ITEM 12. |  | Security Ownership of
    Certain Beneficial Owners and Management and Related Stockholder
    Matters               |      |  | 57 | 
|                                          | ITEM 13. |  | Certain Relationships and
    Related Transactions                                                                   |      |  | 59 | 
|                                          | ITEM 14. |  | Principal Accountant Fees
    and Services                                                                           |      |  | 60 | 
|                                          |          |  |                                                                                                                      |      |  |   
|PART IV                                   |          |  |                                                                                                                      |     
|                                          | ITEM 15. |  | Exhibits, Financial
    Statement Schedules, and Reports on Form 8-K                                                 |      |  | 61 | 
|STOCK OPTION AGREEMENT W/JACK LANGER     
|STOCK OPTION AGREEMENT W/ DAN MASON      
|INCENTIVE STOCK OPTION AGREEMENT         
|NONQUALIFIED STOCK OPTION AGREEMENT      
|NONQUALIFIED STOCK OPTION AGREEMENT      
|NONQUALIFIED STOCK OPTION AGREEMENT      
|INCENTIVE STOCK OPTION AGREEMENT         
|AMENDED AND RESTATED EMPLOYMENT AGREEMENT
|CODE OF BUSINESS CONDUCT AND ETHICS      
|LIST OF SUBSIDIARIES                     
|302 CERTIFICATION: CEO                   
|302 CERTIFICATION: CFO                   
|906 CERTIFICATION: CEO                   
|906 CERTIFICATION: CFO                   



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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, mean 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.

We are the largest Hispanic-controlled radio
broadcasting company in the United States. After giving effect
to the proposed sale of our San Francisco station, we own
and operate 24 radio stations in markets that reach
approximately 45% of the U.S. Hispanic population. Our
stations are located in the top five Hispanic markets in the
United States: Los Angeles, New York, Puerto Rico, Chicago
and Miami. Los Angeles and New York have the largest and
second largest U.S. Hispanic populations, and are the
largest and second largest radio markets in the United Sates in
terms of advertising revenue, respectively. Our top three
markets, based on net revenues, are New York, Los Angeles
and Miami. In New York, we own two of the four FM
Spanish-language radio stations in that market, and believe that
we have the strongest franchise in our target demographic groups.

Mr. Raúl Alarcón, Jr. became
our Chairman of the Board of Directors when we completed our
initial public offering on November 2, 1999 and has been
our Chief Executive Officer since June 1994 and our 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 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 other markets that have a significant Hispanic
population. We also focus on long-term growth by investing in
advertising, programming research and on-air talent.

Market Opportunity

We believe that our focus on formats targeting
U.S. Hispanic audiences in the largest Hispanic radio
markets, together with our skill in programming and marketing to
these audiences, provide us with significant opportunity for the
following reasons:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Hispanic Population
    Growth.The U.S. Hispanic
    population is the largest minority group and the fastest growing
    segment of the U.S. population, growing at approximately
    7.8 times the rate of the non-Hispanic U.S. population
    between 1996 and 2003.                                                                                                                               
|
| |  | Hispanic Buying
    Power.The U.S. Hispanic
    population accounted for estimated buying power of
    $675.0 billion in 2003 and Hispanic buying power is growing
    at nearly twice the annual rate of non-Hispanic buying power.
    Hispanic buying power is expected to increase to $1.2 trillion
    by 2010, positioning this demographic as an extremely attractive
    group for advertisers.
|
| |  | Growth in Spanish Language Advertising
    Spending.In 2003, a total of
    $3.4 billion was spent on Spanish-language media
    advertising, compared to $1.8 billion in 1998. This
    represents a compound annual growth rate of 13.6% over the past
    five years.                                                                                                                               

The above market opportunity information is based
on data provided by Synovate - 2004 U.S. Hispanic Market
Report, The Santiago Solutions Group and the 2003 Jack
Meyers ReportTM.

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Top Five Hispanic Radio Markets in the United
States

The table below lists the top 5 Hispanic radio
markets in the United States, including Puerto Rico. Following
the closing of the proposed sale of our station in
San Francisco, we will continue to own radio stations in
Los Angeles, New York, Puerto Rico, Chicago and Miami.

Top 5 Hispanic Markets




|                      |   |        |        |             |  |               |       |               |  |              |     |          |  |   |       |  |  |   |       |  |  |  |    | 
|--------------------- | - | ------ | ------ | ----------- |  | ------------- | ----- | ------------- |  | ------------ | --- | -------- |  | - | ----- |  |  | - | ----- |  |  |  | -- | 
|                      |   |        |        |             |  | Estimated     |       | Estimated     |  | 2003 Total   |     |         
|                      |   |        |        | Estimated   |  | % of Total    |       | % of Total    |  | Estimated    |     | # of    
|                      |   |        |        | Hispanic    |  | Population in |       | U.S.          |  | Market Radio |     | Our     
|                      |   |        |        | Population  |  | Mkt. which is |       | Hispanic      |  | Revenue      |     | Stations
|Rank                  |   | Market |        | (000)(a)    |  | Hispanic(a)   |       | Population(a) |  | ($mm)(b)     |     | Operated
|                      |   |        |        |             |  |               |       |               |  |              |     |         
|                      | 1 |        |        | Los Angeles |  |               | 7,811 |               |  |              | 45% |          |  |   | 18%   |  |  | $ | 1,039 |  |  |  | 4  | 
|                      | 2 |        |        | New York    |  |               | 4,316 |               |  |              | 21% |          |  |   | 10%   |  |  |   | 825   |  |  |  | 2  | 
|                      | 3 |        |        | Puerto Rico |  |               | 3,832 |               |  |              | 99% |          |  |   | 9%    |  |  |   | 100   |  |  |  | 11 | 
|                      | 4 |        |        | Chicago     |  |               | 1,838 |               |  |              | 19% |          |  |   | 4%    |  |  |   | 592   |  |  |  | 4  | 
|                      | 5 |        |        | Miami       |  |               | 1,837 |               |  |              | 43% |          |  |   | 4%    |  |  |   | 287   |  |  |  | 3  | 
|                      |   |        |        |             |  |               |       |               |  |              |     |          |  |   |       |  |  |   |       |  |  |  |    | 
|Total for our markets |   |        | 19,634 |             |  |               | 35%   |               |  |              | 45% |          |  | $ | 2,843 |  |  |   | 24    | 



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|    |  |                                                                                                                                                                 
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Sources: Synovate, 2004 U.S. Hispanic
    Market Report; U.S. Census Bureau Population Estimates for
    Puerto Rico, 2002; U.S. Census Bureau, Census
    2000.
|   
|(b) |  | Source: BIA Research Inc.s Investing in
    Radio, 2003 Market Report.                                                                                         

Our Strategy

We focus on maximizing the revenue and
profitability of our radio station portfolio. We also focus on
long-term growth by continuously investing in advertising,
programming research and on-air talent. In addition, we have
completed strategic acquisitions and divestitures in order to
achieve a significant presence with clusters of stations in the
top Hispanic markets.

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

Format 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 and the
diverse groups in the Hispanic population 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 very familiar with the musical tastes
and preferences of each of the various Hispanic ethnic groups,
and we customize our programming accordingly.

Attract and retain strong local management
teams.We employ local management
teams in each of our markets that are responsible for the
day-to-day operations of our radio stations. The teams typically
consist of 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. We believe this approach improves our
flexibility and responsiveness to changing conditions in each of
the markets we serve.

Utilize focused sales
efforts.To capture market share,
our sales force focuses on converting audience share into rate
and revenue increases. Strategically, we hire sales
professionals who are experts at Hispanic and general market
advertising. We also value knowledgeable account managers
skilled at dealing directly with clients in the local market.
Spanish-language radio is uniquely positioned for national
campaigns, regional marketing plans and local promotions in our
diverse markets. We believe that our focused sales efforts are

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working to increase media spending targeted at
the Hispanic consumer market and will enable us to continue to
achieve rate and revenue growth, and to narrow the gap between
the level of advertising currently targeted towards
U.S. Hispanics and the actual and potential buying power of
our communities.


Control station operating
costs.We employ a disciplined
approach to operating our radio stations. We emphasize the
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-term and strategic planning, establishing
policies and procedures, maximizing cost savings through
centralized control where appropriate, allocating corporate
resources and maintaining overall control of the stations.

Effective use of promotions and special
events.We 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 organize special promotional
appearances, such as station van appearances at client events,
concerts and tie-ins to special 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 way to reach the Hispanic consumer. In some
instances, these events are co-sponsored by local television
stations, newspapers and promoters, allowing our mutual
advertisers to reach a larger combined audience.

Maintain strong community
involvement.We have 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, charitable contributions
to organizations which benefit the Hispanic community, 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.

Our growth strategy includes evaluating strategic
acquisitions and divestitures in order to achieve a significant
presence with clusters of stations with strong signals in the
top Hispanic markets. We generally 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 and
programming efforts directed at 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.

Programming

We format the programming of each of our stations
to capture a substantial share of the U.S. Hispanic
audience in its respective market. 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, if necessary, 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.

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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, Miami and Puerto Rico. 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | Spanish
    Oldies.The Spanish Oldies format
    includes a variety of Latin and English classics mainly from the
    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 music and ballads with an
    emphasis on Mexican artists.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Central American
    Tropical.The Central American
    Tropical format includes cumbia, soca and punta, with
    traditional salsa and merengue for variety.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

The following table lists the programming formats
of our radio stations and the target demographic group of each
station.

|       |             |            |  |        |      |               |  |                                                  |  |  |       | 
|------ | ----------- | ---------- |  | ------ | ---- | ------------- |  | ------------------------------------------------ |  |  | ----- | 
|       |             |            |  |        |      | Target Buying
|       |             |            |  |        |      | Demographic  
|Market |             | FM Station |  | Format |      | group by age 
|       |             |            |  |        |      |              
|       | Los Angeles |            |  |        | KLAX |               |  | Regional Mexican                                 |  |  | 18-49 | 
|       |             |            |  |        | KZAB |               |  | Central American Tropical                        |  |  | 18-49 | 
|       |             |            |  |        | KZBA |               |  | Central American Tropical                        |  |  | 18-49 | 
|       |             |            |  |        | KXOL |               |  | Mexican Adult Contemporary                       |  |  | 18-49 | 
|      
|       | New York    |            |  |        | WSKQ |               |  | Spanish Tropical                                 |  |  | 18-49 | 
|       |             |            |  |        | WPAT |               |  | Spanish Adult Contemporary                       |  |  | 25-54 | 
|      
|       | Puerto Rico |            |  |        | WMEG |               |  | American Top 40                                  |  |  | 18-34 | 
|       |             |            |  |        | WEGM |               |  | American Top 40                                  |  |  | 18-34 | 
|       |             |            |  |        | WCMA |               |  | American Adult Contemporary 80s &
    90s Hits |  |  | 18-49 | 
|       |             |            |  |        | WIOA |               |  | Spanish Adult Contemporary                       |  |  | 18-49 | 
|       |             |            |  |        | WIOB |               |  | Spanish Adult Contemporary                       |  |  | 18-49 | 
|       |             |            |  |        | WIOC |               |  | Spanish Adult Contemporary                       |  |  | 18-49 | 
|       |             |            |  |        | WZNT |               |  | Spanish Tropical                                 |  |  | 18-49 | 
|       |             |            |  |        | WZMT |               |  | Spanish Tropical                                 |  |  | 18-49 | 
|       |             |            |  |        | WZET |               |  | Spanish Tropical                                 |  |  | 18-49 | 
|       |             |            |  |        | WODA |               |  | Spanish Hot Adult Contemporary                   |  |  | 18-34 | 
|       |             |            |  |        | WNOD |               |  | Spanish Hot Adult Contemporary                   |  |  | 18-34 | 

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|       |         |            |  |        |      |               |  |                            |  |  |       | 
|------ | ------- | ---------- |  | ------ | ---- | ------------- |  | -------------------------- |  |  | ----- | 
|       |         |            |  |        |      | Target Buying
|       |         |            |  |        |      | Demographic  
|Market |         | FM Station |  | Format |      | group by age 
|       |         |            |  |        |      |              
|      
|       | Chicago |            |  |        | WLEY |               |  | Regional Mexican           |  |  | 18-49 | 
|       |         |            |  |        | WDEK |               |  | Spanish Adult Contemporary |  |  | 18-49 | 
|       |         |            |  |        | WKIE |               |  | Spanish Adult Contemporary |  |  | 18-49 | 
|       |         |            |  |        | WKIF |               |  | Spanish Adult Contemporary |  |  | 18-49 | 
|      
|       | Miami   |            |  |        | WXDJ |               |  | Spanish Tropical           |  |  | 18-49 | 
|       |         |            |  |        | WCMQ |               |  | Spanish Oldies             |  |  | 25-54 | 
|       |         |            |  |        | WRMA |               |  | Spanish Adult Contemporary |  |  | 18-49 | 

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, 2003 Market Report, Synovate  2004
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 was projected to be
approximately $1.039 billion in 2003. In 2003, the Los
Angeles market had the largest U.S. Hispanic population
with approximately 7.8 million Hispanics, which is
approximately 44.5% of the Los Angeles markets total
population. The Los Angeles market experienced annual radio
revenue growth of 10.5% between 1997 and 2002. Radio revenue in
the Los Angeles market is expected to grow at an annual rate of
6.4% between 2002 and 2007.

New York

The New York market is the second largest
radio market in terms of advertising revenue which was projected
to be approximately $825.0 million in 2003. In 2003, the
New York market had the second largest U.S. Hispanic
population, with approximately 4.3 million Hispanics, which
is approximately 20.5% 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 four FM
Spanish-language radio stations in the New York market,
WSKQ-FM and WPAT-FM. The New York market experienced annual
radio revenue growth of 7.0% between 1997 and 2002. Radio
revenue in the New York market is expected to grow at an
annual rate of 6.0% between 2002 and 2007.

Puerto Rico

The Puerto Rico market is the thirty-third
largest radio market in terms of advertising revenue which was
projected to be approximately $100.0 million in 2003. In
2003, the Puerto Rico market had the third largest
U.S. Hispanic population, with approximately
3.8 million Hispanics, which is estimated to be
approximately 98.8% of the Puerto Rico markets total
population. The Puerto Rico market experienced annual radio
revenue growth of 5.3% between 1997 and 2002. Radio revenue in
the Puerto Rico market is expected to grow at an annual rate of
5.5% between 2002 and 2007.

Chicago

The Chicago market is the third largest radio
market in terms of advertising revenue which was projected to be
approximately $591.7 million in 2003. In 2003, the Chicago
market had the fourth largest U.S. Hispanic population,
with approximately 1.8 million Hispanics, which is
approximately 19.0% of the Chicago markets total
population. The Chicago market experienced annual radio revenue
growth of 7.6% between 1997 and 2002. Radio revenue in the
Chicago market is expected to grow at an annual rate of 5.6%
between 2002 and 2007.

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Miami

The Miami market is the eleventh largest radio
market in terms of advertising revenue which was projected to be
approximately $287.1 million in 2003. In 2003, the Miami
market had the fifth largest U.S. Hispanic population, with
approximately 1.8 million Hispanics, which is approximately
43.1% of the Miami markets total population. The Miami
market experienced annual radio revenue growth of 6.5% between
1997 and 2002. Radio revenue in the Miami market is expected to
grow at an annual rate of 5.8% between 2002 and 2007.

Latin Music On-Line
(LaMusica.com)

LaMusica.com is our bilingual Spanish-English
Internet website and on-line community that focuses on the
Hispanic market. LaMusica.com, which has links to the websites
of some of our radio stations, is a provider of original
information and interactive content related to Latin music,
entertainment, news and culture. LaMusica.com and our network of
station websites generate revenue primarily from advertising and
sponsorship. 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, music 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 consumers through an additional and
dynamic medium.

Management and Personnel

Without giving effect to the proposed sale of our
San Francisco station, as of March 10, 2004, we had
472 full-time employees, 11 of whom were primarily involved
in corporate management and/or station management, 178 of whom
were primarily involved in the programming of our stations, 169
of whom were primarily involved in sales, 98 of whom were
primarily involved in general administration and 16 of whom were
primarily involved in technical or engineering capacities.

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.

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 routine
post-holiday decreases in advertising expenditures.

Patents, Trademarks, Licenses and
Franchises

In the course of our business, we use various
trademarks, trade names, domain names and service marks,
including logos, in our advertising and promotions. We believe
our trademarks, trade names, domain names and service marks are
important to our business and we intend to continue to protect
and promote these where appropriate and to protect the
registration of new trademarks, including through legal action.
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 (the
FCC).

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

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National Radio Sales, Inc. Local
refers to advertising purchased by advertisers and agencies in
the local market served by a particular station.


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 as well
as the demand on available advertising inventory. Rates also
vary depending upon a programs popularity among the
listeners an advertiser is seeking to attract and the
availability of alternative media in the market. Radio
advertising rates generally are highest during the morning
drive-time hours which are the peak hours for radio audience
listening. A radio broadcaster that 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 and any programming strategy
we utilize to attract listeners. We determine the number of
advertisements broadcast hourly that can maximize the
stations revenue without negatively impacting 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 contracts 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 personnel to obtain local
advertising revenue. Our local sales force is important to
maintaining relationships with key local advertisers and
agencies and identifying new advertisers. We pay commissions to
our local sales staff upon receipt of payment for their
respective billings which assists in our collection efforts. We
offer assistance to local advertisers by providing them with
studio facilities to produce commercials free of charge and, in
some cases, we produce the commercials.

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 radio 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

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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. It is not known at this time
whether digital technology also may be used in the future by
existing radio broadcast stations either on existing or
alternate broadcasting frequencies. The FCC also has begun
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 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

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

Federal Regulation of Radio
Broadcasting

The radio broadcasting industry is subject to
extensive and changing regulation by the FCC of programming,
technical operations, employment and other business practices.
The FCC regulates radio 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.                                                                            

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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;                                                                                                                                        
|
| |  | 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 granting
of the application would serve the public interest, convenience
and necessity, 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

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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.


The following table sets forth the license
expiration dates of each of our radio stations.

|           |  |                 |  |             |          |                 |  |           |          |   |  |  |           | 
|---------- |  | --------------- |  | ----------- | -------- | --------------- |  | --------- | -------- | - |  |  | --------- | 
|           |  |                 |  | Date of     |          | Date of License |  | Operation
|FM Station |  | Market          |  | Acquisition |          | Expiration      |  | Frequency
|           |  |                 |  |             |          |                 |  |          
|KLAX       |  | Los Angeles, CA |  |             | 2/24/88  |                 |  |           | 12/01/05 |   |  |  | 97.9 MHz  | 
|KZAB       |  | Los Angeles, CA |  |             | 11/09/00 |                 |  |           | 12/01/05 |   |  |  | 93.5 MHz  | 
|KZBA       |  | Los Angeles, CA |  |             | 11/09/00 |                 |  |           | 12/01/05 |   |  |  | 93.5 MHz  | 
|KXOL       |  | Los Angeles, CA |  |             | 10/30/03 |                 |  |           | 12/01/05 |   |  |  | 96.3 MHz  | 
|WSKQ       |  | New York, NY    |  |             | 1/26/89  |                 |  |           | 6/01/06  |   |  |  | 97.9 MHz  | 
|WPAT       |  | New York, NY    |  |             | 3/25/96  |                 |  |           | 6/01/06  |   |  |  | 93.1 MHz  | 
|WMEG       |  | Puerto Rico     |  |             | 5/13/99  |                 |  |           | 2/01/12  |   |  |  | 106.9 MHz | 
|WEGM       |  | Puerto Rico     |  |             | 1/14/00  |                 |  |           | 2/01/04  | * |  |  | 95.1 MHz  | 
|WCMA       |  | Puerto Rico     |  |             | 12/01/98 |                 |  |           | 2/01/12  |   |  |  | 96.5 MHz  | 
|WZET       |  | Puerto Rico     |  |             | 5/13/99  |                 |  |           | 2/01/12  |   |  |  | 92.1 MHz  | 
|WIOA       |  | Puerto Rico     |  |             | 1/14/00  |                 |  |           | 2/01/04  | * |  |  | 99.9 MHz  | 
|WIOB       |  | Puerto Rico     |  |             | 1/14/00  |                 |  |           | 2/01/12  |   |  |  | 97.5 MHz  | 
|WIOC       |  | Puerto Rico     |  |             | 1/14/00  |                 |  |           | 2/01/12  |   |  |  | 105.1 MHz | 
|WZNT       |  | Puerto Rico     |  |             | 1/14/00  |                 |  |           | 2/01/12  |   |  |  | 93.7 MHz  | 
|WZMT       |  | Puerto Rico     |  |             | 1/14/00  |                 |  |           | 2/01/12  |   |  |  | 93.3 MHz  | 
|WODA       |  | Puerto Rico     |  |             | 1/14/00  |                 |  |           | 2/01/12  |   |  |  | 94.7 MHz  | 
|WNOD       |  | Puerto Rico     |  |             | 1/14/00  |                 |  |           | 2/01/12  |   |  |  | 94.l MHz  | 
|WLEY       |  | Chicago, IL     |  |             | 3/27/97  |                 |  |           | 12/01/04 |   |  |  | 107.9 MHz | 
|WDEK       |  | Chicago, IL     |  |             | 4/04/03  |                 |  |           | 12/01/04 |   |  |  | 92.5 MHz  | 
|WKIE       |  | Chicago, IL     |  |             | 4/04/03  |                 |  |           | 12/01/04 |   |  |  | 92.7 MHz  | 
|WKIF       |  | Chicago, IL     |  |             | 4/04/03  |                 |  |           | 12/01/04 |   |  |  | 92.7 MHz  | 
|WXDJ       |  | Miami, FL       |  |             | 3/28/97  |                 |  |           | 2/01/04  | * |  |  | 95.7 MHz  | 
|WCMQ       |  | Miami, FL       |  |             | 12/22/86 |                 |  |           | 2/01/12  |   |  |  | 92.3 MHz  | 
|WRMA       |  | Miami, FL       |  |             | 3/28/97  |                 |  |           | 2/01/12  |   |  |  | 106.7 MHz | 




* Pending license renewal. All
authorizations, licenses and permits are valid during the
license renewal application period.

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 without or with
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 has created a subclass of
Class C stations based on antenna height. Stations not
meeting the minimum height requirement within a three-year
transition period may be downgraded to a 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.                                                   

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 case of a
corporation holding broadcast licenses, the interests of
officers, directors and those who, directly or indirectly, have
the right to vote 5% 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

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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 20% 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% 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% 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.    

We are uncertain as to what
cross-ownership or cross-media rules
will be used by the FCC in the future. The FCC has adopted new
ownership rules that were intended to become effective
September 4, 2003. However, a federal court has stayed the
new rules pending a further review, and Congress is considering
a bill that would substantially alter the new rules. Until this
matter is resolved, the FCC intends to follow its prior rules
which used a signal contour method of defining local radio
markets and included certain proscriptions against
newspaper/broadcast and radio/television cross ownership.
Therefore, absent waivers, we 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, would not be able to hold an
attributable interest in a daily newspaper or television
broadcast station in those same markets. The ownership limits
are extremely fluid at this time. In addition, the FCC and/or
Congress may impose new ownership regulations upon broadcast
licensees in the near future.

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



| |   |                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In a radio market with 45 or more commercial
    radio stations, a party may own, operate or control up to eight
    commercial radio stations, not more than five of which are in
    the same service (AM or FM).                   
|
| |  | In a radio market with between 30 and 44
    (inclusive) commercial radio stations, a party may own,
    operate or control up to seven commercial radio stations, not
    more than four of which are in the same service (AM or FM).

12



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| |   |                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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% of the radio stations in such
    market.

The United States Congress is currently reviewing
the FCCs revised ownership rules. It is possible that the
new rules may be modified or even repealed, dependent upon
Congressional action. In addition, the FCC has announced a
series of initiatives to enhance localism among radio and
television broadcasters. Accordingly, the FCC or Congress may
ultimately impose further regulations upon broadcast licensees.
On September 3, 2003, the United States Court of Appeals
for the Third Circuit stayed the effective date of the new
ownership rules. Therefore, at this time the FCCs previous
rules, under which markets were determined by signal contour
overlap standards and different levels of combinations were
permitted, still apply. The specific levels of allowable
ownership are at this time difficult to predict in the absence
of further interim direction from the FCC, a decision on the
merits by the court, and/or the enactment of legislation.

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, equal
employment opportunity, 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.

Time Brokerage
Agreements.Occasionally, radio
stations enter into time brokerage agreements or local marketing
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.

RF Radiation.In 1985, the FCC adopted rules based on a 1982 American National
Standards Institute, or ANSI standard regarding human exposure
to levels of radio frequency, or 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
radiation exposure that, in some respects, was more restrictive
in the amount of environmental RF radiation exposure permitted.
The FCC has since adopted

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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, also known as
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 our radio stations for listeners, but we cannot
predict the effect upon us.

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
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. We cannot assure
you, 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 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 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, received a
notice from the New Jersey Meadowlands Commission indicating
that it was planning to redevelop the lands which include the
Transmitter Property and offering compensation to the landlords
for the purchase of the Transmitter Property. The Meadowlands
Commission also initially indicated that it would not seek
reimbursement from the landlords for the costs of landfill
closure or for the remediation of environmental conditions that
resulted from the operation of the landfill. The landlords
assert that, in any condemnation proceedings, the Meadowlands
Commission should be legally bound by its prior statements,
foregoing landfill related claims. The landlords 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
landlords, and named us as an additional defendant. The
condemnation proceeding, as well as the proposed redevelopment
of the site, are still pending. The Meadowlands

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Commission did not claim reimbursement for
landfill closure related costs. While it reserved its rights to
assert independently (even subsequent to the conclusion of the
condemnation proceedings), claims concerning the remediation of
any contamination unrelated to the landfill operations, the
Meadowlands Commissions investigations thus far have
disclosed no such contamination and, to date, no claims have
been made against the landlords or us relating to the
environmental condition of the Transmitter Property. 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, or EQB,
inspected our transmitter site in Maricao, Puerto Rico. Based on
the inspection, EQB issued a letter to us 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 we 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



| |                                                            
| | -----------------------------------------------------------
| | Issuance of Series A Preferred Stock
    and Exchange Offer

On October 30, 2003, we completed a private
offering of $75.0 million of 10 3/4% Series A
cumulative exchangeable redeemable preferred stock, par value
$.01 per share, with a liquidation preference of
$1,000 per share (the Series A preferred
stock), without a specified maturity date. The initial
purchasers in the private offering sold the Series A
preferred stock within the United States to qualified
institutional buyers in reliance on Rule 144A under the
Securities Act of 1933, as amended (the Securities
Act) and outside the United States to
non-U.S. persons in reliance on Regulation S under the
Securities Act.

On February 18, 2004, we commenced an offer
to exchange registered shares of our 10 3/4% Series B
cumulative exchangeable redeemable preferred stock, par value
$.01 per share and liquidation preference of
$1,000 per share (the Series B preferred
stock) for any and all shares of our outstanding
Series A preferred stock. The exchange offer will expire at
5:00 p.m., eastern standard time, on March 26, 2004,
unless we extend the offer. Our registration statement on
Form S-4, which registered the Series B preferred
stock and the 10 3/4% subordinated exchange notes due
2013 that may be issued under certain circumstances by us in
exchange for the Series B preferred stock in an aggregate
principal amount equal to the liquidation preference of the
Series B preferred stock exchanged (the Exchange
Notes), was declared effective by the Securities and
Exchange Commission (the SEC) on February 13,
2004.

Sale of San Antonio
Stations

On January 30, 2004, we completed the sale
of the assets of radio stations KLEY-FM and KSAH-AM, serving the
San Antonio, Texas market, to Border Media Partners, LLC
(Border Media) for a cash purchase price of
$24.4 million. The sale was made pursuant to the terms of
our asset purchase agreement dated as of September 18, 2003
with Border Media.

Proposed San Francisco Station
Sale

On October 2, 2003, we entered into an asset
purchase agreement with 3 Point Media 
San Francisco, LLC (Three Point Media) to sell
the assets of radio station KPTI-FM, serving the
San Francisco, California market, for a cash purchase price
of $30.0 million. Three Point Media did not close under the
asset purchase agreement, and on February 3, 2004, we
terminated the agreement. We are currently considering

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other offers to purchase the assets of radio
station KPTI-FM. We intend to sell the assets of radio station
KPTI-FM; however, we cannot assure you that the sale will be
completed.


Acquisition of Los Angeles
Station

On October 30, 2003, we completed the
acquisition of the assets of radio station KXOL-FM (formerly
KFSG-FM), serving the Los Angeles, California market, from the
International Church of the FourSquare Gospel (ICFG)
for a total cost of $264.0 million comprised of a cash
purchase price of $250.0 million, closing costs and
commissions of $5.1 million, plus the issuance to ICFG on
February 8, 2002 of 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. On November 2, 2000,
pursuant to the asset purchase agreement between us and ICFG for
the acquisition of the assets of KXOL-FM, we made a
non-refundable deposit of $5.0 million which was credited
towards the $250.0 million cash purchase price at closing.
Pursuant to amendments to the asset purchase agreement, prior to
the closing we made additional non-refundable deposits toward
the cash purchase price in the aggregate amount of
$55.0 million which were also credited towards the
$250.0 million cash purchase price at closing. Cash on hand
was used to make all the non-refundable deposits toward the cash
purchase price. The remaining $190.0 million of the cash
purchase price was funded from (1) the proceeds of our
private offering of Series A preferred stock which closed
on October 30, 2003 and (2) borrowings under a senior
secured credit facility consisting of a $125.0 million term
loan facility which we entered into on October 30, 2003.

In addition to the FCC license of KXOL-FM, the
assets acquired by us from ICFG include certain radio
transmission equipment and a fifty-year lease at a rent of
$1.00 per year for the KXOL-FM tower site, all of which
were used by ICFG for radio broadcasting and which we also
intend to use for radio broadcasting. The consideration for the
acquisition of the assets of KXOL-FM was determined through
arms-length negotiations between us and ICFG. We allocated
the total cost of the purchase price of KXOL-FM as follows:
$262.7 million for FCC licenses, $0.1 million for
equipment, and $1.2 million for other intangible assets.

From April 30, 2001 until the closing of the
acquisition, we broadcast our programming over KXOL-FM pursuant
to a time brokerage agreement with ICFG. ICFG broadcast its
programming over our radio stations KZAB-FM and KZBA-FM pursuant
to a time brokerage agreement with us from April 30, 2001
until February 28, 2003. Pursuant to the amended asset
purchase agreement and amended time brokerage agreements, we
were required to issue additional warrants to ICFG from the date
that ICFG ceased to broadcast its programming over KZAB-FM and
KZBA-FM until the closing of the acquisition of KXOL-FM.
Consequently, on each of March 31, 2003, April 30,
2003, May 31, 2003, June 30, 2003, July 31, 2003,
August 31, 2003 and September 30, 2003, we granted
ICFG a warrant exercisable for 100,000 shares (an aggregate
of 700,000 shares) of our Class A common stock at an
exercise price of $6.14, $7.67, $7.55, $8.08, $8.17, $7.74 and
$8.49 per share, respectively. The warrant issued on
September 30, 2003 was the final warrant required due to
the closing of the acquisition of KXOL-FM. We assigned these
warrants an aggregate fair market value of approximately
$2.9 million based on the Black-Scholes option pricing
model in accordance with Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for
Stock-Based Compensation. The fair market value of each
warrant was recorded as a stock-based programming expense on the
respective date of grant. These warrants are exercisable for a
period of thirty-six months after the date of issuance after
which they will expire if not exercised.

Senior Secured Credit
Facilities

On October 30, 2003, we entered into senior
secured credit facilities with Lehman Commercial Paper Inc. as
syndication agent and administrative agent and the several banks
and other financial institutions or entities from time to time a
party to the credit agreement. The senior secured credit
facilities include a six-year $125.0 million term loan
facility and a five-year $10.0 million revolving credit
facility.

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We used the net proceeds from the offering of our
Series A preferred stock, together with most of the term
loan facility, to fund the purchase of KXOL-FM. We are obligated
to offer to repay a portion of the borrowings under the senior
secured credit facilities with a portion of the net proceeds we
receive from the sale of our San Antonio stations and the
proposed sale of our San Francisco station. The
$10.0 million revolving credit facility remains undrawn and
may be used for working capital purposes, capital needs and
general corporate purposes.

The credit agreement contains a number of
financial covenants which, among other things, require us to
maintain specified financial ratios and impose certain
limitations on us with respect to indebtedness, capital
expenditures, transactions with affiliates and consolidations
and mergers, among other things.

Purchase of Additional Chicago
Stations

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

Industry Segments

Radio broadcasting is our only operating segment.

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.



| |                                                                                
| | -------------------------------------------------------------------------------
| | Our substantial amount of debt could
    adversely affect our financial health.

Our consolidated debt is substantial and we are
highly leveraged, which could adversely affect our financial
condition, limit our ability to grow and compete and prevent us
from fulfilling our obligations relating to our Series A
preferred stock and Series B preferred stock (collectively,
the Preferred Stock) and, if issued, our
unregistered 10 3/4% subordinated exchange notes due
2013, issuable in exchange for our Series A preferred stock
(the Unregistered Exchange Notes) and Exchange
Notes. As of December 31, 2003, we had $454.2 million
of total long-term debt ($464.0 million of total long-term
debt less $9.8 million of unamortized discount). As of
December 31, 2003, our ratio of total debt to last twelve
months Adjusted EBITDA, as defined in the credit agreement, was
10.3 to 1.0. 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 will be limited;                                                                                       
|
| |  | our substantial debt could make us more
    vulnerable to economic downturns and increases in interest
    rates, limit our ability to withstand competitive pressures and
    reduce our flexibility in responding to changing business and
    economic conditions;
|
| |  | our substantial debt could place us at a
    disadvantage compared to our competitors who have less
    debt; and                                                                                                                                                    
|
| |  | it may be more difficult for us to satisfy our
    obligations relating to our Preferred Stock and our Exchange
    Notes and Unregistered Exchange Notes, if issued (for example,
    we may not be able to pay                                                     

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| |  |                                                                                                                            
| |  | ---------------------------------------------------------------------------------------------------------------------------
| |  | cash dividends and interest, respectively, or
    repurchase our Preferred Stock when and if we are required to do
    so);

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
alternative 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.



| |                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We will require a significant amount of
    cash to service our debt and to make cash dividend payments
    under our Preferred Stock. Our ability to generate cash depends
    on many factors beyond our control.

For the last twelve months ended
December 31, 2003, we had net cash interest expense of
$34.1 million as defined in the credit agreement. At
December 31, 2003, our ratio of last twelve months Adjusted
EBITDA to last twelve months net cash interest expense, as
defined in the credit agreement, was approximately 1.3 to 1.0.
Subsequent to October 30, 2003, our net interest expense
increased when we incurred debt under the senior secured credit
facilities and our net interest expense will increase when and
if we exchange our Series A preferred stock for
Unregistered Exchange Notes or Series B preferred stock for
the Exchange Notes. If we acquire additional radio stations in
the future, depending on the financing used to fund these
acquisitions, our interest expense may increase as well. In
addition, we will be required to pay dividends in cash on our
Preferred Stock after October 15, 2008.

Our ability to make payments on and to refinance
our debt, pay dividends in cash on our Preferred Stock after
October 15, 2008, repurchase our Preferred Stock when and
if we are required to do so and to fund necessary or desired
capital expenditures and any future acquisitions, will depend on
our ability to generate cash in the future. This is subject to
general economic, financial, competitive, legislative,
regulatory and other factors that may be beyond our control.

Based on our current level of operations, we
believe that our cash flow from operations, cash on hand and
available borrowings under our senior secured credit facilities
will be adequate to meet our liquidity needs for the near future
barring any unforeseen circumstances. We cannot assure you,
however, that our business will generate sufficient cash flow
from operations or that future borrowings will be available to
us under our senior secured credit facilities or otherwise in a
sufficient amount. We may need to refinance all or a portion of
our debt on or before maturity. We cannot assure you that we
will be able to refinance any of our debt, including our senior
secured credit facilities, our 9 5/8% senior subordinated
notes due 2009 (existing 9 5/8% notes) or the
Exchange Notes and Unregistered Exchange Notes, if issued, on
commercially reasonable terms or at all.



| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | Any acceleration of our debt or event of
    default would harm our business and financial
    condition.

If there were an event of default under our or
our subsidiaries indebtedness, including the senior
secured credit facilities, our existing 9 5/8% notes
and the Exchange Notes and Unregistered Exchange Notes, if
issued, the holders of the affected indebtedness could elect to
declare all of that indebtedness to be due and payable
immediately, which in turn could cause some or 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. Under the terms of our senior secured
credit facilities and our existing 9 5/8% notes, if
the amounts outstanding under our indebtedness were accelerated,
our lenders would have the right to foreclose on their liens on
substantially all of our and our subsidiaries assets (with
the exception of our FCC licenses held by certain of our
subsidiaries, because a grant of a security interest therein
would be prohibited by law, and certain general intangibles and
fixed assets under particular limited circumstances) and on the

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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.




| |                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Despite our current significant level of
    debt, 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
terms of our Preferred Stock, our existing
9 5/8% notes and the senior secured credit facilities
restrict our ability to incur additional debt, these
restrictions are subject to a number of qualifications and
exceptions and, under certain circumstances, debt incurred in
compliance with these restrictions could be substantial. In
addition, the terms of our Series B preferred stock permit
us to exchange our Series B preferred stock for the
Exchange Notes and the terms of our Series A preferred
stock permit us to exchange our Series A preferred stock
for Unregistered Exchange Notes. If we or our subsidiaries incur
additional debt, the related risks described above that we and
our subsidiaries face could intensify.



| |                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------
| | The terms of our debt and our Preferred
    Stock impose or will impose restrictions on us that may
    adversely affect our business.

The terms of our Preferred Stock, existing
9 5/8% notes, senior secured credit facilities, and,
if issued, Unregistered Exchange Notes and Exchange Notes
contain covenants that, among other things, limit our ability to:



| |   |                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | incur additional debt, incur contingent
    obligations and issue preferred stock;                                                                                                                               
|
| |  | redeem or repurchase securities ranking junior to
    our Preferred Stock;                                                                                                                                       
|
| |  | create liens;                                                                                                                                                                                                    
|
| |  | pay dividends, distributions or make other
    specified restricted payments and may also place restrictions on
    the ability of certain of our subsidiaries to pay dividends or
    make other payments to us;
|
| |  | sell assets;                                                                                                                                                                                                     
|
| |  | make certain capital expenditures, investments
    and acquisitions;                                                                                                                                             
|
| |  | change or add lines of business;                                                                                                                                                                                 
|
| |  | enter into certain transactions with affiliates;                                                                                                                                                                 
|
| |  | enter into sale and leaseback transactions;                                                                                                                                                                      
|
| |  | 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.                                                      

The terms of the senior secured credit facilities
also require us to maintain specified financial ratios and to
satisfy certain financial condition tests. These covenants could
materially and adversely affect our ability to finance our
future operations or capital needs and to engage in other
business activities that may be in our best interest. All of
these covenants may restrict our ability to expand or to pursue
our business strategies. Our ability to comply with these
covenants may be affected by events beyond our control, such as
prevailing economic conditions and changes in regulations, and,
if such events occur, we cannot be sure that we will be able to
comply. A breach of any of these covenants could result in a
default under one or more of our debt instruments.

If an event of default occurs under the senior
secured credit facilities or the indenture governing our
existing 9 5/8% notes, the lenders and/or the
noteholders could elect to declare all amounts of debt
outstanding, together with accrued interest, to be immediately
due and payable. In addition, there are change of control
provisions in the senior secured credit facilities, the
indenture governing the existing 9 5/8% notes, the
certificates of designations governing our Series A
preferred stock and our Series B preferred stock and the

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indentures that will govern our Exchange Notes
and Unregistered Exchange Notes, if issued, each of which would
cause an acceleration of the applicable indebtedness and/or
require us to make an offer to repurchase all of the applicable
notes and/or Series A preferred stock and Series B
preferred stock in the event that we experience a change of
control.




| |                                                                                                                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may not have the funds or the ability to
    raise the funds necessary to repurchase our Preferred Stock if
    holders exercise their repurchase right, or to finance the
    change of control offer required by our Preferred Stock and the
    indentures that would govern our Exchange Notes and Unregistered
    Exchange Notes, if issued.

On October 15, 2013, each holder of
Preferred Stock will have the right to require us to redeem all
or a portion of the Preferred Stock at a purchase price of 100%
of the liquidation preference thereof, plus all accumulated and
unpaid dividends to the date of repurchase. In addition, if we
experience certain kinds of changes of control as described in
the certificates of designations creating the Preferred Stock,
subject to certain restrictions in our debt instruments we will
be required to make an offer to purchase the Preferred Stock for
cash at a purchase price of 101% of the liquidation preference
thereof, plus accumulated dividends. The source of funds for any
such repurchases would be our available cash or cash generated
from operations or other sources, including borrowings, sales of
equity or funds provided by a new controlling person or entity.
We cannot assure you that sufficient funds will be available to
us on favorable terms, or at all, to repurchase all tendered
Preferred Stock or Exchange Notes or Unregistered Exchange
Notes, if issued, pursuant to these requirements. Our failure to
offer to repurchase or to repurchase Preferred Stock or Exchange
Notes or Unregistered Exchange Notes tendered, as the case may
be, will result in a voting rights triggering event under the
certificates of designations governing our Preferred Stock or a
default under the indentures that would govern our Exchange
Notes and Unregistered Exchange Notes, if issued, as the case
may be. Such events could lead to a cross-default under our
senior secured credit facilities and under the terms of our
other debt. In addition, our senior secured credit facilities
and our existing 9 5/8% notes would either prohibit or
effectively prohibit us from making any such required
repurchases. The underlying change of control event could also
trigger our obligation to offer to repurchase our existing
9 5/8% notes at 101% of their principal amount. Prior
to repurchasing our Preferred Stock or Exchange Notes or
Unregistered Exchange Notes on a change of control event, we
must either repay outstanding debt under our senior secured
credit facilities or obtain the consent of the lenders under
those facilities and we may have to offer to purchase our
existing 9 5/8% notes. If we do not obtain the
required consents or repay our outstanding debt under our senior
secured credit facilities, we would remain effectively
prohibited from offering to repurchase our Preferred Stock or
Exchange Notes or Unregistered Exchange Notes. Even if we are
able to repay the senior secured credit facilities, if we have
insufficient funds to purchase both our existing
9 5/8% notes and our Preferred Stock or Exchange Notes
or Unregistered Exchange Notes, we would remain effectively
prohibited from offering to repurchase our Preferred Stock or
Exchange Notes or Unregistered Exchange Notes.



| |                                                                        
| | -----------------------------------------------------------------------
| | We may not complete the proposed sale of
    our San Francisco station.

Although we entered into a definitive agreement
for the proposed sale of the assets of our San Francisco
station on October 2, 2003, the buyer did not close under
the agreement and on February 3, 2004, we terminated the
agreement. We are currently considering other offers to purchase
the assets of our San Francisco station. We intend to sell
the assets of our San Francisco station; however, we cannot
assure you that the proposed sale will be completed. If the
proposed sale does not close, we will be unable to use the
anticipated proceeds from such sale to reduce our debt and
therefore we will be more highly leveraged.



| |                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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 may not 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

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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 for the fiscal year ended December 31, 2003, in
the fiscal year ended December 29, 2002, in the three-month
transitional period ended December 30, 2001, and in the
fiscal year ended September 30, 2001. If we acquire
additional radio stations in the future, depending on the
financing used to fund these acquisitions, interest expense may
increase as well. In addition, the additional tax amortization
of radio station KXOL-FM, which we acquired on October 30,
2003, will increase our deferred income tax expense and
effective tax rate significantly.




| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | Our operating results could be adversely
    affected by a national or regional recession.

Our operating results could be adversely affected
by a recession and/or further downturn in the United States
economy since advertising expenditures generally decrease as the
economy slows down. In addition, our operating results in
individual geographic markets could be adversely affected by
local or regional economic downturns. Our operating results have
been adversely affected by past recessions.



| |                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------
| | A large portion of our net revenue and
    station operating income currently comes from our New York, Los
    Angeles and Miami markets.

Our New York, Los Angeles and Miami markets
account for more than 70% of our revenue for the fiscal year
ended December 31, 2003. A significant decline in net
revenue or station operating income from our stations in any of
these markets could have a material adverse effect on our
financial position and results of operations.



| |                                                                          
| | -------------------------------------------------------------------------
| | Loss of any of our 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.



| |                                                                           
| | --------------------------------------------------------------------------
| | Our growth depends on successfully
    executing our acquisition strategy.

We have pursued the acquisition of radio
stations, primarily in the largest U.S. Hispanic markets,
as a growth strategy. 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:



| |   |                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we may be limited in our ability to acquire
    additional radio stations due to our substantial level of debt;                                                                                                                                                                              
|
| |  | 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;                                                                                                                                     
|
| |  | we may not increase our station operating income
    or yield other anticipated benefits despite newly acquired
    stations;                                                                                                                                                                
|
| |  | we may incur unanticipated delays in completing
    acquisitions due to required regulatory approvals;                                                                                                                                                                                       
|
| |  | we may have difficulty managing any rapid growth;                                                                                                                                                                                                                                            
|
| |  | we may have difficulty programming newly acquired
    stations to attract listenership; and                                                                                                                                                                                                  
|
| |  | 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.

Although we intend to pursue additional strategic
acquisitions, our ability to do so is significantly restricted
by the terms of the senior secured credit facilities, the
indenture governing our existing 9 5/8% notes, the
certificates of designations governing our Series A
preferred stock and Series B preferred stock, the
indentures that will govern the Exchange Notes and Unregistered
Exchange Notes, if issued, and our ability to

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raise additional funds. Additionally, our
competitors who have greater resources than we do will have an
advantage over us in pursuing and completing strategic
acquisitions.




| |                                                                                                                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Raúl Alarcón, Jr., our
    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 such as a merger or
    sale.

Raúl Alarcón, Jr., our Chairman of
the Board of Directors, Chief Executive Officer and President,
owns shares of Class B common stock having approximately
81% 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 such as a merger or sale.



| |                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.

Radio 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 our business as
a whole.

Although we believe that each of our radio
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 station operating income 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.



| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | We will face increased competition because
    of the recent merger of Univision Communications Inc. and
    Hispanic Broadcasting Corp.

Because of the recent merger of Univision
Communications Inc. and Hispanic Broadcasting Corp. we will face
increased competition for advertising revenue from an entity
that will have a dominant share of both the Spanish-language
television advertising market and Spanish-language radio
advertising market. The merged entity holds the nations
largest network of Spanish-language television stations and the
nations largest network of Spanish-language radio
stations. The merged entity will also have substantially more
resources than we do which could make us face even greater
competitive pressures in the markets in which we operate.



| |                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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, diverse and evolving
    forms of program distribution;                                                                                                                                 

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



| |                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------
| | 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 or anti-trust violations, 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 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 and would negatively
impact our operating results.

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.



| |                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------
| | 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 (the Justice Department) 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

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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.




| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | The market price of our shares of
    Class A common stock may fluctuate
    significantly.

The stock market in general has recently
experienced 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 national economy;                        
|
| |  | significant 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.



| |                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------
| | 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 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. In addition, we were required to issue additional
warrants to ICFG from the date that ICFG ceased to broadcast its
programming over KZAB-FM and KZBA-FM until the closing of the
acquisition of KXOL-FM. On each of March 31, 2003,
April 30, 2003, May 31, 2003, June 30, 2003,
July 31, 2003, August 31, 2003 and September 30,
2003, we granted ICFG a warrant exercisable for
100,000 shares (an aggregate of 700,000 shares) of our
Class A common stock at an exercise price of $6.14, $7.67,
$7.55, $8.08, $8.17, $7.74 and $8.49 per share,
respectively. The warrant issued on September 30, 2003 was
the final warrant required to be issued due to the closing of
the acquisition of KXOL-FM. These warrants are also exercisable
for a period of thirty-six months after the date of issuance
after which they will expire if not exercised. To date, none of
the warrants that we have issued to ICFG has been exercised. If
these warrants are exercised, we cannot assure you that this
would not depress the market price of our Class A common stock.

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 (the Exchange Act). 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,

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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

We are subject to the reporting and other
information requirements of the Exchange Act. We file reports
and other information with the SEC. Such reports and other
information filed by us pursuant to the Exchange Act may be
inspected and copied at the public reference facility maintained
by the SEC at 450 Fifth Street, N.W., Washington D.C.
20549. If interested, please call 1-800-SEC-0330 for further
information on the public reference room. The SEC maintains a
website on the Internet containing reports, proxy materials,
information statements and other items. The Internet website
address is http://www.sec.gov. Our reports, proxy
materials, information statements and other information can also
be inspected and copied at the offices of The Nasdaq Stock
Market, on which our common stock is listed (symbol: SBSA). 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 Exchange Act 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. Our corporate headquarters are
located in Coconut Grove, Florida in a building indirectly owned
by Raúl Alarcón, Jr., for which we entered into a
ten-year lease on December 1, 2000. The studios and offices
of our Miami 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 buildings 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). We own the buildings housing our Puerto Rico
offices and studios in Guaynabo, Puerto Rico and Mayagüez,
Puerto Rico. We own the transmitter sites for five of our eleven
stations in Puerto Rico. 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 2004 and 2053, assuming all renewal options are
exercised. We lease the office and studio facilities for our
stations in Chicago, Illinois and Oakland, California and
additional office space for our stations in New York and
Puerto Rico.

We have backup transmitter facilities in place
for our New York stations WSKQ and WPAT in midtown
Manhattan on the Four Times Square Building. We also have backup
transmitter sites for KLAX in Los Angeles, WLEY 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 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 radio
stations are vital to our overall operations. Management
believes that our properties are in good condition and are
suitable for our operations; however, we continually assess the
need to upgrade our properties. We own substantially all the
equipment used in our radio broadcasting business.

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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 us 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 complaint was brought
on behalf of Mr. Wolf and an alleged class of similarly
situated purchasers, against us, eight underwriters and/or their
successors-in-interest who led or otherwise participated in our
initial public offering, two members of our senior management
team, one of whom is our Chairman of the Board of Directors, and
an additional director; the latter individuals are referred to
collectively as the individual defendants. To date, the
complaint, while served upon us, has not been served upon the
individual defendants, 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
underwriter defendants, and 1,000 individuals 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 us, have been assigned for consolidated pretrial
purposes to one judge of the United States District Court for
the Southern District of New York. One of the claims
against the individual defendants, specifically the
Section 10b-5 claim, has been dismissed.

In June of 2003, after lengthy negotiations, a
settlement proposal was embodied in a memorandum of
understanding among the investors in the plaintiff class, the
issuer defendants and the issuer defendants insurance
carriers. On July 23, 2003, our Board of Directors approved
both the memorandum of understanding and an agreement between
the issuer defendants and the insurers. As of March 1,
2004, the overwhelming majority of non-bankrupt issuer
defendants have approved the settlement proposal. The principal
components of the settlement include: 1) a release of all
claims against the issuer defendants and their directors,
officers and certain other related parties arising out of the
alleged wrongful conduct in the amended complaint; 2) the
assignment to the plaintiffs of certain of the issuer
defendants potential claims against the underwriter
defendants; and 3) a guarantee by the insurers to the
plaintiffs of the difference between $1.0 billion and any
lesser amount recovered by the plaintiffs against the
underwriter defendants. The payments will be charged to each
issuer defendants insurance policy on a pro rata basis.

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 us,
alleging that he was entitled to compensation for work performed
for us and a commission for the pending purchase of KXOL-FM by
us. On July 29, 2002, a final judgment was entered in favor
of Mr. Rumbaut which was amended on August 29, 2002 to
reflect an award of $1.2 million, consisting of
compensation for executive services of $0.2 million and
$1.0 million for his contribution towards the pending
purchase of KXOL-FM. 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 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
February 19, 2003, we made a payment of $2.0 million
into an escrow account for the attorneys fees awarded and
postjudgment interest. We appealed the judgment. In February
2004, the litigation was resolved pursuant to a confidential
settlement agreement. The parties thereafter sought dismissal of
the pending appeal and seek nothing further from the other in
litigation. We

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adequately reserved for this matter previous to
the settlement and the settlement had no material impact on our
operating results or financial position.


On June 12, 2002, we 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 our ability to raise capital, depressed our
share price, impugned our reputation, made station acquisitions
more difficult, and interfered with our business opportunities
and contractual arrangements. In the amended complaint, we
sought actual damages in excess of $500.0 million, which
would be trebled under anti-trust law. On January 31, 2003,
the Court granted defendants motions to dismiss for
failure to adequately allege antitrust injury. We 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 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. On August 6, 2003, the District
Court denied our motion for reconsideration. On
September 5, 2003, we filed an appeal to the 11th Circuit
Court of Appeals of the District Courts decisions dated
January 31, 2003 and August 6, 2003. The briefing on
that appeal was completed in December 2003, oral argument
occurred in Miami on February 26, 2004 and the decision on
the matter was reserved.

On June 14, 2000, an action was filed in the
Eleventh Judicial Circuit in and for Miami-Dade County, Florida
by Jose Antonio Hurtado against us, alleging that he was
entitled to a commission related to an acquisition made by us.
The case was tried before a jury during the week of
December 1, 2003 and Mr. Hurtado was awarded the sum
of $1.8 million, plus interest. Mr. Hurtado also filed
for an application for attorneys fees, which we opposed on
grounds that there was no contractual or statutory basis for
such an award. We filed a motion for judgment notwithstanding
the verdict, which was heard on February 6, 2004. Our
motion for judgment notwithstanding the verdict and the
Courts consideration of granting a new trial have been
taken under advisement by the 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 31, 2003.

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##### Table of Contents






PART II





|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market For Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities

Our Class A common stock is traded on the
Nasdaq Stock Markets National Market under the symbol
SBSA. 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.

|                                    |  |      |       |     |  |   |      | 
|----------------------------------- |  | ---- | ----- | --- |  | - | ---- | 
|Fiscal Year Ended December 29, 2002 |  | High |       | Low
|                                    |  |      |       |    
|First Quarter (12/31/01  3/31/02)  |  | $    | 14.30 |     |  | $ | 7.80 | 
|Second Quarter (4/01/02  6/30/02)  |  | $    | 17.34 |     |  | $ | 8.92 | 
|Third Quarter (7/01/02  9/29/02)   |  | $    | 11.07 |     |  | $ | 5.35 | 
|Fourth Quarter (9/30/02  12/29/02) |  | $    | 9.37  |     |  | $ | 5.30 | 

|                                     |  |      |       |     |  |   |      | 
|------------------------------------ |  | ---- | ----- | --- |  | - | ---- | 
|Fiscal Year Ended December 31, 2003  |  | High |       | Low
|                                     |  |      |       |    
|First Quarter (12/30/02  3/31/03)   |  | $    | 9.16  |     |  | $ | 5.13 | 
|Second Quarter (4/01/03  6/30/03)   |  | $    | 8.85  |     |  | $ | 6.26 | 
|Third Quarter (7/01/03  9/30/03)    |  | $    | 9.45  |     |  | $ | 6.76 | 
|Fourth Quarter (10/01/03  12/31/03) |  | $    | 10.95 |     |  | $ | 8.46 | 

As of March 10, 2004, there were
approximately 62 record 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 10, 2004, there were 7
record holders of our Class B common stock. These figures
do 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 any class of our common stock in the last two
fiscal years. 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 Class A or Class B
common stock in the near 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 and our
senior secured credit facilities contain restrictions on our
ability to pay dividends.

Under the terms of our Series A preferred
stock and Series B preferred stock, we are required to pay
dividends at a rate of 10 3/4% per year of the $1,000
liquidation preference per share of Preferred Stock. From
October 30, 2003 to October 15, 2008, we may pay these
dividends in either cash or additional shares of Preferred
Stock. After October 15, 2008, we will be required to pay
the dividends on our Series A preferred stock and
Series B preferred stock only in cash.

Recent Sales of Unregistered
Securities

On October 30, 2003, we completed a private
offering of 75,000 shares of 10 3/4% Series A
cumulative exchangeable redeemable preferred stock, par value
$.01 per share and liquidation preference of
$1,000 per share, without a specified maturity date, for an
aggregate offering price of $75.0 million. The shares were
offered and issued to Lehman Brothers, Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Deutsche Bank
Securities Inc. as initial purchases and qualified institutional
buyers under Rule 144A of the Securities Act.

All other sales for the period covered by this
annual report on Form 10-K have been previously reported by us
on our Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2003, June 30, 2003 and
September 30, 2003.

Equity Compensation Plan Information

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

28



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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, Other
Financial Data and Consolidated Balance Sheet
Data, as of and for each of the fiscal years in the
three-year period ended September 30, 2001, the three-month
transitional period ended December 30, 2001, and the fiscal
years ended December 29, 2002 and December 31, 2003
are derived from our historical consolidated financial
statements, which have been audited by KPMG LLP, independent
certified public accountants.

Effective November 6, 2001, we changed our
fiscal year end from the last Sunday in September of each
calendar year to the last Sunday in December of each calendar
year; therefore, we filed a transition report on Form 10-Q
covering the transitional period from October 1, 2001
through December 30, 2001. Effective December 30,
2002, we again changed our fiscal year end from a broadcast
calendar 52-53-week fiscal year ending on the last Sunday in
December to a calendar year ending on December 31.
Financial results for December 30 and 31, 2002 are
included in our financial results for the fiscal year ended
December 31, 2003.

Our selected historical consolidated financial
data should be read in conjunction with our historical
consolidated financial statements as of December 29, 2002
and December 31, 2003, and for the fiscal year ended
September 30, 2001, the three-month transitional period
ended December 30, 2001, and for the fiscal years ended
December 29, 2002 and December 31, 2003, the related
notes and the independent auditors report included
elsewhere in this report. For additional information see the
financial section of this report and Item 7.
Managements Discussion and Analysis of Financial Condition
and Results of Operations.

|                                                                                                                                                         |  |                                       |         |               |  |                   |         |              |  |              |         |              |  |   |        |   |  |   |         |   |  |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | ------------- |  | ----------------- | ------- | ------------ |  | ------------ | ------- | ------------ |  | - | ------ | - |  | - | ------- | - |  | - | ------- | -
|                                                                                                                                                         |  |                                       |         |               |  |                   |         | Three        |  |              |         |             
|                                                                                                                                                         |  |                                       |         | Months        |  |                  
|                                                                                                                                                         |  | Fiscal Year Ended                     |         | Ended         |  | Fiscal Year Ended
|                                                                                                                                                         |  |                                       |         |               |  |                  
|                                                                                                                                                         |  | September 26,                         |         | September 24, |  | September 30,     |         | December 30, |  | December 29, |         | December 31,
|                                                                                                                                                         |  | 1999                                  |         | 2000          |  | 2001              |         | 2001         |  | 2002         |         | 2003        
|                                                                                                                                                         |  |                                       |         |               |  |                   |         |              |  |              |         |             
|                                                                                                                                                         |  |                                      
|                                                                                                                                                         |  | (in thousands, except per share data)
|Statement of Operations Data:                                                                                                                            |  |                                       |         |               |  |                   |         |              |  |              |         |              |  |   |        |   |  |   |         |   |  |   |         |  
|Gross revenue(1)                                                                                                                                         |  | $                                     | 108,487 |               |  | $                 | 135,301 |              |  | $            | 142,781 |              |  | $ | 36,106 |   |  | $ | 154,472 |   |  | $ | 155,717 |  
|Less: agency commissions                                                                                                                                 |  |                                       | 12,980  |               |  |                   | 17,540  |              |  |              | 17,314  |              |  |   | 4,337  |   |  |   | 18,784  |   |  |   | 20,451  |  
|                                                                                                                                                         |  |                                       |         |               |  |                   |         |              |  |              |         |              |  |   |        |   |  |   |         |   |  |   |         |  
|Net revenue(1)                                                                                                                                           |  | $                                     | 95,507  |               |  | $                 | 117,761 |              |  | $            | 125,467 |              |  | $ | 31,769 |   |  | $ | 135,688 |   |  | $ | 135,266 |  
|Station operating expenses(1)(2)                                                                                                                         |  |                                       | 42,297  |               |  |                   | 53,206  |              |  |              | 76,277  |              |  |   | 19,447 |   |  |   | 77,779  |   |  |   | 73,374  |  
|Stock based programming expense(3)                                                                                                                       |  |                                       |        |               |  |                   |        |              |  |              |        |              |  |   |       |   |  |   |        |   |  |   | 2,943   |  
|Corporate expenses                                                                                                                                       |  |                                       | 10,636  |               |  |                   | 20,730  |              |  |              | 10,515  |              |  |   | 2,387  |   |  |   | 13,546  |   |  |   | 17,853  |  
|Depreciation and amortization                                                                                                                            |  |                                       | 9,623   |               |  |                   | 12,828  |              |  |              | 16,750  |              |  |   | 4,275  |   |  |   | 2,871   |   |  |   | 2,901   |  
|                                                                                                                                                         |  |                                       |         |               |  |                   |         |              |  |              |         |              |  |   |        |   |  |   |         |   |  |   |         |  
|Operating income from continuing operations                                                                                                              |  | $                                     | 32,951  |               |  | $                 | 30,997  |              |  | $            | 21,925  |              |  | $ | 5,660  |   |  | $ | 41,492  |   |  | $ | 38,195  |  
|Interest expense, net(4)                                                                                                                                 |  |                                       | (21,181 | )             |  |                   | (19,538 | )            |  |              | (30,643 | )            |  |   | (8,212 | ) |  |   | (34,146 | ) |  |   | (36,622 | )
|Other income (expense), net                                                                                                                              |  |                                       | (749    | )             |  |                   | (302    | )            |  |              | 497     |              |  |   | 650    |   |  |   | (720    | ) |  |   | 1,125   |  
|Loss on extinguishment of debt(5)                                                                                                                        |  |                                       |        |               |  |                   | (28,585 | )            |  |              | (3,063  | )            |  |   |       |   |  |   |        |   |  |   |        |  
|                                                                                                                                                         |  |                                       |         |               |  |                   |         |              |  |              |         |              |  |   |        |   |  |   |         |   |  |   |         |  
|Income (loss) from continuing operations before
    income taxes, discontinued operations, and cumulative effect of
    a change in accounting principle |  | $                                     | 11,021  |               |  | $                 | (17,428 | )            |  | $            | (11,284 | )            |  | $ | (1,902 | ) |  | $ | 6,626   |   |  | $ | 2,698   |  
|Income tax expense (benefit)                                                                                                                             |  |                                       | 4,776   |               |  |                   | (6,634  | )            |  |              | (4,307  | )            |  |   | (686   | ) |  |   | 53,094  |   |  |   | 11,280  |  
|                                                                                                                                                         |  |                                       |         |               |  |                   |         |              |  |              |         |              |  |   |        |   |  |   |         |   |  |   |         |  
|Income (loss) from continuing operations before
    discontinued operations, and cumulative effect of a change in
    accounting principle               |  | $                                     | 6,245   |               |  | $                 | (10,794 | )            |  | $            | (6,977  | )            |  | $ | (1,216 | ) |  | $ | (46,468 | ) |  | $ | (8,582  | )
|Discontinued operations, net of income taxes(6)                                                                                                          |  |                                       | (428    | )             |  |                   | 188     |              |  |              | (611    | )            |  |   | (11    | ) |  |   | 1,910   |   |  |   | (168    | )
|Cumulative effect of a change in accounting
    principle, net of income taxes(7)                                                                        |  |                                       |        |               |  |                   |        |              |  |              |        |              |  |   |       |   |  |   | (45,288 | ) |  |   |        |  
|                                                                                                                                                         |  |                                       |         |               |  |                   |         |              |  |              |         |              |  |   |        |   |  |   |         |   |  |   |         |  

29



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|                                                                                                                 |  |                                       |         |               |  |                   |          |              |  |              |         |              |  |   |         |   |  |   |         |   |  |   |          |  
|---------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | ------------- |  | ----------------- | -------- | ------------ |  | ------------ | ------- | ------------ |  | - | ------- | - |  | - | ------- | - |  | - | -------- | -
|                                                                                                                 |  |                                       |         |               |  |                   |          | Three        |  |              |         |             
|                                                                                                                 |  |                                       |         | Months        |  |                  
|                                                                                                                 |  | Fiscal Year Ended                     |         | Ended         |  | Fiscal Year Ended
|                                                                                                                 |  |                                       |         |               |  |                  
|                                                                                                                 |  | September 26,                         |         | September 24, |  | September 30,     |          | December 30, |  | December 29, |         | December 31,
|                                                                                                                 |  | 1999                                  |         | 2000          |  | 2001              |          | 2001         |  | 2002         |         | 2003        
|                                                                                                                 |  |                                       |         |               |  |                   |          |              |  |              |         |             
|                                                                                                                 |  |                                      
|                                                                                                                 |  | (in thousands, except per share data)
|Net income (loss)                                                                                                |  | $                                     | 5,817   |               |  | $                 | (10,606  | )            |  | $            | (7,588  | )            |  | $ | (1,227  | ) |  | $ | (89,846 | ) |  | $ | (8,750   | )
|                                                                                                                 |  |                                       |         |               |  |                   |          |              |  |              |         |              |  |   |         |   |  |   |         |   |  |   |          |  
|Dividends on preferred stock                                                                                     |  | $                                     | (34,749 | )             |  | $                 | (28,372  | )            |  | $            |        |              |  | $ |        |   |  | $ |        |   |  | $ | (1,366   | )
|                                                                                                                 |  |                                       |         |               |  |                   |          |              |  |              |         |              |  |   |         |   |  |   |         |   |  |   |          |  
|Net loss applicable to common stock                                                                              |  | $                                     | (28,932 | )             |  | $                 | (38,978  | )            |  | $            | (7,588  | )            |  | $ | (1,227  | ) |  | $ | (89,846 | ) |  | $ | (10,116  | )
|                                                                                                                 |  |                                       |         |               |  |                   |          |              |  |              |         |              |  |   |         |   |  |   |         |   |  |   |          |  
|Loss per common share:                                                                                           |  |                                       |         |               |  |                   |          |              |  |              |         |              |  |   |         |   |  |   |         |   |  |   |          |  
|Basic and Diluted (before discontinued operations
    and cumulative effect of a change in accounting principle) |  | $                                     | (0.85   | )             |  | $                 | (0.67    | )            |  | $            | (0.11   | )            |  | $ | (0.02   | ) |  | $ | (0.72   | ) |  | $ | (0.16    | )
|Basic and Diluted                                                                                                |  | $                                     | (0.86   | )             |  | $                 | (0.67    | )            |  | $            | (0.12   | )            |  | $ | (0.02   | ) |  | $ | (1.39   | ) |  | $ | (0.16    | )
|Weighted average common shares outstanding(8):                                                                   |  |                                       |         |               |  |                   |          |              |  |              |         |              |  |   |         |   |  |   |         |   |  |   |          |  
|Basic and Diluted                                                                                                |  |                                       | 33,585  |               |  |                   | 58,163   |              |  |              | 64,096  |              |  |   | 64,658  |   |  |   | 64,670  |   |  |   | 64,684   |  
|                                                                                                                
|Other Financial Data:                                                                                            |  |                                       |         |               |  |                   |          |              |  |              |         |              |  |   |         |   |  |   |         |   |  |   |          |  
|Station operating income(9)                                                                                      |  | $                                     | 53,210  |               |  | $                 | 64,555   |              |  | $            | 49,190  |              |  | $ | 12,322  |   |  | $ | 57,909  |   |  | $ | 58,949   |  
|Station operating income margin(9)                                                                               |  |                                       | 56%     |               |  |                   | 55%      |              |  |              | 39%     |              |  |   | 39%     |   |  |   | 43%     |   |  |   | 44%      |  
|Adjusted EBITDA(9)                                                                                               |  | $                                     | 42,574  |               |  | $                 | 43,825   |              |  | $            | 38,675  |              |  | $ | 9,935   |   |  | $ | 44,363  |   |  | $ | 41,096   |  
|Adjusted EBITDA margin(9)                                                                                        |  |                                       | 45%     |               |  |                   | 37%      |              |  |              | 31%     |              |  |   | 31%     |   |  |   | 33%     |   |  |   | 30%      |  
|Capital expenditures                                                                                             |  | $                                     | 2,100   |               |  | $                 | 3,793    |              |  | $            | 5,595   |              |  | $ | 830     |   |  | $ | 3,994   |   |  | $ | 3,365    |  
|Net cash provided by (used in) operating
    activities                                                          |  | $                                     | 20,782  |               |  | $                 | 28,672   |              |  | $            | 17,023  |              |  | $ | (7,377  | ) |  | $ | 10,666  |   |  | $ | 13,226   |  
|Net cash provided by (used in) investing
    activities                                                          |  | $                                     | (38,384 | )             |  | $                 | (205,050 | )            |  | $            | (35,181 | )            |  | $ | (837    | ) |  | $ | 9,265   |   |  | $ | (231,170 | )
|Net cash provided by (used in) financing
    activities                                                          |  | $                                     | (3,065  | )             |  | $                 | 218,962  |              |  | $            | 18,499  |              |  | $ | (46     | ) |  | $ | (141    | ) |  | $ | 192,123  |  
|                                                                                                                
|Consolidated Balance Sheet Data:                                                                                 |  |                                       |         |               |  |                   |          |              |  |              |         |              |  |   |         |   |  |   |         |   |  |   |          |  
|Cash and cash equivalents                                                                                        |  | $                                     | 16,975  |               |  | $                 | 59,559   |              |  | $            | 59,900  |              |  | $ | 51,640  |   |  | $ | 71,430  |   |  | $ | 45,609   |  
|Total assets                                                                                                     |  | $                                     | 365,681 |               |  | $                 | 634,691  |              |  | $            | 700,178 |              |  | $ | 687,078 |   |  | $ | 634,767 |   |  | $ | 842,282  |  
|Total debt (including current portion)                                                                           |  | $                                     | 172,486 |               |  | $                 | 304,664  |              |  | $            | 327,452 |              |  | $ | 327,631 |   |  | $ | 328,310 |   |  | $ | 454,194  |  
|Preferred stock                                                                                                  |  | $                                     | 235,918 |               |  | $                 |         |              |  | $            |        |              |  | $ |        |   |  | $ |        |   |  | $ | 76,366   |  
|Total stockholders (deficiency) equity                                                                          |  | $                                     | (75,122 | )             |  | $                 | 274,465  |              |  | $            | 309,426 |              |  | $ | 308,199 |   |  | $ | 227,425 |   |  | $ | 216,676  |  



---



|    |                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Below are revenue and expenses related to a two
    year AOL Time Warner, Inc. barter agreement which concluded in
    August 2002 and are included in continuing operations. These
    results are non-recurring and had a significant non-cash impact
    for the periods:

|                                         |  |                  |        |          |  |        |         |   |  |   |      |  
|---------------------------------------- |  | ---------------- | ------ | -------- |  | ------ | ------- | - |  | - | ---- | -
|                                         |  |                 
|                                         |  | Impact on       
|                                         |  |                 
|                                         |  |                  |        | Adjusted
|                                         |  | Revenue          |        | Expense  |  | EBITDA
|                                         |  |                  |        |          |  |       
|                                         |  |                 
|                                         |  | ($ in thousands)
|(a) Fiscal year ended September 24, 2000 |  | $                | 504    |          |  | $      | (668    | ) |  | $ | (164 | )
|(b) Fiscal year ended September 30, 2001 |  |                  | 10,409 |          |  |        | (10,234 | ) |  |   | 175  |  
|(c) Three months ended December 30, 2001 |  |                  | 2,437  |          |  |        | (2,433  | ) |  |   | 4    |  
|(d) Fiscal year ended December 29, 2002  |  |                  | 6,351  |          |  |        | (6,366  | ) |  |   | (15  | )



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Station operating expenses include engineering,
    programming, selling and general and administrative expenses,
    but exclude stock-based programming expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(3) | We were required to issue additional warrants to
    ICFG from the date that ICFG ceased to broadcast its programming
    over KZAB-FM and KZBA-FM until the closing of the acquisition of
    KXOL-FM. On each of March 31, 2003, April 30, 2003,
    May 31, 2003, June 30, 2003, July 31, 2003,
    August 31, 2003 and September 30, 2003, we granted
    ICFG a warrant exercisable for 100,000 shares (an aggregate
    of 700,000 shares) of our Class A common stock at an
    exercise price of $6.14, $7.67, $7.55, $8.08, $8.17, $7.74 and
    $8.49 per share, respectively. The warrant issued on
    September 30, 2003 was the final warrant required under the
    amended time brokerage agreement due to the closing of the
    acquisition of KXOL-FM. We assigned these warrants an aggregate
    fair market value of approximately $2.9 million based on
    the Black- Scholes option pricing model in accordance with
    SFAS No. 123, Accounting for Stock-Based

30



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##### Table of Contents



| |                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Compensation. The fair market value of each
    warrant was recorded as a non-recurring stock-based programming
    expense on the respective date of grant.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(5) | In April 2002, the Financial Accounting Standards
    Board (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, Accounting for Leases and other
    existing authoritative pronouncements to make various technical
    corrections and clarify meanings, or to describe their
    applicability under changed conditions. The adoption of
    SFAS No. 145 required our extraordinary loss
    recognized on extinguishments of debt in fiscal years 2000 and
    2001 to be reclassified to income or loss from continuing
    operations before income taxes, discontinued operations and
    cumulative effect of a change in accounting principle.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | For the fiscal year ended September 24,
    2000, we recorded an extraordinary loss of $28.6 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. This extraordinary loss was reclassified to a
    loss on extinguishment of debt due to the adoption of
    SFAS No. 145.
|
| | 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 $3.1 million, which relates to the
    write-off of the related unamortized deferred financing costs.
    This extraordinary loss was reclassified to a loss on
    extinguishment of debt due to the adoption of
    SFAS No. 145.                                                                         



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) | On September 18, 2003, we entered into an
    asset purchase agreement with Border Media Partners, LLC to sell
    the assets of radio stations KLEY-FM and KSAH-AM, serving the
    San Antonio, Texas market, for a cash purchase price of
    $24.4 million. Additionally, on October 2, 2003, we
    entered into an asset purchase agreement with 3 Point
    Media  San Francisco, LLC (Three Point
    Media) to sell the assets of radio station KPTI-FM,
    serving the San Francisco, California market, for a cash
    purchase price of $30.0 million (the
    San Francisco Asset Purchase Agreement). On
    December 31, 2003, these stations assets held for
    sale consisted of $25.0 million of intangible assets, net,
    and $0.9 million of property and equipment. Three Point
    Media did not close under the San Francisco Asset Purchase
    Agreement, and on February 3, 2004, we terminated the
    agreement. We are currently considering other offers to purchase
    the assets of our San Francisco station. We intend to sell
    the assets of our San Francisco station; however, we cannot
    assure you that the sale will be completed. We completed the
    sale of the assets of our San Antonio stations on
    January 30, 2004.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On August 23, 2002, we sold for
    $35.0 million KTCY-FMs assets held for sale
    consisting of intangible assets and property and equipment. We
    recognized a gain of approximately $1.8 million, net of
    closing costs and taxes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| | On December 31, 2001, we adopted the
    provisions of SFAS No. 144 Accounting for the
    Impairment of Long-Lived Assets and for Long-Lived Assets to be
    Disposed Of (SFAS No. 144). Under SFAS No. 144,
    discontinued businesses or assets held for sale are removed from
    the results of continuing operations. We determined that the
    proposed sale of KPTI-FM serving the San Francisco,
    California market, as well as the sales of KLEY-FM and KSAH-AM
    serving the San Antonio, Texas market and KTCY-FM serving
    the Dallas, Texas market met the criteria in accordance with
    SFAS No. 144. The results of operations in the current
    year and prior year periods of these stations have been
    classified as discontinued operations in the selected historical
    consolidated statements of operations.



|    |                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(7) | In July 2001, FASB issued SFAS No. 142,
    Goodwill and Other Intangible Assets (SFAS) No.
    142). 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

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##### Table of Contents



| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | SFAS No. 142. We have concluded that our
    intangible assets, comprised primarily of FCC licenses, qualify
    as indefinite-life intangible assets under SFAS No. 142.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | After performing the transitional impairment
    evaluation of our indefinite-life intangible assets on
    December 31, 2001, we determined that the carrying value of
    certain indefinite-life intangible assets exceeded their
    respective fair market values. As a result of adopting
    SFAS No. 142 in the fiscal year ended
    December 29, 2002, we recorded a non-cash charge for the
    cumulative effect of a change in accounting principle of
    $45.3 million, net of an income tax benefit of
    $30.2 million.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(8) | On September 29, 1999, we filed a third
    amended and restated certificate of incorporation which resulted
    in (1) the redesignation of our previously outstanding
    shares of Class A common stock into shares of Class B
    common stock, (2) a 50-to-1 stock split of our Class B
    common stock, and (3) a reduction in the par value of our
    Class A common stock and Class B common stock from
    $0.01 per share to $0.0001 per share. The financial
    information has been restated to reflect this redesignation,
    stock split and change in par value.                                                                                                                           
|   
|(9) | Station operating income,
    station operating income margin, broadcast
    cash flow, broadcast cash flow margin,
    Adjusted EBITDA and Adjusted EBITDA
    margin are non-GAAP financial measures as defined by the
    Securities and Exchange Commissions Regulation G.
    These non-generally accepted accounting principles (GAAP)
    financial measures should not be construed as superior to GAAP
    financial measures. The GAAP financial measure most directly
    comparable to each non-GAAP financial measure and a
    reconciliation of the differences between each non-GAAP
    financial measure and the comparable GAAP financial measure are
    included on page 33.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The term station operating income
    (our former broadcast cash flow or BCF) is defined
    as GAAP operating income from continuing operations excluding
    corporate expenses and depreciation and amortization. Station
    operating income replaces our former BCF as the metric used by
    management to assess the performance of our stations. Although
    it is calculated in the same manner as BCF, management believes
    that using the term station operating income
    provides a more accurate description of the performance measure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| | The term station operating income
    margin consists of station operating income divided by net
    revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| | EBITDA consists of earnings before interest
    expenses, interest income, income taxes, depreciation and
    amortization of assets, gain or loss from extinguishments of
    debt, discontinued operations and the cumulative effect of a
    change in accounting principle. We calculate our EBITDA
    differently. Our EBITDA is EBITDA as defined above
    but excluding other income or expense, or alternatively, GAAP
    operating income from continuing operations before depreciation
    and amortization. To distinguish our calculation of EBITDA from
    other possible meanings of EBITDA, for periods ending after
    March 31, 2003 and going forward we changed references to
    EBITDA in our financial reports to the term
    Adjusted EBITDA. Although our Adjusted
    EBITDA and what we formerly referred to as our
    EBITDA are calculated in the same manner, management
    believes Adjusted EBITDA is a more accurate
    description.                                                                                                                                                                                                                                                                                                                                  
|
| | The term Adjusted EBITDA margin
    consists of Adjusted EBITDA divided by net revenue.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | Station operating income, station operating
    income margin, Adjusted EBITDA and Adjusted EBITDA margin, as we
    define the terms, are not measures of performance or liquidity
    calculated in accordance with GAAP and may not be comparable to
    similarly titled measures employed by other companies. Although
    station operating income, station operating income margin,
    Adjusted EBITDA and Adjusted EBITDA margin are not measures of
    performance calculated in accordance with GAAP, we believe that
    they are useful to an investor in evaluating an investment in
    our securities because they are measures widely used in the
    broadcast industry to evaluate a radio companys operating
    performance and are used by management for internal budgeting
    purposes and to evaluate the performance of our radio stations.
    However, station operating income, station operating income
    margin, Adjusted EBITDA and Adjusted EBITDA margin should not be
    considered in isolation or as substitutes for operating income,
    net income (loss), cash flows from operating activities and
    other income or cash flow statement data prepared in accordance
    with GAAP, or as measures of liquidity or profitability. Also,
    because they are not calculated

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| |                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------
| | in the same manner by all companies, they may not
    be comparable to other similarly titled measures used by other
    companies.

Reconciliation Between Adjusted Historical
GAAP Results

and Non-GAAP Pro Forma Results


|                                                                                  |                   |                   |         |               |  |                   |         |              |   |              |         |              |   |   |        |        |   |   |         |         |   |   |         |        |  
|--------------------------------------------------------------------------------- | ----------------- | ----------------- | ------- | ------------- |  | ----------------- | ------- | ------------ | - | ------------ | ------- | ------------ | - | - | ------ | ------ | - | - | ------- | ------- | - | - | ------- | ------ | -
|                                                                                  |                   |                   |         |               |  |                   |         | Three        |   |              |         |             
|                                                                                  |                   |                   |         | Months        |  |                  
|                                                                                  |                   | Fiscal Year Ended |         | Ended         |  | Fiscal Year Ended
|                                                                                  |                   |                   |         |               |  |                  
|                                                                                  |                   | September 26,     |         | September 24, |  | September 30,     |         | December 30, |   | December 29, |         | December 31,
|                                                                                  |                   | 1999              |         | 2000          |  | 2001              |         | 2001         |   | 2002         |         | 2003        
|                                                                                  |                   |                   |         |               |  |                   |         |              |   |              |         |             
|Net revenue(1)                                                                    |                   | $                 | 95,507  |               |  | $                 | 117,761 |              |   | $            | 125,467 |              |   | $ | 31,769 |        |   | $ | 135,688 |         |   | $ | 135,266 |       
|Station operating expenses(2)                                                     |                   |                   | 42,297  |               |  |                   | 53,206  |              |   |              | 76,277  |              |   |   | 19,447 |        |   |   | 77,779  |         |   |   | 73,374  |       
|Stock based programming expense(3)                                                |                   |                   |        |               |  |                   |        |              |   |              |        |              |   |   |       |        |   |   |        |         |   |   | 2,943   |       
|                                                                                  |                   |                   |         |               |  |                   |         |              |   |              |         |              |   |   |        |        |   |   |         |         |   |   |         |       
|Station operating income(9)                                                       |                   | $                 | 53,210  |               |  | $                 | 64,555  |              |   | $            | 49,190  |              |   | $ | 12,322 |        |   | $ | 57,909  |         |   | $ | 58,949  |       
|Corporate expenses                                                                |                   |                   | 10,636  |               |  |                   | 20,730  |              |   |              | 10,515  |              |   |   | 2,387  |        |   |   | 13,546  |         |   |   | 17,853  |       
|                                                                                  |                   |                   |         |               |  |                   |         |              |   |              |         |              |   |   |        |        |   |   |         |         |   |   |         |       
|Adjusted EBITDA(9)                                                                |                   | $                 | 42,574  |               |  | $                 | 43,825  |              |   | $            | 38,675  |              |   | $ | 9,935  |        |   | $ | 44,363  |         |   | $ | 41,096  |       
|Depreciation and amortization                                                     |                   |                   | 9,623   |               |  |                   | 12,828  |              |   |              | 16,750  |              |   |   | 4,275  |        |   |   | 2,871   |         |   |   | 2,901   |       
|                                                                                  |                   |                   |         |               |  |                   |         |              |   |              |         |              |   |   |        |        |   |   |         |         |   |   |         |       
|Operating income from continuing operations                                       |                   | $                 | 32,951  |               |  | $                 | 30,997  |              |   | $            | 21,925  |              |   | $ | 5,660  |        |   | $ | 41,492  |         |   | $ | 38,195  |       
|Interest expense, net(4)                                                          |                   |                   | (21,181 | )             |  |                   | (19,538 | )            |   |              | (30,643 | )            |   |   | (8,212 | )      |   |   | (34,146 | )       |   |   | (36,622 | )     
|Other income (expense), net                                                       |                   |                   | (749    | )             |  |                   | (302    | )            |   |              | 497     |              |   |   | 650    |        |   |   | (720    | )       |   |   | 1,125   |       
|Loss on extinguishment of debt(5)                                                 |                   |                   |        |               |  |                   | (28,585 | )            |   |              | (3,063  | )            |   |   |       |        |   |   |        |         |   |   |        |       
|Income tax expense (benefit)                                                      |                   |                   | 4,776   |               |  |                   | (6,634  | )            |   |              | (4,307  | )            |   |   | (686   | )      |   |   | 53,094  |         |   |   | 11,280  |       
|Discontinued operations, net of income taxes(6)                                   |                   |                   | (428    | )             |  |                   | 188     |              |   |              | (611    | )            |   |   | (11    | )      |   |   | 1,910   |         |   |   | (168    | )     
|Cumulative effect of a change in accounting
    principle, net of income taxes(7) |                   |                   |        |               |  |                   |        |              |   |              |        |              |   |   |       |        |   |   | (45,288 | )       |   |   |        |       
|                                                                                  |                   |                   |         |               |  |                   |         |              |   |              |         |              |   |   |        |        |   |   |         |         |   |   |         |       
|                                                                                  | Net income (loss) |                   | $       | 5,817         |  |                   | $       | (10,606      | ) |              | $       | (7,588       | ) |   | $      | (1,227 | ) |   | $       | (89,846 | ) |   | $       | (8,750 | )
|                                                                                  |                   |                   |         |               |  |                   |         |              |   |              |         |              |   |   |        |        |   |   |         |         |   |   |         |       
|Dividends on preferred stock                                                      |                   | $                 | (34,749 | )             |  | $                 | (28,372 | )            |   | $            |        |              |   | $ |       |        |   | $ |        |         |   | $ | (1,366  | )     
|                                                                                  |                   |                   |         |               |  |                   |         |              |   |              |         |              |   |   |        |        |   |   |         |         |   |   |         |       
|Net loss applicable to common stock                                               |                   | $                 | (28,932 | )             |  | $                 | (38,978 | )            |   | $            | (7,588  | )            |   | $ | (1,227 | )      |   | $ | (89,846 | )       |   | $ | (10,116 | )     
|                                                                                  |                   |                   |         |               |  |                   |         |              |   |              |         |              |   |   |        |        |   |   |         |         |   |   |         |       






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

Overview

We are the largest Hispanic-controlled radio
broadcasting company in the United States. After giving effect
to the proposed sale of our San Francisco station, we own
and operate 24 radio stations in five of the top-ten Hispanic
markets in the United States, including Los Angeles,
New York, Puerto Rico, Miami and Chicago. Our radio
stations are located in markets that reach approximately 45% of
the U.S. Hispanic population. As part of our operating
business, we also operate LaMusica.com, a bilingual
Spanish-English Internet website providing content related to
Latin music, entertainment, news and culture.

The success of each of our radio stations depends
significantly upon its audience ratings and share of the overall
advertising revenue within its market. The radio broadcasting
industry is a highly competitive business, but some barriers to
entry do exist. 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. 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.
Our top three markets, based on net revenue, are New York, Los
Angeles and Miami. A significant decline in net revenue or
station operating income from our stations in any of these
markets could have a material adverse effect on our financial
position and results of operations.

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The performance of a radio station group is
customarily measured by its ability to generate station
operating income and Adjusted EBITDA. The term station
operating income (our former broadcast cash flow or
BCF) is defined as GAAP operating income from
continuing operations excluding corporate expenses and
depreciation and amortization. Station operating income replaces
our former BCF as the metric used by management to assess the
performance of our radio stations. Although it is calculated in
the same manner as BCF, management believes that using the term
station operating income provides a more accurate
description of the performance measure. The term station
operating income margin consist of station operating
income divided by net revenue.

EBITDA consists of earnings before interest
expenses, interest income, income taxes, depreciation and
amortization of assets, gain or loss from extinguishments of
debt, discontinued operations and the cumulative effect of a
change in accounting principle. We calculate our EBITDA
differently. Our EBITDA is EBITDA as defined above
but excluding other income or expense, or alternatively, GAAP
operating income from continuing operations before depreciation
and amortization. To distinguish our calculation of EBITDA from
other possible meanings of EBITDA, for periods ending after
March 31, 2003 and going forward we changed references to
EBITDA in our financial reports to the term
Adjusted EBITDA. Although our Adjusted
EBITDA and what we formerly referred to as our
EBITDA are calculated in the same manner, management
believes Adjusted EBITDA is a more accurate
description.

Station operating income,
station operating income margin, and Adjusted
EBITDA are non-GAAP financial measures as defined by the
Securities and Exchange Commissions Regulation G.
These non-GAAP financial measures should not be construed as
superior to GAAP financial measures. The GAAP financial measure
most directly comparable to each non-GAAP financial measure and
a reconciliation of the differences between each non-GAAP
financial measure and the comparable GAAP financial measure are
included in Item 6. Selected Financial Data.
Although station operating income, station operating income
margin and Adjusted EBITDA are not measures of performance
calculated in accordance with GAAP, we believe that they are
useful to an investor in evaluating an investment in our
securities because they are measures widely used in the
broadcast industry to evaluate a radio companys operating
performance and are used by management for internal budgeting
purposes and to evaluate the performance of our radio stations.
However, station operating income, station operating income
margin and Adjusted EBITDA should not be considered in isolation
or as substitutes for operating income, net income (loss), cash
flows from operating activities and other income or cash flow
statement data prepared in accordance with GAAP, or as measures
of liquidity or profitability. Also, because they are not
calculated in the same manner by all companies, they may not be
comparable to other similarly titled measures used by other
companies.

Our primary source of revenue is the sale of
advertising time on our radio stations to local and national
advertisers. Our revenue is affected primarily by the
advertising rates that our radio stations are able to charge, as
well as the overall demand for radio advertising time in each
respective market. Seasonal net broadcasting revenue
fluctuations are common in the radio broadcasting industry and
are due to fluctuations in advertising expenditures by local and
national advertisers. Typically for the radio broadcasting
industry, the first calendar quarter generally produces the
lowest revenue. Our most significant operating expenses, for
purposes of the computation of station operating income and
Adjusted 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.

Additionally, effective December 30, 2002,
we changed our fiscal year end from a broadcast calendar
52-53-week fiscal year ending on the last Sunday in December to
a calendar year ending on December 31. Pursuant to
Securities and Exchange Commission Financial Reporting Release
No. 35, such change is not deemed a change in fiscal year
for financial reporting purposes and we are not required to file
a separate transition report or to report separate financial
information for the two-day period of December 30
and 31,

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2002. Financial results for December 30
and 31, 2002 are included in our financial results for the
fiscal year ended December 31, 2003.


Prior to December 29, 2002, we reported
revenue and expenses on a broadcast calendar basis.
Broadcast calendar basis means a period ending on
the last Sunday of each reporting period. For the fiscal years
ended September 30, 2001 and December 29, 2002, we
reported 53 and 52 weeks of revenues and expenses,
respectively. For the three-month transitional period ended
December 30, 2001, we reported 13 weeks of revenues
and expenses. For the three-month period ended December 31,
2000 and December 30, 2001, we reported 14 weeks and
13 weeks of revenues and expenses, respectively.

Fiscal Year Ended December 31, 2003
Compared to Fiscal Year Ended December 29, 2002

Net Revenue.Net
revenue was $135.3 million for the fiscal year ended
December 31, 2003 compared to $135.7 million for the
fiscal year ended December 29, 2002, a decrease of
$0.4 million or 0.3%. The net revenue decrease was due to
the decrease in barter revenue primarily related to the AOL Time
Warner, Inc. (AOL Time Warner) barter agreement that
concluded in August 2002. To provide better comparability on our
net revenue, if the non-cash AOL Time Warner barter revenue of
$6.4 million is excluded from the fiscal year ended
December 29, 2002 results, pro forma net
revenue actually increased by $6.0 million or 4.6%.
This pro forma net revenue increase was due to the double-digit
growth in our stations KLAX-FM and KXOL-FM, serving the Los
Angeles market. In addition, the start-up stations in Chicago
and Los Angeles, which began operating on January 6, 2003
and March 1, 2003, respectively, generated combined net
revenue of $3.3 million. Offsetting these increases were
decreases in our New York station WSKQ-FM mainly in
national revenue and promotional events, as well as decreases in
barter revenue in the core markets.

Station Operating
Expenses.Station operating expenses
were $76.3 million for the fiscal year ended
December 31, 2003 compared to $77.8 million for the
fiscal year ended December 29, 2002, a decrease of
$1.5 million or 1.9%. The station operating expenses
decrease was caused by the decrease in barter expense related to
the conclusion of the AOL Time Warner barter agreement in August
2002. To provide better comparability on our station operating
expenses, if the non-cash AOL Time Warner barter expense of
$6.4 million is excluded from the fiscal year ended
December 29, 2002 results, pro forma station
operating expenses actually increased by $4.9 million
or 6.9%. This pro forma station operating expenses increase was
primarily attributed to the start-up stations in Chicago and Los
Angeles, which had a combined station operating expenses
increase of $3.9 million. In addition, we granted ICFG
seven warrants, each exercisable for 100,000 shares (an
aggregate of 700,000 shares) of our Class A common
stock with an aggregate fair market value of approximately
$2.9 million. These warrants were issued under the terms of
our amended time brokerage agreement for KXOL-FM. The fair
market value was based on the Black-Scholes option pricing model
in accordance with SFAS No. 123, Accounting for
Stock-Based Compensation and was recorded as a non-cash
programming expense in the fiscal year ended December 31,
2003. Excluding the prior years AOL Time Warner barter
expense of $6.4 million and the current years
start-up stations operating expenses increase of
$3.9 million and non-cash programming (warrant) expense of
$2.9 million, as adjusted station operating
expenses decreased $1.9 million or 2.7% from
$71.4 million to $69.5 million, mainly due to a
decrease in expenses related to promotional events.

Station Operating
Income.Station operating income was
$58.9 million for the fiscal year ended December 31,
2003 compared to $57.9 million for the fiscal year ended
December 29, 2002, an increase of $1.0 million or
1.7%. To provide better comparability on our station operating
income, excluding fiscal year 2002 AOL barter results which were
minimal and the fiscal year 2003 start-up stations
operating losses of $0.9 million and non-cash programming
(warrant) expense of $2.9 million, as adjusted
station operating income increased $4.8 million or
8.3% from $57.9 million to $62.7 million, mainly due
to the increase in net revenue due to the double-digit growth in
our Los Angeles stations KLAX-FM and KXOL-FM.

Our station operating income margin increased to
43.5% for the fiscal year ended December 31, 2003 compared
to 42.7% for the fiscal year ended December 29, 2002. To
provide better comparability on our station operating income
margin, excluding fiscal year 2002 AOL barter results which were
minimal and the fiscal year 2003 start-up stations
operating losses of $0.9 million and non-cash programming
(war-

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rant) expense of $2.9 million, as
adjusted station operating income margin increased from
44.8% to 47.5% mainly due to the increase in net revenue due to
the double-digit growth in our Los Angeles stations KLAX-FM and
KXOL-FM.


Corporate Expenses.Corporate expenses were $17.8 million for the fiscal year
ended December 31, 2003 compared to $13.5 million for
the fiscal year ended December 29, 2002, an increase of
$4.3 million or 31.9%. The increase in corporate expenses
resulted mainly from an increase in non-recurring legal and
professional fees due to various lawsuits and other related
matters, as well as an increase in directors and officers
liability insurance.

Adjusted EBITDA.Adjusted EBITDA was $41.1 million for the fiscal year ended
December 31, 2003 compared to $44.4 million for the
fiscal year ended December 29, 2002, a decrease of
$3.3 million or 7.4%. The decrease in Adjusted EBITDA was
attributed to the increase in corporate expenses.

Depreciation and
Amortization.Depreciation and
amortization expense was $2.9 million for each of the
fiscal years ended December 31, 2003 and December 29,
2002.

Operating Income from Continuing
Operations.Operating income from
continuing operations was $38.2 million for the fiscal year
ended December 31, 2003 compared to $41.5 million for
the fiscal year ended December 29, 2002, a decrease of
$3.3 million or 8.0%. The decrease in operating income from
continuing operations was primarily attributed to the decrease
in Adjusted EBITDA.

Interest Expense,
Net.Interest expense, net, was
$36.6 million for the fiscal year ended December 31,
2003 compared to $34.1 million for the fiscal year ended
December 29, 2002, an increase of $2.5 million or
7.3%. The increase in interest expense, net, was primarily due
to interest expense incurred on the new $125.0 million
senior secured credit facility term loan that was entered into
on October 30, 2003, interest expense on a lawsuit judgment
that is being appealed, and a decrease in interest income
resulting from a general decline in interest rates on our cash
balances.

Other, Net.Other,
net, was income of $1.1 million for the fiscal year ended
December 31, 2003 due mostly to an insurance recovery for a
claim related to our New York transmitting facilities and
operations, offset by a legal judgment related to a commission
for an acquisition. Other, net, was an expense of
$0.7 million for the fiscal year ended December 29,
2002 due mainly to a legal judgment involving compensation for
executive services and related services, which was offset by an
insurance recovery for a claim related to the New York
facilities.

Income Taxes.Income
tax expense was $11.3 million for the fiscal year ended
December 31, 2003 compared to $53.1 million for the
fiscal year ended December 29, 2002. Income tax expense of
$11.3 million for the fiscal year ended December 31,
2003 was primarily due to an increase in our valuation allowance
on our deferred tax assets. Our effective book tax rate was
impacted by the adoption of SFAS No. 142 on
December 31, 2001. As a result of adopting
SFAS No. 142, the reversal of our deferred tax
liabilities related to our intangible assets could no longer be
assured over our net operating loss carryforward period.
Therefore, our effective book tax rate reflects a full valuation
allowance on our deferred tax assets. Income tax expense for the
fiscal year ended December 29, 2002 consisted primarily of
a $55.4 million non-cash charge to income tax expense to
establish a valuation allowance against our deferred tax assets,
effective December 31, 2001. Additionally, we recorded an
income tax expense of $11.6 million based on the effective
book tax rate for the 2002 fiscal year, offset by a
$13.9 million non-cash income tax benefit due to a
reduction of some of our valuation allowance on our deferred
taxes, determined in accordance with SFAS No. 109 and
available information. Excluding the fiscal year ended
December 29, 2002 non-cash income tax expense of
$55.4 million and non-cash income tax benefit of
$13.9 million, as adjusted income tax expense decreased
$0.3 million or 2.6% from $11.6 million to
$11.3 million due to a decrease in current foreign income
taxes expense.

Discontinued Operations, Net of
Taxes.Loss on discontinued
operations, net of taxes, was $0.2 million for the fiscal
year ended December 31, 2003 compared to income on
discontinued operations, net of taxes, of $1.9 million for
the fiscal year ended December 29, 2002. We determined that
the pending sales of our KLEY-FM and KSAH-AM stations serving
the San Antonio, Texas market, KPTI-FM station serving the
San Francisco, California market, and the sale of our
KTCY-FM station serving the Dallas, Texas market, all

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met the criteria in accordance with SFAS No.
144 to classify their operations as discontinued operations.
Consequently, these stations results from operations for
the fiscal years ended December 31, 2003 and
December 29, 2002 have been classified as discontinued
operations. On August 23, 2002, we 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.There was no
cumulative effect of a change in accounting principle for the
fiscal year ended December 31, 2003. Cumulative effect of a
change in accounting principle, net of taxes was
$45.3 million for the fiscal year ended December 29,
2002. We 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, we incurred a non-cash transitional
charge of $45.3 million, net of income tax benefit.

Net Loss.Net loss
was $8.7 million for the fiscal year ended
December 31, 2003 compared to $89.8 million for the
fiscal year ended December 29, 2002. The net loss for the
fiscal year ended December 29, 2002 was impacted due to the
adoption of SFAS No. 142, which resulted in the
$55.4 million non-cash charge to establish a valuation
allowance on our deferred tax assets and the non-cash charge of
$45.3 million related to the cumulative effect of a change
in accounting principle, net of income tax benefit. Excluding
the fiscal year ended December 29, 2002 non-cash income tax
expense of $55.4 million, income tax benefit of
$13.9 million, and cumulative effect of a change in
accounting principle of $45.3 million, as adjusted
net loss increased $5.7 million from a net loss of
$3.0 million to $8.7 million. The increase in the as
adjusted net loss was due primarily to a decrease in pre-tax
income mainly due to the decrease in Adjusted EBITDA and
increase in interest expense.

The following table presents adjusted financial
results for the fiscal years ended December 29, 2002 and
December 31, 2003, respectively, adjusting for the
cumulative effect of a change in accounting principle and the
increase in the income tax valuation allowance upon the adoption
of SFAS No. 142 on December 31, 2001.

|                                                                                    |  |                       |         |              |  |   |         |  
|----------------------------------------------------------------------------------- |  | --------------------- | ------- | ------------ |  | - | ------- | -
|                                                                                    |  |                      
|                                                                                    |  | Fiscal Year Ended    
|                                                                                    |  |                      
|                                                                                    |  | December 29,          |         | December 31,
|                                                                                    |  | 2002                  |         | 2003        
|                                                                                    |  |                       |         |             
|                                                                                    |  |                      
|                                                                                    |  | (In thousands, except
|                                                                                    |  | per share data)      
|                                                                                    |  | (Unaudited)          
|Reported net loss applicable to common
    stockholder:                             |  | $                     | (89,846 | )            |  | $ | (10,116 | )
|Add back:cumulative
    effect of a change in accounting principle, net of tax(1)   |  |                       | 45,288  |              |  |   |        |  
|Add back:income tax
    valuation allowance(2)                                      |  |                       | 55,358  |              |  |   |        |  
|                                                                                    |  |                       |         |              |  |   |         |  
|Adjusted net income (loss)                                                          |  | $                     | 10,800  |              |  | $ | (10,116 | )
|                                                                                    |  |                       |         |              |  |   |         |  
|Basic and diluted loss per share:                                                   |  |                       |         |              |  |   |         |  
|Reported net loss per share:                                                        |  | $                     | (1.39   | )            |  | $ | (0.16   | )
|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    |              |  |   |        |  
|                                                                                    |  |                       |         |              |  |   |         |  
|Adjusted net income (loss) per share:                                               |  | $                     | 0.17    |              |  | $ | (0.16   | )
|                                                                                    |  |                       |         |              |  |   |         |  



---



|    |                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As a result of the adoption of
    SFAS No. 142 on December 31, 2001, we incurred a
    non-cash transitional charge of $45.3 million, net of
    income tax benefit of $30.2 million, due to the cumulative
    effect of the change in accounting principle.
|   
|(2) | As a result of the adoption of
    SFAS No. 142 on December 31, 2001, we incurred a
    non-cash income tax expense of $55.4 million to establish a
    valuation allowance against deferred tax assets on the date of
    adoption.                          

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

Net Revenue.Net
revenue was $135.7 million for the fiscal year ended
December 29, 2002 compared to $125.5 million for the
fiscal year ended September 30, 2001, an increase of
$10.2 million or 8.1%. 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 $77.8 million for the fiscal year ended
December 29, 2002 compared to $76.3 million for the
fiscal year ended September 30, 2001, an increase of
$1.5 million or 2.0%. 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.

Station Operating
Income.Station operating income was
$57.9 million for the fiscal year ended December 29,
2002 compared to $49.2 million for the fiscal year ended
September 30, 2001, an increase of $8.7 million or
17.7%. Our station operating income margin increased to 42.7%
for the fiscal year ended December 29, 2002 compared to
39.2% for the fiscal year ended September 30, 2001. The
station operating income 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 station operating income 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.

Adjusted EBITDA.Adjusted EBITDA was $44.4 million for the fiscal year ended
December 29, 2002 compared to $38.7 million for the
fiscal year ended September 30, 2001, an increase of
$5.7 million or 14.7%. The increase in Adjusted EBITDA was
attributed to the increase in station operating income,
partially offset by the increase in corporate expenses.

Depreciation and
Amortization.Depreciation and
amortization expense was $2.9 million for the fiscal year
ended December 29, 2002 compared to $16.8 million for
the fiscal year ended September 30, 2001, a decrease of
$13.9 million or 82.7%. The decrease was related to the
adoption of SFAS No. 142, which ceased the
amortization on all of our intangible assets and goodwill,
effective December 31, 2001.

Operating Income From Continuing
Operations.Operating income from
continuing operations was $41.5 million for the fiscal year
ended December 29, 2002 compared to $21.9 million for
the fiscal year ended September 30, 2001, an increase of
$19.6 million or 89.5%. The increase in operating income
from continuing operations was caused by an increase in Adjusted
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 $30.6 million for the fiscal year ended
September 30, 2001, an increase of $3.5 million or
11.4%. The increase in interest expense, net, was primarily due
to interest expense incurred on the additional $100 million
of 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,
net, was an expense of $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 transmitting facilities. Other, net, was income of
$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

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transmitter and antenna for KLAX-FM and an
insurance recovery claim related to an office building in Los
Angeles.


Loss on extinguishment of
debt.During the fiscal year ended
December 29, 2002 we had no loss on extinguishment of debt.
During fiscal year 2001, we incurred a loss of
$3.1 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. This loss was
reclassified to a loss on extinguishment of debt due to the
adoption of SFAS No. 145, which required our
extraordinary loss previously recognized on the extinguishment
of debt in 2001 to be reclassified to income or loss from
continuing operations before income taxes, discontinued
operations and cumulative effect of a change in accounting
principle.

Income Taxes.Income
tax expense was $53.1 million for the fiscal year ended
December 29, 2002 compared to an income tax benefit of
$4.3 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 $49.3 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 we 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 $1.9 million for the fiscal
year ended December 29, 2002 compared to a loss on
discontinued operations, net of taxes of $0.6 million for
the fiscal year ended September 30, 2001. We determined
that the pending sales of our KLEY-FM and KSAH-AM stations
serving the San Antonio, Texas market, KPTI-FM station
serving the San Francisco, California market, and the sale
of our KTCY-FM station serving the Dallas, Texas market, all met
the criteria in accordance with SFAS No. 144 to classify
their operations as discontinued operations. Consequently, these
stations 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, we 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. We 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,
we 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 Period Ended
December 31, 2000 (Unaudited)

Net Revenue.Net
revenues were $31.8 million for the three months ended
December 30, 2001 compared to $34.9 million for the
three months ended December 31, 2000, a decrease of
$3.1 million or 8.9%. 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. The markets most affected were
New York, Miami and Puerto Rico where the local economies
are significantly influenced by tourism.

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Station Operating
Expenses.Station operating expenses
were $19.5 million for the three months ended
December 30, 2001 compared to $19.8 million for the
three months ended December 31, 2000, a decrease of
$0.3 million or 1.5%. The decrease in station operating
expenses was primarily attributed to managements efforts
in administering cost cutting approaches and improving economies
of scale in our Puerto Rico market which experienced decreased
facilities expenses and personnel compensation expenses, as well
as the improvement in the collections processes in our Puerto
Rico market which decrease bad debts expense. These decreases
were partially offset by an increase in advertising and
promotions expenditures in our core markets.

Station Operating
Income.Station operating income was
$12.3 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 $2.8 million or
18.5%. Our station operating income margin decreased to 38.7%
for the three months ended December 30, 2001 compared to
43.3% for the three months ended December 31, 2000. Our
station operating income margin decreased mainly due to lower
same station net revenues. In addition, our station operating
income margin decreased due to the negative margin contributed
by our start-up station KXOL-FM which was 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.

Adjusted EBITDA.Adjusted EBITDA was $9.9 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
$2.7 million or 21.4%. The decrease in Adjusted EBITDA was
attributed to the decrease in station operating income.

Depreciation and
Amortization.Depreciation and
amortization expense was $4.2 million for the three months
ended December 30, 2001 compared to $4.1 million for
the three months ended December 31, 2000, an increase of
$0.1 million or 2.4%. 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 $5.7 million for the three months
ended December 30, 2001 compared to $8.5 million for
the three months ended December 31, 2000, a decrease of
$2.8 million or 32.9%. The decrease in operating income was
caused mostly by the decrease in Adjusted EBITDA.

Interest Expense,
Net.Interest expense, net, 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 related to the decline in interest
rates.

Other, Net.We
recorded $0.6 million of other 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 $0.7 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 minimal for the three months ended
December 30, 2001 and $0.1 million for the three
months ended December 31, 2000. We determined that the
pending sales of our KLEY-FM and KSAH-AM stations serving the
San Antonio, Texas market, our KPTI-FM station serving the
San Francisco, California market, and the sale of our
KTCY-FM station serving the Dallas, Texas market, all met the
criteria in accordance with SFAS No. 144 to classify
their operations as discontinued operations. Consequently, these
stations results from operations for

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the three month periods 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.

Liquidity and Capital Resources

Our primary source of liquidity is cash on hand
and cash provided by operations and, to the extent necessary,
undrawn commitments that are available under a five-year
$10.0 million revolving credit facility arranged by Lehman
Brothers Inc. in October 2003. Our ability to raise funds by
increasing our indebtedness is limited by the terms of the
indentures governing our senior subordinated notes, the
certificates of designations governing our Preferred Stock and
the credit agreement governing our senior secured credit
facilities. Additionally, the indentures certificates of
designations and credit agreement place restrictions on us with
respect to the sale of assets, liens, investments, dividends,
debt repayments, capital expenditures, transactions with
affiliates and consolidations and mergers, among other things.
We had cash and cash equivalents of $71.4 million and
$45.6 million as of December 29, 2002 and
December 31, 2003, respectively.

Net cash flows provided by operating activities
were $17.0 million, $10.7 million and
$13.2 million for the fiscal years ended September 30,
2001, December 29, 2002 and December 31, 2003 and net
cash flows used in operating activities were $7.4 million
for the three month transitional period ended December 30,
2001, respectively. Our increase in net cash provided by
operating activities from fiscal year 2002 to 2003 of
$2.5 million was due primarily to an increase in cash
receipts from customers, driven by an increase in net revenue
from our Los Angeles market and start-up stations and improved
collection efforts, offset by an increase in cash paid to
vendors, suppliers and employees. Cash payment to suppliers,
vendors and employees increased during fiscal year 2003
primarily due to an increase in corporate expenses. Our decrease
in net cash provided by operating activities from fiscal year
2001 to 2002 of $6.3 million was due primarily to an
increase in cash paid for interest due to the issuance of an
additional $100.0 million of our existing 9 5/8% notes
in June 2001 and an increase in legal expenses.

Net cash flows used in investing activities were
$35.2 million and $231.2 million for the fiscal years
ended September 30, 2001 and December 31, 2003 and
$0.8 million 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 from 2002 to 2003 were primarily a result
of the acquisition of the Los Angeles station KXOL-FM on
October 30, 2003. Changes in our net cash flows from
investing activities from 2001 to 2002 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 $18.5 million and $192.1 million for the fiscal
years ended September 30, 2001 and December 31, 2003,
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. Changes in our net cash
flows from financing activities from 2002 to 2003 were primarily
a result of the financing of the acquisition of the Los Angeles
station KXOL-FM. To finance KXOL-FM, on October 30, 2003 we
sold $75.0 million of 10 3/4% Series A cumulative
exchangeable redeemable preferred stock through a Rule 144A
offering and entered into a $125.0 senior secured credit
facility term loan, which resulted in combined net proceeds of
$192.3 million. Our net cash flows from financing
activities during fiscal year 2001 were primarily a result of
our Rule 144A offering of $100.0 million of our
existing 9 5/8% notes and our repayment of the outstanding
indebtedness under our senior credit facility which we then
terminated.

Total capital expenditures were
$5.6 million, $4.0 million and $3.4 million for
the fiscal years ended September 30, 2001,
December 29, 2002 and December 31, 2003 and
$0.8 million for the three-month transitional period ended
December 30, 2001, respectively. These expenditures were
financed by funds from operations.

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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 and principal payments
pursuant to the senior secured credit facilities agreement and
governing our existing 9 5/8% notes indenture 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.                                                                

On January 30, 2004, we completed the sale
of the assets of radio stations KLEY-FM and KSAH-AM serving the
San Antonio, Texas market, to Border Media Partners, LLC
(Border Media) for a cash purchase price of $24.4 million.
The sale was made pursuant to the terms of our asset purchase
agreement dated as of September 18, 2003 with Border Media.
The assets sold consisted of $11.2 million of intangible
assets, net and $0.6 million of property and equipment.

On February 3, 2004, we terminated the
agreement we entered into on October 2, 2003 with
3 Point Media-San Francisco, LLC (Three Point Media)
under which Three Point Media was to acquire the assets of radio
station KPTI-FM, serving the San Francisco, California
market, for a cash purchase price of $30.0 million. We are
currently considering other offers to purchase the assets of
radio station KPTI-FM. We intend to sell the assets of radio
station KPTI-FM; however, we cannot assure you that the sale
will be completed. Pursuant to our credit agreement governing
our senior secured credit facilities, a portion (approximately
$25.0 million) of the proceeds received from the sale of
KPTI-FM, when and if completed, must be offered to the
noteholders to pay down the senior secured credit facilities.

We continuously review opportunities to acquire
additional radio stations and sell non-core 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. We currently
have no 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.

Contractual Obligations

The following table summarizes our principal
contractual obligations at December 31, 2003 and the effect
such obligations are expected to have on our liquidity and cash
flows in future periods ($ in thousands):

|                                                                           |  |      |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |  |       |  |  |  |         |  |  |  |         | 
|-------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---------- |  | ----- | ----- |  |  |  | ----- |  |  |  | ------- |  |  |  | ------- | 
|Contractual Obligations                                                    |  | 2004 |       | 2005 |  | 2006 |       | 2007 |  | 2008 |       | Thereafter |  | Total
|                                                                           |  |      |       |      |  |      |       |      |  |      |       |            |  |      
|Recorded obligations:                                                      |  |      |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |  |       |  |  |  |         |  |  |  |         | 
|Senior secured credit facilities term loan due
    2009(a)                 |  | $    | 1,250 |      |  |      | 1,250 |      |  |      | 1,250 |            |  |       | 1,250 |  |  |  | 1,250 |  |  |  | 118,750 |  |  |  | 125,000 | 
|9 5/8% senior subordinated notes, due
    2009(a)                          |  |      |      |      |  |      |      |      |  |      |      |            |  |       |      |  |  |  |      |  |  |  | 335,000 |  |  |  | 335,000 | 
|Other long-term debt(a)                                                    |  |      | 227   |      |  |      | 3,154 |      |  |      | 75    |            |  |       | 79    |  |  |  | 85    |  |  |  | 328     |  |  |  | 3,948   | 
|10 3/4% Series A cumulative
    exchangeable redeemable preferred stock(b) |  |      |      |      |  |      |      |      |  |      |      |            |  |       |      |  |  |  |      |  |  |  | 126,952 |  |  |  | 126,952 | 
|                                                                           |  |      |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |  |       |  |  |  |         |  |  |  |         | 
|                                                                           |  | $    | 1,477 |      |  |      | 4,404 |      |  |      | 1,325 |            |  |       | 1,329 |  |  |  | 1,335 |  |  |  | 581,030 |  |  |  | 590,900 | 
|                                                                           |  |      |       |      |  |      |       |      |  |      |       |            |  |       |       |  |  |  |       |  |  |  |         |  |  |  |         | 

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|                         |                   |      |        |        |  |      |       |        |  |      |       |            |  |       |       |       |  |  |       |       |  |  |       |         |  |  |        |         | 
|------------------------ | ----------------- | ---- | ------ | ------ |  | ---- | ----- | ------ |  | ---- | ----- | ---------- |  | ----- | ----- | ----- |  |  | ----- | ----- |  |  | ----- | ------- |  |  | ------ | ------- | 
|Contractual Obligations  |                   | 2004 |        | 2005   |  | 2006 |       | 2007   |  | 2008 |       | Thereafter |  | Total
|                         |                   |      |        |        |  |      |       |        |  |      |       |            |  |      
|Unrecorded obligations:  |                   |      |        |        |  |      |       |        |  |      |       |            |  |       |       |       |  |  |       |       |  |  |       |         |  |  |        |        
|Operating leases(c)      |                   |      | 2,576  |        |  |      | 2,517 |        |  |      | 2,017 |            |  |       | 1,662 |       |  |  | 1,566 |       |  |  | 9,687 |         |  |  | 20,025 |        
|Employment agreements(d) |                   |      | 9,722  |        |  |      | 5,389 |        |  |      | 1,480 |            |  |       | 428   |       |  |  | 392   |       |  |  |      |         |  |  | 17,411 |        
|                         |                   |      |        |        |  |      |       |        |  |      |       |            |  |       |       |       |  |  |       |       |  |  |       |         |  |  |        |        
|                         |                   | $    | 12,298 |        |  |      | 7,906 |        |  |      | 3,497 |            |  |       | 2,090 |       |  |  | 1,958 |       |  |  | 9,687 |         |  |  | 37,436 |        
|                         |                   |      |        |        |  |      |       |        |  |      |       |            |  |       |       |       |  |  |       |       |  |  |       |         |  |  |        |        
|                         | Total obligations |      | $      | 13,775 |  |      |       | 12,310 |  |      |       | 4,822      |  |       |       | 3,419 |  |  |       | 3,293 |  |  |       | 590,717 |  |  |        | 628,336 | 
|                         |                   |      |        |        |  |      |       |        |  |      |       |            |  |       |       |       |  |  |       |       |  |  |       |         |  |  |        |        



---



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Related interest obligations have been excluded
    from this maturity schedule. Our 2004 cash interest payments are
    expected to be approximately $38.0 million. See
    Notes 8, 9 and 10 to our consolidated financial statements
    for disclosure associated with the terms of these instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(b) |  | Our Series A preferred stock has no
    specified maturity. However, holders of the preferred stock may
    exercise an option on October 15, 2013 to require us to
    redeem all or a portion of their preferred stock. The amount of
    $126.9 million in the table above assumes the complete
    redemption of the preferred stock and accrued dividends on
    October 15, 2013.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |  | Related dividend obligations have been excluded
    from this maturity schedule. The holders of shares of
    Series A preferred stock are entitled to receive cumulative
    dividends at a rate of 10 3/4% per year of the $1,000
    liquidation preference per share. All dividends will be
    cumulative from the date of issuance of the Series A
    preferred stock and will be payable quarterly in arrears on
    October 15, January 15, April 15 and July 15
    of each year. On or before October 15, 2008, we at our
    option may pay dividends in cash or in additional fully paid and
    non-assessable shares of Series A preferred stock
    (including fractional shares or, at our option, cash in lieu of
    fractional shares) having an aggregate liquidation preference
    equal to the amount of such dividends. After October 15,
    2008, dividends may be paid only in cash. Our ability to pay
    cash dividends is subject to, and will be limited by the terms
    of our existing 9 5/8% notes and our senior secured
    credit facilities. Our 2004 dividend payments are expected to be
    paid in shares of preferred stock and are expected to total
    approximately $8.5 million.
|   
|(c) |  | Included in our non-cancelable operating lease
    obligations are minimum lease payments for office space and
    facilities and certain equipment. See Note 13 to the
    consolidated financial statements for a discussion of the terms
    of these lease agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(d) |  | At December 31, 2003, we are committed to
    employment contracts for certain executives, on-air talent and
    general managers expiring through 2008. See Note 13 to the
    consolidated financial statements for further discussion on the
    nature and terms of our employment agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

We have contingencies that are deemed not
reasonably likely and thus not included in the above table. See
Note 14 to the consolidated financial statements for
further discussion.

Our strategy is to primarily utilize cash flows
from operations to meet our capital needs and contractual
obligations. However, we also have bank borrowings available to
meet our capital needs and contractual obligations and, when
appropriate, will obtain financing by issuing debt or common
stock.

As of December 31, 2003, we are required to
maintain financial covenants under our senior secured credit
facilities as follows: (i) Consolidated EBITDA minimum,
(ii) Consolidated Fixed Charge Coverage Ratio,
(iii) Consolidated Leverage Ratio, (iv) Consolidated
Interest Coverage Ratio and (v) Consolidated Senior Secured
Debt Ratio, all as defined in the credit agreement solely for
the purpose of determining compliance with the covenants. The
credit agreement requiring compliance with these financial
covenants states that the calculations must be based on
generally accepted accounting principles promulgated by the
Financial Accounting Standards Board. We are in compliance with
all covenants under our senior secured credit facilities and all
other debt instruments as of December 31, 2003 and expect
to be in the foreseeable future.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements
that have, or are reasonably likely to have, a current or future
material effect on our financial condition, changes in financial
condition, revenue or expenses, results of operations, liquidity
or capital resources.

Critical Accounting Policies

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, 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 ultimately

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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, consisting principally of our FCC licenses.
Impairment to the carrying value of these assets could have a
material effect on our operations and financial condition. We
have concluded that our FCC licenses qualify as indefinite-life
intangible assets under SFAS No. 142 Goodwill
and Other Intangible Assets. We at least annually assess
the recoverability of the carrying amount of intangible assets,
including goodwill, in accordance with SFAS No. 142.
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, we recorded a
non-cash charge for the cumulative effect of a change in
accounting principle of $45.3 million, net of income tax
benefit of $30.2 million. Under SFAS No. 142,
goodwill is deemed to be impaired if the net book value of the
reporting unit exceeds its estimated fair value. We have
determined that we have one reporting unit under
SFAS No. 142 and that there is no impairment of
goodwill.

We performed an annual impairment review of our
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.



| |                            
| | ---------------------------
| | 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. 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
No. 142 on December 31, 2001, amortization of
intangible assets and goodwill ceased for financial statement
purposes. As a result, we could not be assured that the
reversals of the deferred tax liabilities relating to those
intangible assets and goodwill would occur within our net
operating loss carry-forward period. Therefore, on the date of
adoption, we 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 30, 2001, December 29, 2002 and
December 31, 2003, we incurred bad debt expense
(recovery) of $2.1 million, $(0.1) million and
$0.3 million, respectively. For the three-month
transitional period ended December 30, 2001 we incurred bad
debt expense of $0.7 million. Changes in the credit
worthiness of customers, general economic conditions and other
factors may impact the level of future write-offs.

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| |                    
| | -------------------
| | 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, where
applicable, 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 us 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.

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).
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. We have concluded
that our intangible assets, comprised primarily of FCC licenses,
qualify as indefinite-life intangible assets under
SFAS No. 142.

We adopted the provisions of
SFAS No. 142 effective December 31, 2001. After
performing the transitional impairment evaluation of our
indefinite-life intangible assets, we determined that the
carrying value of certain indefinite-life intangible assets
acquired from AM/FM 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 at
that time. Fair market values of our 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, we 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. We have determined that
we have 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 our
indefinite-life intangible assets ceased for financial statement
purposes under SFAS No. 142, we could not be assured
that the reversals of the deferred tax liabilities relating to
those indefinite-life intangible assets would occur within our
net operating loss carry-forward period. Therefore, on
December 31, 2001, we recognized a noncash charge totaling
$55.4 million to income tax expense to establish a
valuation allowance against our deferred tax assets, primarily
consisting of net operating loss carry-forwards.

As of our adoption of SFAS No. 142
effective December 31, 2001, we 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. Continuing operations and discontinuing
operations combined amortization expense related to goodwill and
identifiable intangible assets was $15.6 million and
$4.0 million for the fiscal year ended 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 30, 2001, three-month transitional period ended
December 30, 2001, and fiscal years

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ended December 29, 2002 and
December 31, 2003, respectively, on a basis consistent with
the new accounting principle.


|                                                        |                                                                       |                                                                                    |        |              |        |              |        |              |        |   |         |        |        |  |         |       |         |  
|------------------------------------------------------- | --------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ------ | ------------ | ------ | ------------ | ------ | ------------ | ------ | - | ------- | ------ | ------ |  | ------- | ----- | ------- | -
|                                                        |                                                                       |                                                                                    |        | Three-       |        |              |        |             
|                                                        |                                                                       | Fiscal Year                                                                        |        | Months       |        | Fiscal Year  |        | Fiscal Year 
|                                                        |                                                                       | Ended                                                                              |        | Ended        |        | Ended        |        | Ended       
|                                                        |                                                                       | September 30,                                                                      |        | December 30, |        | December 29, |        | December 31,
|                                                        |                                                                       | 2001                                                                               |        | 2001         |        | 2002         |        | 2003        
|                                                        |                                                                       |                                                                                    |        |              |        |              |        |             
|                                                        |                                                                       |                                                                                   
|                                                        |                                                                       | (in thousands, except per share data)                                             
|Reported net loss applicable to common
    stockholders |                                                                       | $                                                                                  | (7,588 | )            |        |              | (1,227 | )            |        |   | (89,846 | )      |        |  | (10,116 | )    
|                                                        | 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)        |                                                                                    |        | 15,635       |        |              |        | 3,983        |        |   |         |       |        |  |         |      |        
|                                                        | Income tax expense adjustment(3)                                      |                                                                                    |        | (11,369      | )      |              |        | (5,702       | )      |   |         |       |        |  |         |      |        
|                                                        |                                                                       |                                                                                    |        |              |        |              |        |              |        |   |         |        |        |  |         |      
|                                                        |                                                                       | Adjusted (loss) net income                                                         |        | $            | (3,322 | )            |        |              | (2,946 | ) |         |        | 10,800 |  |         |       | (10,116 | )
|                                                        |                                                                       |                                                                                    |        |              |        |              |        |              |        |   |         |        |        |  |         |      
|Basic and diluted (loss) income per share:              |                                                                       |                                                                                    |        |              |        |              |        |              |        |   |         |        |        |  |         |      
|                                                        | Reported net loss per share                                           |                                                                                    | $      | (0.12        | )      |              |        | (0.02        | )      |   |         | (1.39  | )      |  |         | (0.16 | )      
|                                                        |                                                                       | 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)                    |        |              | 0.24   |              |        |              | 0.06   |   |         |        |       |  |         |       |        |  
|                                                        |                                                                       | Income tax adjustment per share(3)                                                 |        |              | (0.17  | )            |        |              | (0.09  | ) |         |        |       |  |         |       |        |  
|                                                        |                                                                       |                                                                                    |        |              |        |              |        |              |        |   |         |        |        |  |         |      
|Adjusted net (loss) income per share                    |                                                                       | $                                                                                  | (0.05  | )            |        |              | (0.05  | )            |        |   | 0.17    |        |        |  | (0.16   | )    
|                                                        |                                                                       |                                                                                    |        |              |        |              |        |              |        |   |         |        |        |  |         |      






|    |                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | As a result of the adoption of
    SFAS No. 142 on December 31, 2001, we 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, we 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
    year ended September 30, 2001 and the three-month
    transitional period ended December 30, 2001 add back
    noncash goodwill and intangible assets amortization of
    $15.6 million and $4.0 million, respectively, and
    reflect adjusted income tax expense assuming that
    SFAS No. 142 was effective as of September 25,
    2000.

We performed our annual impairment review of our
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 June 2001, FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations (SFAS
No. 143). SFAS No. 143 requires us to record the
fair value of an asset retirement obligation as a liability in
the period in which we incur a legal obligation associated
with the retirement of tangible long-lived assets that results
from the acquisition, construction, development, and/or normal
use of the assets. We would also record a corresponding asset
that is depreciated over the life of the asset. Subsequent to
the initial measurement of the asset retirement obligation, the
obligation will be adjusted at the end of each period to reflect
the passage of time and changes in the estimated future cash
flows underlying the obligation. We adopted
SFAS No. 143 on December 30, 2002. The adoption
of SFAS No. 143 did not have a material effect on our
consolidated financial statements.

In April 2002, 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

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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
is effective for fiscal years beginning after May 15, 2002.
The adoption of SFAS No. 145 required that our
extraordinary losses recognized on the extinguishments of debt
in 2000 and 2001 be reclassified to income or loss from
continuing operations in our consolidated financial statements
for the fiscal year ended December 31, 2003.


In December 2002, FASB issued
SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure (SFAS
No. 148). SFAS No. 148 amends the transition and
disclosure provisions of SFAS No. 123. Among other
items, SFAS No. 148 allows companies adopting
SFAS No. 123 to utilize one of three alternative
transition methods, one of which was a prospective
method, as defined, that was only available if adopted
during 2003. To date, we have not adopted SFAS No. 123
utilizing any of the transition methods of
SFAS No. 148. FASB currently is working on a project
to develop a new standard for accounting for stock-based
compensation. Tentative decisions by FASB indicate that
expensing of stock options will be required beginning
January 1, 2005. FASB expects to issue an exposure draft,
which will be subject to public comment, in the first quarter of
2004 and issue its final standard in the second half of 2004.

In May 2003, FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity (SFAS
No. 150), effective for financial instruments entered into
or modified after May 31, 2003, and otherwise effective at
the beginning of the first interim period beginning after
June 15, 2003. This statement establishes standards for how
an issuer classifies and measures certain financial instruments
with characteristics of both liabilities and equity. It requires
that an issuer classify a freestanding financial instrument that
is within its scope as a liability (or an asset in some
circumstances) when that financial instrument embodies an
obligation of the issuer. The adoption of SFAS No. 150
did not have an impact on our consolidated financial statements.

In December 2003, FASB issued a revised
Interpretation No. 46, Consolidation of Variable
Interest Entities, an Interpretation of Accounting Research
Bulletin No. 51 (FIN 46R). FIN 46R requires
the consolidation of entities in which an enterprise absorbs a
majority of the entitys expected losses, receives a
majority of the entitys expected residual returns, or
both, as a result of ownership, contractual or other financial
interests in the entity. Currently entities are generally
consolidated by an enterprise when it has a controlling
financial interest through ownership of a majority voting
interest in the entity. The provisions of FIN 46R are
generally effective for existing (prior to February 1,
2003) variable interest relationships of a public entity no
later than the end of the first reporting period that ends after
March 15, 2004. However, prior to the required application
of this interpretation a public entity that is not a small
business issuer shall apply FIN 46R to those entities that
are considered to be special-purpose entities no later than the
end of the first reporting period that ends after
December 15, 2003. We applied the portion of FIN 46R
that is applicable to special purpose entities effective
December 31, 2003, with no material effect, and will apply
the remainder of FIN 46R to our first quarter 2004
financial statements.






|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures
    About Market Risk

We believe that inflation has not had a material
impact on our results of operations for each of our fiscal years
ended December 29, 2002 and December 31, 2003.
However, there can be no assurance that future inflation would
not have an adverse impact on our operating results and
financial condition.

Our primary market risk is a change in interest
rates. Our primary exposure is variable rates of interest
associated with borrowings under our senior secured credit
facilities. Advances under the senior secured credit facilities
bear base rate or eurodollar rate interest (in each case subject
to applicable margins), as applicable, which vary in accordance
with prevailing economic conditions. Our earnings are affected
by changes in interest rates due to the impact those changes
have on interest expense from variable-rate debt instruments and
on interest income generated from our cash and investment
balances. At December 31, 2003, all of our debt, other than
our $125.0 million senior secured credit facility term
loan, had fixed interest rates. If variable interest rates
average 10% higher in 2004 than they did during 2003, our
variable interest expense would

47



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##### Table of Contents



increase by approximately $0.6 million,
compared to a variable annualized estimated $5.5 million
for 2003 measured as of December 31, 2003. If interest
rates average 10% lower in 2004 than they did during 2003,
our interest income from cash and investment balances would
decrease by approximately $0.1 million, compared to a
variable annualized estimated $0.5 million for 2003
measured as of December 31, 2003. These amounts are
determined by considering the impact of the hypothetical
interest rates on our variable-rate debt, cash equivalents and
short-term investment balances at December 31, 2003.







|        |                                                
|------- | -----------------------------------------------
|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, our accountants or
disagreements between us and our accountants on accounting or
financial disclosure during our two most recent fiscal years or
any subsequent interim period.






|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Our principal executive and financial officers
have concluded, based on their evaluation as of a date within
75 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 their evaluation, there were no
significant changes in internal controls or other factors that
could significantly affect these internal controls. It should be
noted that the design of any system of controls is based in part
upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future
conditions, regardless of how remote.




PART III






|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant

The following table sets forth the names, ages
and positions of our directors, executive officers and certain
key employees as of December 31, 2003. Each of our
directors and officers serves until his successor is elected and
qualifies.

|                       |  |     |    |          |  |                                                                              
|---------------------- |  | --- | -- | -------- |  | -----------------------------------------------------------------------------
|Name                   |  | Age |    | Position
|                       |  |     |    |         
|Raúl Alarcón, Jr.      |  |     | 47 |          |  | Chairman of the Board of Directors, Chief
    Executive Officer and President
|Pablo Raúl Alarcón, Sr |  |     | 77 |          |  | Chairman Emeritus and Director                                               
|Joseph A. García       |  |     | 58 |          |  | Chief Financial Officer, Executive Vice President
    and Secretary          
|Marko Radlovic         |  |     | 40 |          |  | Chief Revenue Officer                                                        
|William B. Tanner      |  |     | 59 |          |  | Executive Vice President of Programming                                      
|Jack Langer            |  |     | 55 |          |  | Director                                                                     
|Dan Mason              |  |     | 52 |          |  | Director                                                                     
|Carl Parmer            |  |     | 45 |          |  | Director                                                                     
|Jason L. Shrinsky      |  |     | 66 |          |  | Director                                                                     

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Raúl
Alarcón, Jr.joined us
in 1983 as an account executive and has been our President and a
director since October 1985 and our Chief Executive Officer
since June 1994. On November 2, 1999,
Mr. Alarcón, Jr. became our Chairman of the Board
of Directors and continues as our Chief Executive Officer and
President. Currently, Mr. Alarcón, Jr. is
responsible for our long-range strategic planning and
operational matters and is instrumental in the acquisition and
related financing of each of our radio stations.
Mr. Alarcón, Jr. is the son of Pablo Raúl
Alarcón, Sr.

Pablo Raúl
Alarcón, Sr.is our
founder and 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 one of
our 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.

Joseph A. Garcíahas been our Chief Financial
Officer since 1984, Executive Vice President since 1996 and
Secretary since November 2, 1999. Mr. García is
responsible for our financial affairs, day-to-day operational
matters and investor relations, and he has been instrumental in
the acquisition and related financing of our radio stations.
Before joining us 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.

Marko Radlovicbecame our Chief Revenue Officer
on December 1, 2003. Mr. Radlovic is responsible for
overseeing the revenue performance of all of our local,
national, and network sales efforts. Mr. Radlovic was Vice
President/ General Manager for our Los Angeles radio cluster
from January 2002 until November 2003 and previously served as
Vice President of Sales for the Los Angeles cluster. Prior to
joining us, he was a Market Manager for CUMULUS Media in
Southern California from January 2001 until August 2001 and was
Vice President/ General Manager for AM/ FM Inc. in Los Angeles
from October 1998 to October 2000.

William B. Tannerhas served as our Executive Vice
President of Programming since August 31, 2000.
Mr. Tanner is responsible for the programming of our
stations as well as maintaining and improving their ratings.
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.

Jack Langerbecame one of our directors on
July 10, 2003. Mr. Langer has over 27 years of
investment banking experience and was most recently Managing
Director and Global Co-Head of the Media Group at Lehman
Brothers Inc. from 1997 to 2002. He was also Managing Director
and Head of Media Group at Bankers Trust & Company,
Kidder Peabody & Co., Inc. and Drexel, Burnham
Lambert & Co. Mr. Langer has extensive experience
in advising media companies on financial strategies, financings
and acquisitions.

Dan Masonbecame one of our directors on
July 10, 2003. Mr. Mason, a veteran of the radio
broadcasting industry with nearly 30 years of experience,
was most recently President of Infinity Radio from 1999 to 2002
and President of CBS Radio from 1995 to 1999. Mr. Mason
currently serves as a consultant to various companies in the
radio broadcasting industry. Besides his tenure at Infinity
Radio and CBS Radio, Mr. Mason also served as President of
Group W Radio and Cook Inlet Radio Partners, L.P.

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 (one of the predecessors of Hispanic Broadcasting
Corporation) from 1991 to 1996. Mr. Parmer has been
President and Chief Executive Officer of Broadcasting
Management, Inc., a company that provides television
related services, 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.

49



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##### Table of Contents



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 19 years.

See Item 13. Certain Relationships and
Related Transactions.

Section 16(a) Beneficial Ownership
Reporting Compliance

Section 16(a) of the Exchange Act 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
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 31, 2003, all the Reporting Persons complied with
all applicable filing requirements, except that one report
covering one transaction by William B. Tanner was filed late.

Code of Ethics

We have adopted a Code of Business Conduct and
Ethics (Code of Ethics) within the meaning of
Item 406(b) of Regulation S-K. This Code of Ethics
applies to our employees, officers and directors and is publicly
available on our Internet website at
www.spanishbroadcasting.com. If we make substantive amendments
to this Code of Ethics or grant any waiver from its provisions
to our principal executive, financial or accounting officers, or
persons performing similar functions, including any implicit
waiver, we will disclose the nature of such amendment or waiver
on our website or in a report on Form 8-K within five days
of such amendment or waiver.

Composition of the Audit Committee; Audit
Committee Financial Expert

We have a separately-designated standing Audit
Committee established in accordance with Section 3(a)58(A)
of the Exchange Act. The current members of our Audit Committee
are three independent directors (as defined under applicable SEC
and Nasdaq rules): Carl Parmer, Jack Langer and Dan Mason. Our
Board of Directors has determined that Carl Parmer, the Chairman
of the Audit Committee, is an audit committee financial
expert as defined under Item 401(h) of
Regulation S-K.

50



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##### Table of Contents








|         |                       
|-------- | ----------------------
|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 31, 2003, December 29, 2002 and
September 30, 2001, by our Chief Executive Officer and
President and our next highest paid executive officers at
December 31, 2003, whose total annual salary and bonus
exceeded $100,000.

Summary Compensation Table

|                  |  |                     |  |            |      |              |  |              |           |                 |  |              |         |  |  |   |         |     |  |  |         | 
|----------------- |  | ------------------- |  | ---------- | ---- | ------------ |  | ------------ | --------- | --------------- |  | ------------ | ------- |  |  | - | ------- | --- |  |  | ------- | 
|                  |  |                     |  |            |      |              |  |              |           |                 |  | Long Term   
|                  |  |                     |  |            |      |              |  |              |           |                 |  | Compensation
|                  |  |                     |  |            |      |              |  |              |           |                 |  | Awards      
|                  |  |                     |  |           
|                  |  | Annual Compensation |  | Securities
|                  |  |                     |  | Underlying
|                  |  |                     |  | Bonus      |      | Other Annual |  | Options/SARs
|Name              |  | Principal Position  |  | Year       |      | Salary ($)   |  | ($)          |           | Compensation($) |  | (#)         
|                  |  |                     |  |            |      |              |  |              |           |                 |  |             
|Raúl Alarcón, Jr. |  | Chief Executive     |  |            | 2003 |              |  | $            | 1,226,888 |                 |  | $            | 710,183 |  |  | $ | 82,265  | (a) |  |  | 100,000 | 
|                  |  | Officer,            |  |            | 2002 |              |  |              | 1,226,888 |                 |  |              | 790,629 |  |  |   | 101,008 | (a) |  |  | 100,000 | 
|                  |  | President and       |  |            | 2001 |              |  |              | 1,000,000 |                 |  |              | 792,864 |  |  |   | 155,531 | (a) |  |  | 100,000 | 
|                  |  | Chairman            |  |            |      |              |  |              |           |                 |  |              |         |  |  |   |         |     |  |  |         | 
|                  |  | of the Board of     |  |            |      |              |  |              |           |                 |  |              |         |  |  |   |         |     |  |  |         | 
|                  |  | Directors           |  |            |      |              |  |              |           |                 |  |              |         |  |  |   |         |     |  |  |         | 
|                 
|Joseph A. García  |  | Executive Vice      |  |            | 2003 |              |  | $            | 400,000   |                 |  | $            | 160,000 |  |  |   |        | (c) |  |  |        | 
|                  |  | President, Chief    |  |            | 2002 |              |  |              | 423,077   | (b)             |  |              | 200,000 |  |  |   |        | (c) |  |  | 150,000 | 
|                  |  | Financial Officer   |  |            | 2001 |              |  |              | 379,615   |                 |  |              | 100,000 |  |  |   |        | (c) |  |  | 100,000 | 
|                  |  | and Secretary       |  |            |      |              |  |              |           |                 |  |              |         |  |  |   |         |     |  |  |         | 
|                 
|Marko Radlovic    |  | Chief Revenue       |  |            | 2003 |              |  | $            | 416,538   |                 |  | $            | 97,199  |  |  |   |        | (c) |  |  | 90,000  | 
|                  |  | Officer(d)          |  |            | 2002 |              |  |              |          |                 |  |              |        |  |  |   |        |     |  |  |        | 
|                  |  |                     |  |            | 2001 |              |  |              |          |                 |  |              |        |  |  |   |        |     |  |  |        | 
|                 
|William B. Tanner |  | Executive Vice      |  |            | 2003 |              |  | $            | 617,540   |                 |  | $            | 446,500 |  |  |   |        | (c) |  |  | 15,000  | 
|                  |  | President of        |  |            | 2002 |              |  |              | 563,582   |                 |  |              | 192,000 |  |  | $ | 154,742 | (e) |  |  | 15,000  | 
|                  |  | Programming         |  |            | 2001 |              |  |              | 530,058   |                 |  |              | 18,000  |  |  |   | 156,572 | (e) |  |  | 15,000  | 






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Mr. Alarcón, Jr. received personal
    benefits in addition to his salary and bonus, including use of
    automobiles. We paid an aggregate of $82,265, $98,388 and
    $123,611 in fiscal years 2003, 2002 and 2001, respectively, for
    automobiles used, including drivers salary, by
    Mr. Alarcón, Jr. These amounts 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 reimbursed 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) |  | Mr. Radlovic became our Chief Revenue Officer on
    December 1, 2003. For the preceding portion of fiscal year
    2003, he served as Vice President/General Manager for our Los
    Angeles radio cluster and was not an executive officer.                                                                                                                                                                                                                                                                                                                                                    
|   
|(e) |  | In November 2001 and December 2002, we made
    payments of $154,742 to William Tanner pursuant to an addendum
    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 financial statements in fiscal years 2002 and
    2001.                                                                                                                                                             

51



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##### Table of Contents



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 31,
2003:

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)     |         | 2003         |  | ($/Sh)      |       | Expiration Date            |  | 5%($) |      | 10%($)
|                  |  |                   |         |              |  |             |       |                            |  |       |      |       
|Raúl Alarcón, Jr  |  |                   | 100,000 | (b)          |  |             | 29.9% |                            |  | $     | 8.69 |        |  |  | 10/25/13 |  |  | $ | 546,509 |  |  | $ | 1,384,962 | 
|Joseph A. García  |  |                   |        |              |  |             |      |                            |  |       |     |        |  |  |         |  |  |   |        |  |  |   |          | 
|Marko Radlovic    |  |                   | 90,000  | (c)          |  |             | 26.9  |                            |  | $     | 9.44 |        |  |  | 11/06/13 |  |  |   | 534,309 |  |  |   | 1,354,044 | 
|William B. Tanner |  |                   | 15,000  | (d)          |  |             | 4.5   |                            |  | $     | 7.80 |        |  |  | 8/31/08  |  |  |   | 32,325  |  |  |   | 71,430    | 






|    |  |                                                                                                                                                                                                                                                                                                                                                        
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 25, 2003.                                                                                                                                                                                                                     
|   
|(c) |  | One-third of Marko Radlovics option vested
    immediately on November 6, 2003, the date of grant, and the
    rest vests ratably over a two-year period.                                                                                                                                                                                             
|   
|(d) |  | William B. Tanners option vested and became
    exercisable immediately upon the granting of such option on
    August 31, 2003.                                                                                                                                                                                                                      

The following table sets forth certain
information regarding stock options exercised by the named
executive officers during fiscal year 2003, 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 31, 2003. 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 31, 2003.

Aggregated Option/ SAR Exercises in Last
Fiscal

Year and Fiscal Year End Options/ SAR
Values


|                  |  |                |   |          |  |                        |   |                              |  |             |         |               |  |  |         |  |  |   |           |  |  |   |         | 
|----------------- |  | -------------- | - | -------- |  | ---------------------- | - | ---------------------------- |  | ----------- | ------- | ------------- |  |  | ------- |  |  | - | --------- |  |  | - | ------- | 
|                  |  |                |   |          |  |                        |   |                              |  |            
|                  |  |                |   |          |  | Number of Securities   |   |                             
|                  |  |                |   |          |  | Underlying Unexercised |   | Value of Unexercised In-the-
|                  |  |                |   |          |  | Options/SARs at Fiscal |   | Money Options at Fiscal     
|                  |  | Shares         |   | Value    |  | Year End(#)            |   | Year End($)                 
|                  |  | Acquired       |   | Realized |  |                        |   |                             
|Name              |  | on Exercise(#) |   | ($)      |  | Exercisable            |   | Unexercisable                |  | Exercisable |         | Unexercisable
|                  |  |                |   |          |  |                        |   |                              |  |             |         |              
|Raúl Alarcón, Jr  |  |                |  |          |  |                        |  |                              |  |             | 500,000 |               |  |  |        |  |  | $ | 1,014,130 |  |  | $ |        | 
|Joseph A. García  |  |                |  |          |  |                        |  |                              |  |             | 390,000 |               |  |  | 110,000 |  |  | $ | 545,960   |  |  | $ | 245,240 | 
|Marko Radlovic    |  |                |  |          |  |                        |  |                              |  |             | 48,010  |               |  |  | 76,990  |  |  | $ | 58,094    |  |  | $ | 90,566  | 
|William B. Tanner |  |                |  |          |  |                        |  |                              |  |             | 263,552 |               |  |  |        |  |  | $ | 233,904   |  |  | $ |        | 

Director Compensation

All directors are reimbursed for their
out-of-pocket expenses incurred in connection with their service
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 and directors fees.

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 vested
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.

52



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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 immediately, and the
remaining options to purchase 40,000 shares vest ratably
over four years. Mr. Fernandez resigned as a member of the
Board of Directors on April 11, 2003 and all his vested and
unvested options have terminated.

Effective as of July 10, 2003, in connection
with the election of Jack Langer and Dan Mason to our Board of
Directors, we granted each of Messrs. Langer and Mason
options to purchase 50,000 shares of Class A common
stock, with an exercise price of $8.60 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.

In order to attract and retain independent
directors, the Board of Directors has determined that the annual
fees paid to non-employee directors for service on the Board of
Directors and committees should consist of: $50,000 for service
on the Board of Directors; $50,000 for service on the Audit
Committee; $25,000 for service as the Audit Committee Chairman;
and $25,000 for service on the Compensation Committee. During
the fiscal year ended December 31, 2003, we made payments
in the amount of $30,000 to Pablo Raúl
Alarcón, Sr., $75,000 to Carl Parmer and $62,500 to
each of Messrs. Mason and Langer for their services
rendered as directors. Mr. Shrinsky declined to accept a
fee. We also paid for the use of an automobile by
Mr. Alarcón, Sr. in the amount of $19,517.

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 based on annual same station
operating income or a greater amount in the discretion of the
Board of Directors. 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 one 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 by SBS. 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.
Mr. García is entitled to the use of one automobile at
our expense. 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 Agreement,

53



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##### Table of Contents



Mr. García received an option to
purchase 250,000 shares of Class A common stock, at an
exercise price of $20.00 per share, all of which has vested.




| |                  
| | -----------------
| | 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 among other
calculations. 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 reimbursement of power and telephone bills for a Los Angeles
residence and a monthly automobile allowance.



| |               
| | --------------
| | Marko Radlovic

We have an employment agreement with Marko
Radlovic dated as of October 31, 2003, pursuant to which
Mr. Radlovic serves as our Chief Revenue Officer. The term
of the agreement is from December 1, 2003 to
November 30, 2006. The agreement provides for an annual
base salary of $500,000. Mr. Radlovic is entitled to
receive quarterly performance bonuses based on net sales per
quarter meeting certain sales budget targets. Under the terms of
the agreement, Mr. Radlovic received (1) an option to
purchase 90,000 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
62,500 shares of Class A common stock to be granted
based on merit in each of the second and third years of the
employment term and which will vest ratably in the three years
following the grant date, in each case at an exercise price
equal to the closing price of our Class A common stock on
the business day of each respective grant date.
Mr. Radlovic is also entitled to receive standard employee
benefits provided to all of our executives, such as health, life
and long-term disability insurance and reimbursement of business
related expenses. He is also entitled to reimbursement of
relocation expenses and a monthly automobile allowance.

Stock Plans



| |                       
| | ----------------------
| | 1999 Stock Option Plan

We adopted an option plan to incentivize our
present and future executives, managers 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 31, 2003, options to purchase 335,000 shares
of Class A common stock were granted under this plan at
exercise prices ranging from $7.20 to $9.82 per share.

Pursuant to the option plan, 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.

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Options, which include non-qualified stock
options and incentive stock options, are rights to purchase a
specified number of shares of our Class A common stock at a
price fixed by the Compensation Committee. The option price may
be lower than, equal to or higher 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% or greater 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 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 in 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 options 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/her annual salary,
not to exceed the statutorily prescribed annual limit, which was
$12,000 for 2003. 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.

55



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##### Table of Contents



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.

We currently have directors and officers
liability insurance that provides for coverage of up to
$35.0 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 us 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 complaint was brought on behalf of
Mr. Wolf and an alleged class of similarly situated
purchasers, against us, eight underwriters and/or their
successors-in-interest who led or otherwise participated in our
initial public offering, two members of our senior management
team, one of whom is our Chairman of the Board of Directors, and
an additional director, referred to collectively as the
individual defendants. To date, the complaint, while served upon
us, has not been served upon the individual defendants, 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
underwriter defendants, and 1,000 individuals 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 us, have been assigned for consolidated pretrial
purposes to one judge of the United States District Court for
the Southern District of New York. One of the claims
against the individual defendants, specifically the
Section 10b-5 claim, has been dismissed.

In June of 2003, after lengthy negotiations, a
settlement proposal was embodied in a memorandum of
understanding among the investors in the plaintiff class, the
issuer defendants and the issuer defendants insurance
carriers. On July 23, 2003, our Board of Directors approved
both the memorandum of understanding and an agreement between
the issuer defendants and the insurers. As of March 1,
2004, the overwhelming majority of non-bankrupt issuer
defendants have approved the settlement proposal. The principal
components of the settlement include: 1) a release of all
claims against the issuer defendants and their directors,
officers and certain other related parties arising out of the
alleged wrongful conduct in the amended complaint; 2) the
assignment to the plaintiffs of certain of the issuer
defendants potential claims against the underwriter
defendants; and 3) a guarantee by the insurers to the
plaintiffs of the difference between $1.0 billion and any
lesser amount recovered by the plaintiffs against the
underwriter defendants. The payments will be charged to each
issuer defendants insurance policy on a pro rata basis.

56



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##### Table of Contents



Compensation Committee Interlocks and Insider
Participation

Our Compensation Committee is currently comprised
of three independent directors: Jack Langer, our Compensation
Committee Chairman, Carl Parmer and Dan Mason.
Messrs. Langer and Mason became members of the Compensation
Committee on July 10, 2003. Mr. Parmer was a member of our
Compensation Committee during all of fiscal year 2003. Jason L.
Shrinsky, a non-employee director, was a member of our
Compensation Committee during fiscal year 2003 until
July 10, 2003. See Item 13. Certain
Relationships and Related Transactions.






|         |                                                                                                       
|-------- | ------------------------------------------------------------------------------------------------------
|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 10,
2004, 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)                                          |  |                | 500,000   |                |  |           | 1.2  | %       |  |          | 23,500,000 |        |  |  | 93.6 | % |  |  | 36.3 | % |  |  | 80.7 | %
|Pablo Raúl Alarcón, Sr.(4)                                    |  |                |          |                |  |           |     |         |  |          | 1,070,000  |        |  |  | 4.3  | % |  |  | 1.6  | % |  |  | 3.7  | %
|Joseph A. García(5)                                           |  |                | 440,000   |                |  |           | 1.1  | %       |  |          |           |        |  |  |     |   |  |  | *    |   |  |  | *    |  
|William B. Tanner(6)                                          |  |                | 263,552   |                |  |           | *    |         |  |          |           |        |  |  |     |   |  |  | *    |   |  |  | *    |  
|Jason L. Shrinsky(7)                                          |  |                | 65,000    |                |  |           | *    |         |  |          |           |        |  |  |     |   |  |  | *    |   |  |  | *    |  
|Carl Parmer(8)                                                |  |                | 101,100   |                |  |           | *    |         |  |          |           |        |  |  |     |   |  |  | *    |   |  |  | *    |  
|Jack Langer(9)                                                |  |                | 10,000    |                |  |           | *    |         |  |          |           |        |  |  |     |   |  |  | *    |   |  |  | *    |  
|Dan Mason(9)                                                  |  |                | 10,000    |                |  |           | *    |         |  |          |           |        |  |  |     |   |  |  | *    |   |  |  | *    |  
|Marko Radlovic(10)                                            |  |                | 52,960    |                |  |           | *    |         |  |          |           |        |  |  |     |   |  |  | *    |   |  |  | *    |  
|                                                              |  |                |           |                |  |           |      |         |  |          |            |        |  |  |      |   |  |  |      |   |  |  |      |  
|All named executive officers and directors as a
    group(11) |  |                | 1,442,612 |                |  |           | 3.5  | %       |  |          | 24,570,000 |        |  |  | 97.9 | % |  |  | 39.4 | % |  |  | 84.6 | %
|T. Rowe Price Associates, Inc.(12)                            |  |                | 4,312,400 |                |  |           | 10.5 | %       |  |          |           |        |  |  |     |   |  |  | 6.5  | % |  |  | 1.5  | %
|Columbia Wagner Asset Management, L.P.(13)                    |  |                | 2,690,100 |                |  |           | 6.6  | %       |  |          |           |        |  |  |     |   |  |  | 4.1  | % |  |  | *    |  
|Maria Alarcón Living Trust(14)                                |  |                | 2,500,000 |                |  |           | 6.1  | %       |  |          | 10,000     |        |  |  | *    |   |  |  | 3.8  | % |  |  | *    |  






| |   |                        
| | - | -----------------------
| | * | 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 500,000 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

57



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##### Table of Contents





| |     |                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (5) | Includes 430,000 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) | 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 table.                                                                                                                                                                                                                                                   
|
| | (7) | Includes 50,000 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) | Represents 71,100 shares of Class A
    common stock owned indirectly through Henry Carlson
    Parmer, Jr. Living Trust and 30,000 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 table.                                                                                                           
|
| | (9) | Includes 10,000 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 52,960 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    
|(11) | Includes 1,346,512 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 table.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    
|(12) | 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 1,142,700 shares and sole
    dispositive power with respect to all the shares. The shares are
    owned 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. T. Rowe Price
    Associates, Inc. provided this information directly to us
    on February 25, 2004.
|    
|(13) | The address of Columbia Wagner Asset Management,
    L.P. is 227 W. Monroe Ste. 3000,
    Chicago, Illinois 60606. Columbia Wagner Asset Management,
    L.P. has sole investment discretion and voting power with
    respect to all the shares. The shares are owned by various
    individual and institutional investors for which Columbia Wagner
    Asset Management, L.P. serves as an investment advisor. Columbia
    Wagner Asset Management, L.P. provided this information directly
    to us on February 27, 2004.                                                                                                                                              
|    
|(14) | Ms. Maria Alarcóns shares are held in
    a living trust with Ms. Alarcón as sole beneficiary. The
    address of Ms. Alarcón is c/o Melvyn B. Frumkes &
    Associates PA, 100 North Biscayne Boulevard,
    Suite 1607, Miami, Florida 33132. This information was
    provided directly to us on March 12, 2004.                                                                                                                                                                                                                                                                                                                                                          

58



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##### Table of Contents



Equity Compensation Plan Information

The following table sets forth, as of
December 31, 2003, 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 31, 2003


|                                                           |                                               |                  |  |                  |           |                      |   |       |  |  |  |           |           | 
|---------------------------------------------------------- | --------------------------------------------- | ---------------- |  | ---------------- | --------- | -------------------- | - | ----- |  |  |  | --------- | --------- | 
|                                                           |                                               | (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
    Stockholders     |                                               |                  |  |                  |           |                      |   |       |  |  |  |          
|                                                           | 1999 Stock Option Plan                        |                  |  | 1,901,252        |           |                      | $ | 12.33 |  |  |  | 1,064,448 |          
|                                                           | Non-Employee Director Stock Option Plan       |                  |  | 200,000          |           |                      |   | 11.18 |  |  |  | 100,000   |          
|Equity Compensation Plans Not Approved by
    Stockholders |                                               |                  |  |                  |           |                      |   |       |  |  |  |          
|                                                           | Options issued to a former director(a)        |                  |  | 250,000          |           |                      |   | 20.00 |  |  |  |          |          
|                                                           | Warrants related to acquisition of KXOL-FM(b) |                  |  | 2,700,000        |           |                      |   | 9.77  |  |  |  |          |          
|                                                           |                                               |                  |  |                  |           |                      |   |       |  |  |  |          
|                                                           |                                               | Total            |  |                  | 5,051,252 |                      |   |       |  |  |  |           | 1,164,448 | 
|                                                           |                                               |                  |  |                  |           |                      |   |       |  |  |  |          






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | We granted Arnold Sheiffer, who served as a
    director of SBS from 1996 until August 1999, stock options to
    purchase 250,000 shares of Class A common stock upon
    the closing of our initial public offering, for his past
    services as a director.                                                                                                                                                                                                                                                                                                                                                                                          
|   
|(b) |  | On October 30, 2003, we completed the
    acquisition of the assets of radio station KXOL-FM serving the
    Los Angeles, California market, from ICFG for a cash purchase
    price of $250.0 million plus the issuance to ICFG on
    February 8, 2002 of a warrant exercisable for an aggregate
    of 2,000,000 shares of our Class A common stock. Pursuant
    to the amended asset purchase agreement and amended time
    brokerage agreements relating to the acquisition of KXOL-FM, we
    issued to ICFG seven additional warrants, each exercisable for
    100,000 shares (an aggregate of 700,000 shares) of our
    Class A common stock.






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

In 1992, Messrs. Alarcón, Sr., our
Chairman Emeritus and a member of our Board of Directors, and
Alarcón, Jr., our Chairman of the Board of Directors,
Chief Executive Officer and President, 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., one of our subsidiaries, entered into a
20-year net lease with Messrs. Alarcón, Sr. and
Alarcón, Jr. for the Coral Gables building which
provides for a base monthly rent of $9,000 with no increases.
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 and current real estate
rental amounts, we believe that the lease for the current studio
is at or below the market rate.

Our corporate headquarters are located in 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 $45,000 for
this office space. We believe that the monthly rent we pay is at
the market rate.

Jason L. Shrinsky, one of our directors, is a
partner of Kaye Scholer LLP, which has regularly represented us
as our legal counsel for more than 19 years and continues
to do so. Mr. Shrinskys son, Jeffrey Shrinsky, is
employed by us as Director of National Sales for SBS. His base
salary is $200,000 plus additional incentive bonuses. During
fiscal year 2003, Jeffrey Shrinsky was paid $26,271.

59



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##### Table of Contents



Gabriel Grimalt, the former brother-in-law of
Raúl Alarcón, Jr., was employed by SBS as an
operations manager. During fiscal year 2003, he was paid $91,137
in compensation and $9,615 as severance pay. As part of his
compensation, we also paid the leasing costs for an automobile
in the amount of $3,625. As of May 2, 2003,
Mr. Grimalt is no longer employed by SBS.






|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal Accountant Fees and
    Services

The following table sets forth the aggregate fees
billed to us for professional audit services rendered by KPMG
LLP for the audit of our annual consolidated financial
statements for the fiscal years ended December 31, 2003 and
December 29, 2002, the review of the consolidated financial
statements included in our Quarterly Reports on Form 10-Q
for such periods and fees billed for other services rendered by
KPMG LLP for such periods.

|                      |                         |                   |     |                   |  |   |     |       | 
|--------------------- | ----------------------- | ----------------- | --- | ----------------- |  | - | --- | ----- | 
|                      |                         | Fiscal Year Ended |     | Fiscal Year Ended
|                      |                         | December 31, 2003 |     | December 29, 2002
|                      |                         |                   |     |                  
|                      |                         |                  
|                      |                         | ($ in thousands) 
|Annual audit fees(1)  |                         | $                 | 473 |                   |  | $ | 477 |      
|Audit related fees(2) |                         |                   | 15  |                   |  |   | 19  |      
|Tax fees(3)           |                         |                   | 279 |                   |  |   | 511 | (4)  
|All other fees(5)     |                         |                   |    |                   |  |   | 127 |      
|                      |                         |                   |     |                   |  |   |     |      
|                      | Total fees for services |                   | $   | 767               |  |   | $   | 1,134 | 
|                      |                         |                   |     |                   |  |   |     |      



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Annual audit fees are the fees billed for
    professional services rendered or estimated to be rendered for
    the audit of the consolidated financial statements and reviews
    of quarterly financial statements. This category also includes
    fees for two statutory audits required for Puerto Rico tax
    returns, debt compliance letters, comfort letter, review of
    registration statements and other documents filed with the SEC,
    and accounting consultations and research work necessary to
    comply with generally accepted auditing standards.                                                                                                                                                                                        
|   
|(2) | Audit related fees are the fees billed for the
    financial statement audit of SBSs employee benefit plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(3) | Tax fees are the fees billed for professional
    services rendered for tax compliance, tax advice, and tax
    planning for our U.S. and Puerto Rico entities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(4) | Tax fees for the fiscal year ended
    December 29, 2002 include professional services rendered in
    connection with our income tax returns for the fiscal year ended
    September 30, 2001, for the transitional period ended
    December 30, 2001 and for other services rendered during
    the fiscal year ended December 29, 2002. Due to the change
    in fiscal year, the transitional period ended December 30,
    2001 for tax purposes was considered a separate taxable period
    that required an additional set of tax returns. Therefore,
    additional costs were incurred for the transitional
    periods income tax returns and related tax consultation,
    which are included in the fiscal year ended December 29,
    2002 tax fees.
|   
|(5) | All other fees are the fees for services other
    than those in the above three categories. This category includes
    certain advisory services such as internal audit assistance
    permitted by SEC rules during the applicable periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

Before our accountants are engaged by us to
render audit or non-audit services, the engagement is approved
by our Audit Committee.

60



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##### Table of Contents






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                                                                                                                                                                                                                                
|
| | Consolidated Balance Sheets as of
    December 29, 2002 and December 31, 2003                                                                                                                                                                               
|
| | Consolidated Statements of Operations for the
    fiscal year ended September 30, 2001, the three-month
    transitional period ended December 30, 2001, and for the
    fiscal years ended December 29, 2002 and December 31,
    2003                     
|
| | Consolidated Statements of Changes in
    Stockholders Equity for the fiscal year ended
    September 30, 2001, the three-month transitional period
    ended December 30, 2001, and for the fiscal years ended
    December 29, 2002 and December 31, 2003
|
| | Consolidated Statements of Cash Flows for the
    fiscal year ended September 30, 2001, the three-month
    transitional period ended December 30, 2001, and for the
    fiscal years ended December 29, 2002 and December 31,
    2003                     
|
| | 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

61



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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 29, 2002 and December 31, 2003                                                                                                                                                                                |  |      | F-3  | 
|                                                                                                                                                                                                                                                            
|Consolidated Statements of Operations for the
    fiscal year ended September 30, 2001, the three-month
    transitional period ended December 30, 2001, and for the
    fiscal years ended December 29, 2002 and December 31,
    2003                      |  |      | F-4  | 
|                                                                                                                                                                                                                                                            
|Consolidated Statements of Changes in
    Stockholders Equity for the fiscal year ended
    September 30, 2001, the three-month transitional period
    ended December 30, 2001, and for the fiscal years ended
    December 29, 2002 and December 31, 2003 |  |      | F-5  | 
|                                                                                                                                                                                                                                                            
|Consolidated Statements of Cash Flows for the
    fiscal year ended September 30, 2001, the three-month
    transitional period ended December 30, 2001, and for the
    fiscal years ended December 29, 2002 and December 31,
    2003                      |  |      | F-6  | 
|                                                                                                                                                                                                                                                            
|Notes to Consolidated Financial Statements                                                                                                                                                                                                                   |  |      | F-8  | 
|                                                                                                                                                                                                                                                            
|Financial Statement Schedule 
    Valuation and Qualifying Accounts                                                                                                                                                                                         |  |      | F-41 | 

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 29, 2002
and December 31, 2003 and the results of their operations
and their cash flows for the fiscal year ended
September 30, 2001, the three-month transitional period
ended December 30, 2001, and for the fiscal years ended
December 29, 2002 and December 31, 2003, 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
and, as discussed in note 18 to the consolidated financial
statements, effective January 1, 2003 the Company adopted
Statement of Financial Accounting Standards No. 145,
Recission of FASB Statements No. 4, 44 and 64,
Amendment to FASB Statement No. 13 and Technical
Corrections.



| |             
| | ------------
| | /s/ KPMG LLP

Miami, Florida

February 27, 2004


F-2



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 29, 2002 and December 31,
2003


(In thousands, except share data)


|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |          |        |         | 
|--------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------- | ------------ | ------ | ------- | ------- | -------- | ------ | ------- | 
|                                                                                                                      |                                                                                                                                                                                                              | December 29,                                                                                                                               |                            | December 31,
|                                                                                                                      |                                                                                                                                                                                                              | 2002                                                                                                                                       |                            | 2003        
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            |                            |             
|Assets                                                                                                                |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|Current assets:                                                                                                       |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|                                                                                                                      | Cash and cash equivalents                                                                                                                                                                                    |                                                                                                                                            | $                          | 71,430       |        |         |         | 45,609   |       
|                                                                                                                      | Receivables:                                                                                                                                                                                                 |                                                                                                                                            |                            |              |        |         |         |          |       
|                                                                                                                      |                                                                                                                                                                                                              | Trade                                                                                                                                      |                            |              | 29,558 |         |         |          | 28,325 |        
|                                                                                                                      |                                                                                                                                                                                                              | Barter                                                                                                                                     |                            |              |       |         |         |          | 140    |        
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            | 29,558                     |              |        |         | 28,465  |         
|                                                                                                                      |                                                                                                                                                                                                              | Less allowance for doubtful accounts                                                                                                       |                            |              | 4,042  |         |         |          | 2,898  |        
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            | Net receivables            |              |        | 25,516  |         |          |        | 25,567  | 
|                                                                                                                      | Other current assets                                                                                                                                                                                         |                                                                                                                                            |                            | 2,252        |        |         |         | 3,482    |       
|                                                                                                                      | Assets held for sale                                                                                                                                                                                         |                                                                                                                                            |                            | 26,622       |        |         |         | 25,906   |       
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            | Total current assets       |              |        | 125,820 |         |          |        | 100,564 | 
|Property and equipment, net                                                                                           |                                                                                                                                                                                                              |                                                                                                                                            | 23,618                     |              |        |         | 24,558  |         
|Intangible assets, net                                                                                                |                                                                                                                                                                                                              |                                                                                                                                            | 476,369                    |              |        |         | 705,251 |         
|Deferred financing costs, net of accumulated
    amortization of $3,376 in 2002 and $4,767 in 2003                    |                                                                                                                                                                                                              |                                                                                                                                            | 8,759                      |              |        |         | 11,461  |         
|Other assets                                                                                                          |                                                                                                                                                                                                              |                                                                                                                                            | 201                        |              |        |         | 448     |         
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|                                                                                                                      |                                                                                                                                                                                                              | $                                                                                                                                          | 634,767                    |              |        |         | 842,282 |         
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|                                                                                                                     
|Liabilities and Stockholders
    Equity                                                                              |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|Current liabilities:                                                                                                  |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|                                                                                                                      | Current portion of the senior credit facilities
    term loan due 2009                                                                                                                                       |                                                                                                                                            | $                          |             |        |         |         | 1,250    |       
|                                                                                                                      | Current portion of other long-term debt                                                                                                                                                                      |                                                                                                                                            |                            | 208          |        |         |         | 227      |       
|                                                                                                                      | Accounts payable and accrued expenses                                                                                                                                                                        |                                                                                                                                            |                            | 15,691       |        |         |         | 18,822   |       
|                                                                                                                      | Accrued interest                                                                                                                                                                                             |                                                                                                                                            |                            | 5,226        |        |         |         | 6,370    |       
|                                                                                                                      | Deposit on the sale of station                                                                                                                                                                               |                                                                                                                                            |                            |             |        |         |         | 1,500    |       
|                                                                                                                      | Deferred commitment fee                                                                                                                                                                                      |                                                                                                                                            |                            | 581          |        |         |         |         |       
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            | Total current liabilities  |              |        | 21,706  |         |          |        | 28,169  | 
|Senior credit facilities term loan due 2009                                                                           |                                                                                                                                                                                                              |                                                                                                                                            |                           |              |        |         | 123,750 |         
|9 5/8% senior subordinated notes, due
    2009, net of unamortized discount of $10,846 in 2002 and $9,754
    in 2003 |                                                                                                                                                                                                              |                                                                                                                                            | 324,154                    |              |        |         | 325,246 |         
|Other long-term debt, less current portion                                                                            |                                                                                                                                                                                                              |                                                                                                                                            | 3,948                      |              |        |         | 3,721   |         
|Deferred income taxes                                                                                                 |                                                                                                                                                                                                              |                                                                                                                                            | 57,534                     |              |        |         | 68,354  |         
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            | Total liabilities          |              |        | 407,342 |         |          |        | 549,240 | 
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|Commitments and contingencies (notes 13, 14,
    and 17)                                                              |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|Cumulative exchangeable redeemable preferred
    stock:                                                               |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|                                                                                                                      | 10 3/4% Series A cumulative
    exchangeable redeemable preferred stock, $0.01 par value.
    Authorized 280,000 shares, issued and outstanding
    75,000 shares in 2003 liquidation value $1,000 per share |                                                                                                                                            |                            |             |        |         |         | 76,366   |       
|Stockholders equity:                                                                                                 |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|                                                                                                                      | Class A common stock, 0.0001 par value.
    Authorized 100,000,000 shares; issued and outstanding
    37,076,655 shares in 2002, issued and outstanding
    37,087,355 shares in 2003                        |                                                                                                                                            |                            | 3            |        |         |         | 3        |       
|                                                                                                                      |                                                                                                                                                                                                              | Class B common stock, 0.0001 par value.
    Authorized 50,000,000 shares; issued and outstanding
    27,605,150 shares in 2002 and in 2003 |                            |              | 3      |         |         |          | 3      |        
|                                                                                                                      | Additional paid-in capital                                                                                                                                                                                   |                                                                                                                                            |                            | 444,594      |        |         |         | 443,961  |       
|                                                                                                                      | Accumulated deficit                                                                                                                                                                                          |                                                                                                                                            |                            | (217,175     | )      |         |         | (227,291 | )     
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            | Total stockholders equity |              |        | 227,425 |         |          |        | 216,676 | 
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         
|                                                                                                                      |                                                                                                                                                                                                              | $                                                                                                                                          | 634,767                    |              |        |         | 842,282 |         
|                                                                                                                      |                                                                                                                                                                                                              |                                                                                                                                            |                            |              |        |         |         |         

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 year ended September 30, 2001, the
three-month transitional period ended


December 30, 2001, and the fiscal years
ended December 29, 2002 and December 31,
2003


|                                                                                                       |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |              |        |   |         |         |         |   |         |         |         |  
|------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | ------------ | ------- | ------------ | ------ | ------------ | ------ | - | ------- | ------- | ------- | - | ------- | ------- | ------- | -
|                                                                                                       |                                                                                                                            | Fiscal year                                                                                                                                              |         | Three-month  |         | Fiscal year  |        | Fiscal year 
|                                                                                                       |                                                                                                                            | September 30,                                                                                                                                            |         | December 30, |         | December 29, |        | December 31,
|                                                                                                       |                                                                                                                            | 2001                                                                                                                                                     |         | 2001         |         | 2002         |        | 2003        
|                                                                                                       |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |             
|                                                                                                       |                                                                                                                            |                                                                                                                                                         
|                                                                                                       |                                                                                                                            | (In thousands, except per share data)                                                                                                                   
|Gross revenue                                                                                          |                                                                                                                            | $                                                                                                                                                        | 142,781 |              |         |              | 36,106 |              |        |   | 154,472 |         |         |   | 155,717 |        
|Less agency commissions                                                                                |                                                                                                                            |                                                                                                                                                          | 17,314  |              |         |              | 4,337  |              |        |   | 18,784  |         |         |   | 20,451  |        
|                                                                                                       |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                                                                                       |                                                                                                                            | Net revenue                                                                                                                                              |         |              | 125,467 |              |        |              | 31,769 |   |         |         | 135,688 |   |         |         | 135,266 |  
|                                                                                                       |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|Operating expenses:                                                                                    |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                                                                                       | Engineering                                                                                                                |                                                                                                                                                          |         | 3,017        |         |              |        | 641          |        |   |         | 3,551   |         |   |         | 3,806   |        
|                                                                                                       | Programming                                                                                                                |                                                                                                                                                          |         | 17,479       |         |              |        | 3,998        |        |   |         | 19,909  |         |   |         | 19,523  |        
|                                                                                                       | Stock-based programming                                                                                                    |                                                                                                                                                          |         |             |         |              |        |             |        |   |         |        |         |   |         | 2,943   |        
|                                                                                                       | Selling                                                                                                                    |                                                                                                                                                          |         | 40,137       |         |              |        | 11,082       |        |   |         | 40,681  |         |   |         | 35,868  |        
|                                                                                                       | General and administrative                                                                                                 |                                                                                                                                                          |         | 15,644       |         |              |        | 3,726        |        |   |         | 13,638  |         |   |         | 14,177  |        
|                                                                                                       | Corporate expenses                                                                                                         |                                                                                                                                                          |         | 10,515       |         |              |        | 2,387        |        |   |         | 13,546  |         |   |         | 17,853  |        
|                                                                                                       | Depreciation and amortization                                                                                              |                                                                                                                                                          |         | 16,750       |         |              |        | 4,275        |        |   |         | 2,871   |         |   |         | 2,901   |        
|                                                                                                       |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                                                                                       |                                                                                                                            | Total operating expenses                                                                                                                                 |         |              | 103,542 |              |        |              | 26,109 |   |         |         | 94,196  |   |         |         | 97,071  |  
|                                                                                                       |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                                                                                       |                                                                                                                            | Operating income from continuing operations                                                                                                              |         |              | 21,925  |              |        |              | 5,660  |   |         |         | 41,492  |   |         |         | 38,195  |  
|Other (expense) income:                                                                                |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                                                                                       | Interest expense                                                                                                           |                                                                                                                                                          |         | (32,845      | )       |              |        | (8,473       | )      |   |         | (34,836 | )       |   |         | (37,123 | )      
|                                                                                                       | Interest income                                                                                                            |                                                                                                                                                          |         | 2,202        |         |              |        | 261          |        |   |         | 690     |         |   |         | 501     |        
|                                                                                                       | Other, net                                                                                                                 |                                                                                                                                                          |         | 497          |         |              |        | 650          |        |   |         | (720    | )       |   |         | 1,125   |        
|                                                                                                       | Loss on extinguishment of debt                                                                                             |                                                                                                                                                          |         | (3,063       | )       |              |        |             |        |   |         |        |         |   |         |        |        
|                                                                                                       |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                                                                                       |                                                                                                                            | (Loss) income from continuing operations before
    income taxes, discontinued operations, and cumulative effect of
    a change in accounting principle |         |              | (11,284 | )            |        |              | (1,902 | ) |         |         | 6,626   |   |         |         | 2,698   |  
|Income tax (benefit) expense                                                                           |                                                                                                                            |                                                                                                                                                          | (4,307  | )            |         |              | (686   | )            |        |   | 53,094  |         |         |   | 11,280  |        
|                                                                                                       |                                                                                                                            | Loss from continuing operations before
    discontinued operations and cumulative effect of a change in
    accounting principle                         |         |              | (6,977  | )            |        |              | (1,216 | ) |         |         | (46,468 | ) |         |         | (8,582  | )
|                                                                                                       |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|(Loss) income on discontinued operations, net of
    tax                                               |                                                                                                                            |                                                                                                                                                          | (611    | )            |         |              | (11    | )            |        |   | 1,910   |         |         |   | (168    | )      
|Cumulative effect of a change in accounting
    principle for intangible assets, net of tax of $30,192 |                                                                                                                            |                                                                                                                                                          |        |              |         |              |       |              |        |   | (45,288 | )       |         |   |        |        
|                                                                                                       |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                                                                                       |                                                                                                                            | Net loss                                                                                                                                                 |         | $            | (7,588  | )            |        |              | (1,227 | ) |         |         | (89,846 | ) |         |         | (8,750  | )
|                                                                                                       |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|Dividends on preferred stock                                                                           |                                                                                                                            |                                                                                                                                                          |        |              |         |              |       |              |        |   |        |         |         |   | (1,366  | )      
|                                                                                                       |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|Net loss applicable to common stockholders                                                             |                                                                                                                            | $                                                                                                                                                        | (7,588  | )            |         |              | (1,227 | )            |        |   | (89,846 | )       |         |   | (10,116 | )      
|                                                                                                       |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|Basic and diluted loss per common share:                                                               |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                                                                                       | Net loss per common share before discontinued
    operations and cumulative effect of a change in accounting
    principle |                                                                                                                                                          | $       | (0.11        | )       |              |        | (0.02        | )      |   |         | (0.72   | )       |   |         | (0.16   | )      
|                                                                                                       | Net (loss) income per common share for
    discontinued operations                                                         |                                                                                                                                                          | $       | (0.01        | )       |              |        |             |        |   |         | 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                                                                                                                                |         | $            | (0.12   | )            |        |              | (0.02  | ) |         |         | (1.39   | ) |         |         | (0.16   | )
|                                                                                                       |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |              |        |   |         |         |         |   |         |        
|                                                                                                       | Weighted average common shares outstanding (basic
    and diluted)                                                         |                                                                                                                                                          |         | 64,096       |         |              |        | 64,658       |        |   |         | 64,670  |         |   |         | 64,684  |        
|                                                                                                       |                                                                                                                            |                                                                                                                                                          |         |              |         |              |        |              |        |   |         |         |         |   |         |        

See accompanying notes to consolidated financial
statements.

F-4



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS EQUITY

Fiscal year ended September 30, 2001, the
three-month transitional period ended


December 30, 2001, and the fiscal years
ended December 29, 2002 and December 31,
2003


|                              |                                                                                     |                                   |            |              |  |            |   |       |  |         |            |             |   |               |   |   |  |  |         |        |   |  |          |         |   |  |         |         |  
|----------------------------- | ----------------------------------------------------------------------------------- | --------------------------------- | ---------- | ------------ |  | ---------- | - | ----- |  | ------- | ---------- | ----------- | - | ------------- | - | - |  |  | ------- | ------ | - |  | -------- | ------- | - |  | ------- | ------- | -
|                              |                                                                                     |                                   |            |              |  |            |   |       |  |        
|                              |                                                                                     | Class A                           |            | Class B      |  |            |   |       |  |        
|                              |                                                                                     | common stock                      |            | common stock |  |            |   |       |  |        
|                              |                                                                                     |                                   |            |              |  | Additional |   |       |  | Total  
|                              |                                                                                     | Number of                         |            | Par          |  | Number of  |   | Par   |  | paid-in |            | Accumulated |   | stockholders
|                              |                                                                                     | shares                            |            | value        |  | shares     |   | value |  | capital |            | deficit     |   | equity       
|                              |                                                                                     |                                   |            |              |  |            |   |       |  |         |            |             |   |              
|                              |                                                                                     |                                   |            |              |  |            |   |      
|                              |                                                                                     | (In thousands, except share data) |            |              |  |            |   |      
|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 |        
|                              | Issuance of warrants as a payment towards the
    rights to operate a radio station |                                   |            |             |  |            |   |      |  |         |            |            |   |               |   |  |  |  |         | 2,943  |   |  |          |        |   |  |         | 2,943   |  
|                              | Issuance of Class A common stock from
    options exercised                         |                                   |            | 10,700       |  |            |   |      |  |         |            |            |   |               |   |  |  |  |         | 70     |   |  |          |        |   |  |         | 70      |  
|                              | Issuance cost of the preferred stock                                                |                                   |            |             |  |            |   |      |  |         |            |            |   |               |   |  |  |  |         | (3,646 | ) |  |          |        |   |  |         | (3,646  | )
|                              | Preferred stock dividend                                                            |                                   |            |             |  |            |   |      |  |         |            |            |   |               |   |  |  |  |         |       |   |  |          | (1,366  | ) |  |         | (1,366  | )
|                              | Net loss                                                                            |                                   |            |             |  |            |   |      |  |         |            |            |   |               |   |  |  |  |         |       |   |  |          | (8,750  | ) |  |         | (8,750  | )
|                              |                                                                                     |                                   |            |              |  |            |   |       |  |         |            |             |   |               |   |   |  |  |         |        |   |  |          |         |   |  |         |        
|Balance at December 31, 2003  |                                                                                     |                                   | 37,087,355 |              |  | $          | 3 |       |  |         | 27,605,150 |             |   | $             | 3 |   |  |  | 443,961 |        |   |  | (227,291 | )       |   |  | 216,676 |        
|                              |                                                                                     |                                   |            |              |  |            |   |       |  |         |            |             |   |               |   |   |  |  |         |        |   |  |          |         |   |  |         |        

See accompanying notes to consolidated financial
statements.

F-5



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH
FLOWS

Fiscal year ended September 30, 2001, the
three-month transitional period ended


December 30, 2001, and the fiscal years
ended December 29, 2002 and December 31,
2003


|                                      |                                                                                               |                                                                                 |                                                                  |                                                          |        |              |         |              |       |        |        |         |        |        |        |          |        |        |          |  
|------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ---------------------------------------------------------------- | -------------------------------------------------------- | ------ | ------------ | ------- | ------------ | ----- | ------ | ------ | ------- | ------ | ------ | ------ | -------- | ------ | ------ | -------- | -
|                                      |                                                                                               | Fiscal year                                                                     |                                                                  | Three-month                                              |        | Fiscal year  |         | Fiscal year 
|                                      |                                                                                               | September 30,                                                                   |                                                                  | December 30,                                             |        | December 29, |         | December 31,
|                                      |                                                                                               | 2001                                                                            |                                                                  | 2001                                                     |        | 2002         |         | 2003        
|                                      |                                                                                               |                                                                                 |                                                                  |                                                          |        |              |         |             
|                                      |                                                                                               |                                                                                
|                                      |                                                                                               | (In thousands)                                                                 
|Cash flows from operating activities: |                                                                                               |                                                                                 |                                                                  |                                                          |        |              |         |              |       |        |        |         |        |        |        |         
|                                      | Net loss                                                                                      |                                                                                 | $                                                                | (7,588                                                   | )      |              |         | (1,227       | )     |        |        | (89,846 | )      |        |        | (8,750   | )     
|                                      |                                                                                               |                                                                                 |                                                                  |                                                          |        |              |         |              |       |        |        |         |        |        |        |         
|                                      | Adjustments to reconcile net loss to net cash
    provided by (used in) operating activities: |                                                                                 |                                                                  |                                                          |        |              |         |              |       |        |        |         |        |        |        |          |       
|                                      |                                                                                               | Loss (income) from discontinued operations, net
    of tax                      |                                                                  |                                                          | 611    |              |         |              | 11    |        |        |         | (1,910 | )      |        |          | 165    |       
|                                      |                                                                                               | Stock-based programming expense                                                 |                                                                  |                                                          |       |              |         |              |      |        |        |         |       |        |        |          | 2,943  |       
|                                      |                                                                                               | Loss on extinguishment of debt                                                  |                                                                  |                                                          | 3,063  |              |         |              |      |        |        |         |       |        |        |          |       |       
|                                      |                                                                                               | Cumulative effect of a change in accounting
    principle for intangible assets |                                                                  |                                                          |       |              |         |              |      |        |        |         | 75,480 |        |        |          |       |       
|                                      |                                                                                               | Loss (gain) on disposal of fixed assets                                         |                                                                  |                                                          | 19     |              |         |              |      |        |        |         | 21     |        |        |          | (166   | )     
|                                      |                                                                                               | Depreciation and amortization                                                   |                                                                  |                                                          | 16,750 |              |         |              | 4,275 |        |        |         | 2,871  |        |        |          | 2,901  |       
|                                      |                                                                                               | Net barter (income) expense                                                     |                                                                  |                                                          | 397    |              |         |              | 303   |        |        |         | (854   | )      |        |          | (495   | )     
|                                      |                                                                                               | Provision for (reduction of) trade doubtful
    accounts                        |                                                                  |                                                          | 1,714  |              |         |              | 572   |        |        |         | (40    | )      |        |          | 345    |       
|                                      |                                                                                               | Amortization of debt discount                                                   |                                                                  |                                                          | 290    |              |         |              | 225   |        |        |         | 970    |        |        |          | 1,092  |       
|                                      |                                                                                               | Amortization of deferred financing costs                                        |                                                                  |                                                          | 1,370  |              |         |              | 321   |        |        |         | 1,281  |        |        |          | 1,391  |       
|                                      |                                                                                               | (Decrease) increase in deferred income taxes                                    |                                                                  |                                                          | (5,428 | )            |         |              | (968  | )      |        |         | 21,927 |        |        |          | 10,820 |       
|                                      |                                                                                               | Decrease in deferred commitment fee                                             |                                                                  |                                                          | (702   | )            |         |              | (175  | )      |        |         | (701   | )      |        |          | (581   | )     
|                                      |                                                                                               | Changes in operating assets and liabilities:                                    |                                                                  |                                                          |        |              |         |              |       |        |        |         |        |        |        |          |        |       
|                                      |                                                                                               |                                                                                 | Decrease (increase) in trade receivables                         |                                                          |        | 416          |         |              |       | (911   | )      |         |        | (2,626 | )      |          |        | (237   | )       
|                                      |                                                                                               |                                                                                 | Decrease (increase) in other current assets                      |                                                          |        | 767          |         |              |       | (187   | )      |         |        | (556   | )      |          |        | (1,222 | )       
|                                      |                                                                                               |                                                                                 | Decrease (increase) in other assets                              |                                                          |        | (55          | )       |              |       | (7     | )      |         |        | 55     |        |          |        | (247   | )       
|                                      |                                                                                               |                                                                                 | Increase (decrease) in accounts payable and
    accrued expenses |                                                          |        | 616          |         |              |       | (1,863 | )      |         |        | 2,514  |        |          |        | 3,533  |         
|                                      |                                                                                               |                                                                                 | Increase (decrease) in accrued interest                          |                                                          |        | 2,585        |         |              |       | (8,302 | )      |         |        | (90    | )      |          |        | 1,144  |         
|                                      |                                                                                               |                                                                                 |                                                                  |                                                          |        |              |         |              |       |        |        |         |        |        |        |         
|                                      |                                                                                               |                                                                                 |                                                                  | Net cash provided by (used in) continuing
    operations |        |              | 14,825  |              |       |        | (7,933 | )       |        |        | 8,496  |          |        |        | 12,636   |  
|                                      |                                                                                               |                                                                                 |                                                                  | Net cash provided by discontinued operations             |        |              | 2,198   |              |       |        | 556    |         |        |        | 2,170  |          |        |        | 590      |  
|                                      |                                                                                               |                                                                                 |                                                                  |                                                          |        |              |         |              |       |        |        |         |        |        |        |         
|                                      |                                                                                               |                                                                                 |                                                                  | Net cash provided by (used in) operating
    activities  |        |              | 17,023  |              |       |        | (7,377 | )       |        |        | 10,666 |          |        |        | 13,226   |  
|                                      |                                                                                               |                                                                                 |                                                                  |                                                          |        |              |         |              |       |        |        |         |        |        |        |         
|Cash flows from investing activities: |                                                                                               |                                                                                 |                                                                  |                                                          |        |              |         |              |       |        |        |         |        |        |        |         
|                                      | Proceeds from sale of radio stations, net of
    disposal costs of $446 in 2002               |                                                                                 |                                                                  |                                                         |        |              |         |             |       |        |        | 34,534  |        |        |        |         |       
|                                      | Deposit on sale of station                                                                    |                                                                                 |                                                                  |                                                         |        |              |         |             |       |        |        |        |        |        |        | 1,500    |       
|                                      | Proceeds from sale of assets                                                                  |                                                                                 |                                                                  |                                                         |        |              |         |             |       |        |        |        |        |        |        | 655      |       
|                                      | Additions to property and equipment                                                           |                                                                                 |                                                                  | (3,768                                                   | )      |              |         | (796         | )     |        |        | (3,828  | )      |        |        | (3,216   | )     
|                                      | Additions to property and equipment of
    discontinued operations                            |                                                                                 |                                                                  | (1,827                                                   | )      |              |         | (34          | )     |        |        | (166    | )      |        |        | (149     | )     
|                                      | Acquisition of radio stations                                                                 |                                                                                 |                                                                  | (3,413                                                   | )      |              |         |             |       |        |        |        |        |        |        | (229,960 | )     
|                                      | Advances on purchase price of radio stations                                                  |                                                                                 |                                                                  | (25,473                                                  | )      |              |         | (7           | )     |        |        | (21,275 | )      |        |        |         |       
|                                      | Advances on purchase price of radio stations of
    discontinued operations                   |                                                                                 |                                                                  | (700                                                     | )      |              |         |             |       |        |        |        |        |        |        |         |       
|                                      |                                                                                               |                                                                                 |                                                                  |                                                          |        |              |         |              |       |        |        |         |        |        |        |         
|                                      |                                                                                               |                                                                                 |                                                                  | Net cash (used in) provided by investing
    activities  |        |              | (35,181 | )            |       |        | (837   | )       |        |        | 9,265  |          |        |        | (231,170 | )
|                                      |                                                                                               |                                                                                 |                                                                  |                                                          |        |              |         |              |       |        |        |         |        |        |        |         

F-6



---



##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH
FLOWS  (Continued)

Fiscal year ended September 30, 2001, the
three-month transitional period ended


December 30, 2001, and the fiscal years
ended December 29, 2002 and December 31,
2003


|                                               |                                                                                                                           |                                                                                                                |                                                          |              |        |              |        |              |   |        |        |        |       |        |        |         |       |         |  
|---------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | ------------ | ------ | ------------ | ------ | ------------ | - | ------ | ------ | ------ | ----- | ------ | ------ | ------- | ----- | ------- | -
|                                               |                                                                                                                           | Fiscal year                                                                                                    |                                                          | Three-month  |        | Fiscal year  |        | Fiscal year 
|                                               |                                                                                                                           | September 30,                                                                                                  |                                                          | December 30, |        | December 29, |        | December 31,
|                                               |                                                                                                                           | 2001                                                                                                           |                                                          | 2001         |        | 2002         |        | 2003        
|                                               |                                                                                                                           |                                                                                                                |                                                          |              |        |              |        |             
|                                               |                                                                                                                           |                                                                                                               
|                                               |                                                                                                                           | (In thousands)                                                                                                
|Cash flows from financing activities:          |                                                                                                                           |                                                                                                                |                                                          |              |        |              |        |              |   |        |        |        |       |        |        |        
|                                               | Proceeds from Series A cumulative
    exchangeable redeemable preferred stock, net of issuance cost of
    $3,646 in 2003 |                                                                                                                | $                                                        |             |        |              |        |             |   |        |        |       |       |        |        | 71,354  |      
|                                               | Proceeds from Class A stock options exercised                                                                             |                                                                                                                |                                                          |             |        |              |        |             |   |        |        | 150    |       |        |        | 70      |      
|                                               | Repayments of other long-term debt                                                                                        |                                                                                                                |                                                          | (171         | )      |              |        | (46          | ) |        |        | (291   | )     |        |        | (208    | )    
|                                               | Proceeds from senior notes, net of financing
    costs of $3,630 in 2001                                                  |                                                                                                                |                                                          | 84,039       |        |              |        |             |   |        |        |       |       |        |        |        |      
|                                               | Proceeds from senior credit facilities                                                                                    |                                                                                                                |                                                          |             |        |              |        |             |   |        |        |       |       |        |        | 125,000 |      
|                                               | Repayment of senior credit facilities                                                                                     |                                                                                                                |                                                          | (65,000      | )      |              |        |             |   |        |        |       |       |        |        |        |      
|                                               | Increase in deferred financing costs                                                                                      |                                                                                                                |                                                          | (369         | )      |              |        |             |   |        |        |       |       |        |        | (4,093  | )    
|                                               |                                                                                                                           |                                                                                                                |                                                          |              |        |              |        |              |   |        |        |        |       |        |        |        
|                                               |                                                                                                                           |                                                                                                                | Net cash provided by (used in) financing
    activities  |              |        | 18,499       |        |              |   | (46    | )      |        |       | (141   | )      |         |       | 192,123 |  
|                                               |                                                                                                                           |                                                                                                                |                                                          |              |        |              |        |              |   |        |        |        |       |        |        |        
|                                               |                                                                                                                           |                                                                                                                | Net increase (decrease) in cash and cash
    equivalents |              |        | 341          |        |              |   | (8,260 | )      |        |       | 19,790 |        |         |       | (25,821 | )
|Cash and cash equivalents at beginning of year |                                                                                                                           |                                                                                                                | 59,559                                                   |              |        |              | 59,900 |              |   |        | 51,640 |        |       |        | 71,430 |        
|                                               |                                                                                                                           |                                                                                                                |                                                          |              |        |              |        |              |   |        |        |        |       |        |        |        
|Cash and cash equivalents at end of year       |                                                                                                                           | $                                                                                                              | 59,900                                                   |              |        |              | 51,640 |              |   |        | 71,430 |        |       |        | 45,609 |        
|                                               |                                                                                                                           |                                                                                                                |                                                          |              |        |              |        |              |   |        |        |        |       |        |        |        
|Supplemental cash flows information:           |                                                                                                                           |                                                                                                                |                                                          |              |        |              |        |              |   |        |        |        |       |        |        |        
|                                               | Interest paid during the year                                                                                             |                                                                                                                | $                                                        | 29,754       |        |              |        | 16,230       |   |        |        | 32,663 |       |        |        | 32,857  |      
|                                               |                                                                                                                           |                                                                                                                |                                                          |              |        |              |        |              |   |        |        |        |       |        |        |        
|                                               | Net income taxes paid (received) during the year                                                                          |                                                                                                                | $                                                        | (137         | )      |              |        | 283          |   |        |        | (13    | )     |        |        | 191     |      
|                                               |                                                                                                                           |                                                                                                                |                                                          |              |        |              |        |              |   |        |        |        |       |        |        |        
|                                               | Noncash investing and financing activities:                                                                               |                                                                                                                |                                                          |              |        |              |        |              |   |        |        |        |       |        |        |         |      
|                                               |                                                                                                                           | Issuance of warrants towards the acquisition of a
    radio station                                            |                                                          | $            |       |              |        |              |  |        |        |        | 8,922 |        |        |         |      |        
|                                               |                                                                                                                           |                                                                                                                |                                                          |              |        |              |        |              |   |        |        |        |       |        |        |        
|                                               |                                                                                                                           | Accrual of preferred stock as payment of
    preferred stock dividend                                          |                                                          | $            |       |              |        |              |  |        |        |        |      |        |        |         | 1,366 |        
|                                               |                                                                                                                           |                                                                                                                |                                                          |              |        |              |        |              |   |        |        |        |       |        |        |        
|                                               |                                                                                                                           | Discount on senior notes                                                                                       |                                                          | $            | 12,331 |              |        |              |  |        |        |        |      |        |        |         |      |        
|                                               |                                                                                                                           |                                                                                                                |                                                          |              |        |              |        |              |   |        |        |        |       |        |        |        
|                                               |                                                                                                                           | Deferred tax liability recorded for difference in
    assigned values and tax basis of radio stations acquired |                                                          | $            | 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 SYSTEM, INC.

AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



|    |                                    
|--- | -----------------------------------
|(1) | Organization and Nature of Business

Spanish Broadcasting System, Inc., a
Delaware corporation, and subsidiaries (the Company), after
giving effect to the proposed sale of our San Francisco
station, will own and operate 24 radio stations serving
five of the top-ten U.S. Hispanic markets, which include
Los Angeles, New York, Puerto Rico, Miami and Chicago. As
part of its operating business, the Company operates
LaMusica.com, a bilingual Spanish-English Internet website
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.

Additionally, effective December 30, 2002,
the Company changed its year-end from a broadcast calendar
52-53 week fiscal year ending on the last Sunday in
December to a calendar year ending on December 31. Pursuant
to Securities and Exchange Commission Financial Reporting
Release No. 35, such change is not deemed a change in
fiscal year for financial reporting purposes and the Company is
not required to file a separate transition report or to report
separate financial information for the two-day period of
December 30 and 31, 2002. Financial results for
December 30 and 31, 2002 are included in the
Companys financial results for the fiscal year ended
December 31, 2003.

Prior to December 29, 2002, the Company
reported 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 30, 2001 and December 29, 2002, the Company
reported 53 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 meeting certain conditions such as persuasive
evidence that an agreement exists, a fixed and

F-8



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 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 Financial Accounting
Standards Board (FASB) issued Statement of Financial
Accounting Standards (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. Prior to
adoption of SFAS No. 144, the Company tested for
impairment of its long-lived assets under
SFAS No. 121, Accounting for Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of.
See note 4 for discontinued operations.



|    |                  
|--- | -----------------
|(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, Goodwill and Other Intangible
Assets. The Company at least annually assesses the
recoverability of the carrying amount of intangible assets,
including goodwill, in accordance with SFAS No. 142.
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 Cumulative Effect
of Accounting Change. Prior to adopting SFAS No. 142,
the Company amortized its intangible assets over a 40-year
period and tested for recoverability under
SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed
Of.



|    |                         
|--- | ------------------------
|(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, June 2001 and
October 2003. During fiscal year ended September 30,

F-9



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

2001, the Company recognized a loss due to
write-offs of deferred financing costs related to debt financing
obtained in July 2000 (see notes 8, 9 and 18).

Deferred financing costs are being amortized
using the effective interest method.



|    |                    
|--- | -------------------
|(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
$15.3 million, $12.9 million, and $6.3 million
for the fiscal years ended September 30, 2001,
December 29, 2002, and December 31, 2003,
respectively. Barter revenue amounted to $4.1 million for
the three-month transitional period ended December 30,
2001. Barter expense amounted to $15.7 million,
$12.0 million, and $5.8 million for the fiscal years
ended September 30, 2001, December 29, 2002, and
December 31, 2003, 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 $0.8 million and $0.7 million at
December 29, 2002 and December 31, 2003, 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 number 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.

Below are gross revenues and selling expenses
related to this two-year ISP agreement which concluded in August
2002 and are included in continuing operations.

|                                     |  |                  |        |                 |  |   |        | 
|------------------------------------ |  | ---------------- | ------ | --------------- |  | - | ------ | 
|                                     |  |                 
|                                     |  | Impact on       
|                                     |  |                 
|                                     |  | Gross revenue    |        | Selling expense
|                                     |  |                  |        |                
|                                     |  |                 
|                                     |  | ($ in thousands)
|Fiscal year ended September 30, 2001 |  | $                | 10,409 |                 |  | $ | 10,234 | 
|                                     |  |                  |        |                 |  |   |        | 
|Three months ended December 30, 2001 |  |                  | 2,437  |                 |  |   | 2,433  | 
|                                     |  |                  |        |                 |  |   |        | 
|Fiscal year ended December 29, 2002  |  |                  | 6,351  |                 |  |   | 6,366  | 
|                                     |  |                  |        |                 |  |   |        | 

(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 for its domestic operations. The Company is also
subject to foreign taxes on its Puerto Rico operations. 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

F-10



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.

(j) Advertising Costs

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

(k) Deferred Commitment
Fee

On December 30, 1996, the Company entered
into an agreement with a national advertising agency (the
Agency) whereby the Agency would serve as the Companys
exclusive sales representative for all national sales for a
seven-year period. Pursuant to this agreement, the Agency agreed
to pay a commitment fee of $5.1 million to the Company, of
which $1.0 million was paid upon execution of the agreement
and $4.1 million was to be remitted on a monthly basis over
a three-year period, through January 2000. During fiscal year
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. The deferred commitment
fee was fully amortized at December 31, 2003 since this
agreement expired.

(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, Miami and Los Angeles markets account for more
than half of net revenue for the fiscal years ended
September 30, 2001, December 29, 2002, and
December 31, 2003 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 applicable to common stockholders 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 30, 2001,
December 29, 2002, and December 31, 2003 amounted to
44,327, 198,157, and 154,723, respectively. Common stock
equivalents for the three-month transitional period ended
December 30, 2001

F-11



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 year ended
September 30, 2001, the three-month transitional period
ended December 30, 2001, and for the fiscal years ended
December 29, 2002 and December 31, 2003 (in thousands,
except per share data):

|                                                                                                                                 |                                                                                                                             |                                                                                                                                                                     |                                            |                           |        |              |        |              |        |        |         |       |         |         |        |        |        |         |       |  
|-------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------- | ------ | ------------ | ------ | ------------ | ------ | ------ | ------- | ----- | ------- | ------- | ------ | ------ | ------ | ------- | ----- | -
|                                                                                                                                 |                                                                                                                             | Fiscal year                                                                                                                                                         |                                            | Three-month               |        | Fiscal year  |        | Fiscal year 
|                                                                                                                                 |                                                                                                                             | September 30,                                                                                                                                                       |                                            | December 30,              |        | December 29, |        | December 31,
|                                                                                                                                 |                                                                                                                             | 2001                                                                                                                                                                |                                            | 2001                      |        | 2002         |        | 2003        
|                                                                                                                                 |                                                                                                                             |                                                                                                                                                                     |                                            |                           |        |              |        |             
|Loss from continuing operations before
    discontinued operations and cumulative effect of a change in
    accounting principle |                                                                                                                             | $                                                                                                                                                                   | (6,977                                     | )                         |        |              | (1,216 | )            |        |        | (46,468 | )     |         |         | (8,582 | )     
|                                                                                                                                 | Less dividends on preferred stock                                                                                           |                                                                                                                                                                     |                                            |                          |        |              |        |             |        |        |         |      |         |         |        | (1,366 | )     
|                                                                                                                                 |                                                                                                                             |                                                                                                                                                                     |                                            |                           |        |              |        |              |        |        |         |       |         |         |        |       
|                                                                                                                                 |                                                                                                                             | Loss applicable to common stockholders from
    continuing operations before discontinued operations, and
    cumulative effect of a change in accounting principle |                                            |                           | (6,977 | )            |        |              | (1,216 | )      |         |       | (46,468 | )       |        |        | (9,948 | )      
|                                                                                                                                 |                                                                                                                             |                                                                                                                                                                     |                                            |                           |        |              |        |              |        |        |         |       |         |         |        |       
|Discontinued operations                                                                                                          |                                                                                                                             |                                                                                                                                                                     | (611                                       | )                         |        |              | (11    | )            |        |        | 1,910   |       |         |         | (168   | )     
|Cumulative effect of a change in accounting
    principle, net of tax                                                            |                                                                                                                             |                                                                                                                                                                     |                                           |                           |        |              |       |              |        |        | (45,288 | )     |         |         |       |       
|                                                                                                                                 |                                                                                                                             |                                                                                                                                                                     |                                            |                           |        |              |        |              |        |        |         |       |         |         |        |       
|                                                                                                                                 |                                                                                                                             |                                                                                                                                                                     | Net loss applicable to common stockholders |                           | $      | (7,588       | )      |              |        | (1,227 | )       |       |         | (89,846 | )      |        |        | (10,116 | )    
|                                                                                                                                 |                                                                                                                             |                                                                                                                                                                     |                                            |                           |        |              |        |              |        |        |         |       |         |         |        |       
|Weighted average common shares outstanding (basic
    and diluted)                                                               |                                                                                                                             |                                                                                                                                                                     | 64,096                                     |                           |        |              | 64,658 |              |        |        | 64,670  |       |         |         | 64,684 |       
|Basic and diluted loss per common share:                                                                                         |                                                                                                                             |                                                                                                                                                                     |                                            |                           |        |              |        |              |        |        |         |       |         |         |        |       
|                                                                                                                                 | Net loss per common share before discontinued
    operations, and cumulative effect of a change in accounting
    principle |                                                                                                                                                                     | $                                          | (0.11                     | )      |              |        | (0.02        | )      |        |         | (0.72 | )       |         |        | (0.16  | )     
|                                                                                                                                 | Net (loss) income per common share for
    discontinued operations                                                          |                                                                                                                                                                     |                                            | (0.01                     | )      |              |        |             |        |        |         | 0.03  |         |         |        |       |       
|                                                                                                                                 | Net loss per common share for cumulative effect
    of a change in accounting principle                                     |                                                                                                                                                                     |                                            |                          |        |              |        |             |        |        |         | (0.70 | )       |         |        |       |       
|                                                                                                                                 |                                                                                                                             |                                                                                                                                                                     |                                            |                           |        |              |        |              |        |        |         |       |         |         |        |       
|                                                                                                                                 |                                                                                                                             |                                                                                                                                                                     |                                            | Net loss per common share |        | $            | (0.12  | )            |        |        | (0.02   | )     |         |         | (1.39  | )      |        |         | (0.16 | )
|                                                                                                                                 |                                                                                                                             |                                                                                                                                                                     |                                            |                           |        |              |        |              |        |        |         |       |         |         |        |       

(o) Fair Value of Financial
Instruments

SFAS No. 107, Disclosures About
Fair Value of Financial Instruments, requires disclosure
of the 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, including our
senior credit facility, approximate their carrying amounts as
the interest rates approximate the Companys current
borrowing rate for similar debt instruments of comparable
maturity, or have variable interest rates.

The Company also has $75.0 million in
10 3/4% Series A Cumulative Exchangeable Redeemable
Preferred Stock (Series A Preferred Stock) outstanding with
a carrying value of $76.4 million at December 31,
2003. The Series A Preferred Stock is not publicly traded
and similar instruments are not available for comparison. The
Company is therefore unable to estimate the fair value of the
Series A Preferred Stock. See note 8(b).

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

F-12



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

|                                 |  |                   |       |                   |  |          |       |            |  |   |       |  |  |  |       | 
|-------------------------------- |  | ----------------- | ----- | ----------------- |  | -------- | ----- | ---------- |  | - | ----- |  |  |  | ----- | 
|                                 |  |                   |       |                  
|                                 |  | December 29, 2002 |       | December 31, 2003
|                                 |  |                   |       |                  
|                                 |  | Gross             |       |                   |  | Gross    |       |           
|                                 |  | carrying          |       |                   |  | carrying |       |           
|                                 |  | amount            |       | Fair value        |  | amount   |       | Fair value
|                                 |  |                   |       |                   |  |          |       |           
|9 5/8% senior subordinated notes |  | $                 | 335.0 |                   |  |          | 346.7 |            |  | $ | 335.0 |  |  |  | 357.6 | 

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) 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 and 18.

(q) Reclassification

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

(r) 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.

(s) National Representation
Agreement

The Company entered into a new eight-year
national sales representation agreement with the Agency in
December 2003. Pursuant to this new agreement, the Agency agreed
to pay a commitment fee of $0.6 million to the Company, of
which none was paid upon execution of the agreement and
$0.1 million will be remitted on a monthly basis over the
next six months, through June 2004. The Company will pay the
Agency a commission percentage determined based on achieving
certain national sales volume.

(3) Acquisitions

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

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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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

On October 30, 2003, the Company completed
the acquisition of the assets of radio station KXOL-FM (formerly
KFSG-FM), serving the Los Angeles, California market, from the
International Church of the FourSquare Gospel (ICFG) for a total
cost of $264.0 million comprised of a cash purchase price of

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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

$250.0 million, closing costs and
commissions of $5.1 million, plus the issuance to ICFG on
February 8, 2002 of 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. 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. On November 2, 2000,
pursuant to the asset purchase agreement between the Company and
ICFG for the acquisition of the assets of KXOL-FM, the Company
made a non-refundable deposit of $5.0 million which was
credited towards the $250.0 million cash purchase price at
closing. Pursuant to amendments to the asset purchase agreement,
prior to the closing, the Company made additional non-refundable
deposits toward the cash purchase price in the aggregate amount
of $55.0 million which were also credited towards the
$250.0 million cash purchase price at closing. Cash on hand
was used to make all the non-refundable deposits toward the cash
purchase price. The remaining $190.0 million of the cash
purchase price was funded from (1) the proceeds of our
private offering of $75.0 million of 10 3/4%
Series A cumulative exchangeable redeemable preferred stock
which closed on October 30, 2003 and (2) borrowings
under a senior secured credit facility, consisting of a
$125.0 million term loan facility which the Company entered
into on October 30, 2003 (see notes 8 and 9).

In addition to the FCC license of KXOL-FM, the
assets acquired by the Company from ICFG include certain radio
transmission equipment and a fifty-year lease at a rent of
$1.00 per year for the KXOL-FM tower site, all of which
were used by ICFG for radio broadcasting and which the Company
also intends to use for radio broadcasting. The consideration
for the acquisition of the assets of KXOL-FM was determined
through arms-length negotiations between the Company and
ICFG. The Company determined the present value of the lease to
be approximately $1.2 million which was allocated to the
purchase price and is being amortized over 40-years. The Company
allocated the total cost of the purchase price of KXOL-FM as
follows: $262.7 million for FCC licenses, $0.1 million
for equipment, and $1.2 million for other intangible assets.

From April 30, 2001 until the closing of the
acquisition, the Company broadcast its programming over KXOL-FM
pursuant to a time brokerage agreement with ICFG. ICFG broadcast
its programming over our radio stations KZAB-FM and KZBA-FM
pursuant to a time brokerage agreement with the Company from
April 30, 2001 until February 28, 2003. Pursuant to
the amended asset purchase agreement and amended time brokerage
agreements, the Company was required to issue additional
warrants to ICFG from the date that ICFG ceased to broadcast its
programming over KZAB-FM and KZBA-FM until the closing of the
acquisition of KXOL-FM. On March 31, 2003, April 30,
2003, May 31, 2003, June 30, 2003, July 31, 2003,
August 31, 2003 and September 30, 2003, the Company
granted ICFG a warrant exercisable for 100,000 shares (an
aggregate of 700,000 shares) of our Class A common
stock at an exercise price of $6.14, $7.67, $7.55, $8.08, $8.17,
$7.74 and $8.49 per share, respectively. The warrant issued
on September 30, 2003 was the final warrant required under
the amended time brokerage agreement due to the closing of the
acquisition of KXOL-FM. The Company assigned these warrants an
aggregate fair market value of approximately $2.9 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 each warrant was
recorded as a stock-based programming expense on the respective
date of grant. These warrants are exercisable for a period of
thirty-six months after the date of issuance after which they
will expire if not exercised.

The Companys consolidated results of
operations include the results of KXOL-FM, KZAB-FM, KZBA-FM,
KPTI-FM (formerly KXJO-FM), KSAH-AM and KTCY-FM from the
respective dates of acquisition or time brokerage agreement.
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.

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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In addition, the Companys consolidated
results of operations include KXEB-AM which was under a time
brokerage asset through July 2001.

(4) Discontinued 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 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.

On September 18, 2003, the Company entered
into an asset purchase agreement with Border Media Partners, LLC
to sell the assets of radio stations KLEY-FM and KSAH-AM,
serving the San Antonio, Texas market, for a cash purchase
price of $24.4 million. In connection with this agreement,
Border Media Partners, LLC made a $1.2 million deposit on
the purchase price which was held in escrow. On January 30,
2004, the Company completed the sale of the assets of radio
stations KLEY-FM and KSAH-AM serving the San Antonio, Texas
market, consisting of $11.2 million of intangible assets,
net, and $0.6 million of property and equipment.

On October 2, 2003, the Company entered into
an asset purchase agreement with 3 Point Media 
San Francisco, LLC (Three Point Media) to sell the assets
of radio station KPTI-FM, serving the San Francisco,
California market, for a cash purchase price of
$30.0 million. In connection with this agreement, Three
Point Media made a $1.5 million deposit on the purchase price.
Three Point Media did not close under the asset purchase
agreement, and, on February 3, 2004, the Company terminated
the agreement. The Company is currently considering other offers
to purchase the assets of radio station KPTI-FM. The Company
intends to sell the assets of radio station KPTI-FM; however,
there cannot be any assurance that the sale will be completed.

The Company determined that the pending sales
and/or sales of these stations met the criteria in accordance
with SFAS No. 144 to classify their respective assets
as held for sale and their respective operations as discontinued
operations. The results of operations in the current year and
prior year periods of these stations have been classified as
discontinued operations in the consolidated statements of
operations. On December 31, 2003, the Company had assets
held for sale consisting of $25.0 million of intangible
assets, net, and $0.9 million of property and equipment for
the radio stations KLEY-FM and KSAH-AM serving the
San Antonio, Texas market and KPTI-FM, serving the
San Francisco, California market.

F-16



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(5) Intangible Assets

Intangible assets consist of the following at
December 29, 2002 and December 31, 2003 (in thousands):

|                                        |  |      |         |      |  |              |         |   |  |  |            | 
|--------------------------------------- |  | ---- | ------- | ---- |  | ------------ | ------- | - |  |  | ---------- | 
|                                        |  |      |         |      |  | Estimated   
|                                        |  | 2002 |         | 2003 |  | useful lives
|                                        |  |      |         |      |  |             
|FCC licenses                            |  | $    | 389,248 |      |  |              | 673,338 |   |  |  | Indefinite | 
|Goodwill                                |  |      | 30,744  |      |  |              | 30,744  |   |  |  | Indefinite | 
|Other intangible assets                 |  |      |        |      |  |              | 1,174   |   |  |  | 40 years   | 
|Deposits on acquisitions of FCC license |  |      | 56,377  |      |  |              |        |   |  |  |            | 
|                                        |  |      |         |      |  |              |         |   |  |  |            | 
|                                        |  | $    | 476,369 |      |  |              | 705,256 |   |  |  |            | 
|Less accumulated amortization           |  |      |        |      |  |              | (5      | ) |  |  |            | 
|                                        |  |      |         |      |  |              |         |   |  |  |            | 
|                                        |  | $    | 476,369 |      |  |              | 705,251 |   |  |  |            | 
|                                        |  |      |         |      |  |              |         |   |  |  |            | 

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.

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.

(6) Property and Equipment, Net

Property and equipment, net consists of the
following at December 29, 2002 and December 31, 2003
(in thousands):

|                                               |  |      |         |      |  |              |         |   |  |  |            | 
|---------------------------------------------- |  | ---- | ------- | ---- |  | ------------ | ------- | - |  |  | ---------- | 
|                                               |  |      |         |      |  | Estimated   
|                                               |  | 2002 |         | 2003 |  | useful lives
|                                               |  |      |         |      |  |             
|Land                                           |  | $    | 2,587   |      |  |              | 2,487   |   |  |  |           | 
|Building and building improvements             |  |      | 19,935  |      |  |              | 19,808  |   |  |  | 20 years   | 
|Tower and antenna systems                      |  |      | 4,152   |      |  |              | 4,487   |   |  |  | 7-15 years | 
|Studio and technical equipment                 |  |      | 7,727   |      |  |              | 8,822   |   |  |  | 10 years   | 
|Furniture and fixtures                         |  |      | 2,831   |      |  |              | 3,000   |   |  |  | 3-10 years | 
|Transmitter equipment                          |  |      | 4,295   |      |  |              | 5,977   |   |  |  | 7-10 years | 
|Leasehold improvements                         |  |      | 2,479   |      |  |              | 2,516   |   |  |  | 5-13 years | 
|Computer equipment and software                |  |      | 3,436   |      |  |              | 3,854   |   |  |  | 5 years    | 
|Other                                          |  |      | 1,264   |      |  |              | 1,462   |   |  |  | 5 years    | 
|                                               |  |      |         |      |  |              |         |   |  |  |            | 
|                                               |  |      | 48,706  |      |  |              | 52,413  |   |  |  |            | 
|Less accumulated depreciation and amortization |  |      | (25,088 | )    |  |              | (27,855 | ) |  |  |            | 
|                                               |  |      |         |      |  |              |         |   |  |  |            | 
|                                               |  | $    | 23,618  |      |  |              | 24,558  |   |  |  |            | 
|                                               |  |      |         |      |  |              |         |   |  |  |            | 

F-17



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(7) Accounts Payable and Accrued
Expenses

Accounts payable and accrued expenses at
December 29, 2002 and December 31, 2003 consist of the
following (in thousands):

|                                     |  |      |        |      |  |  |        | 
|------------------------------------ |  | ---- | ------ | ---- |  |  | ------ | 
|                                     |  | 2002 |        | 2003
|                                     |  |      |        |     
|Accounts payable  trade             |  | $    | 598    |      |  |  | 1,335  | 
|Accounts payable  barter            |  |      | 828    |      |  |  | 690    | 
|Accrued compensation and commissions |  |      | 7,344  |      |  |  | 7,048  | 
|Accrued professional fees            |  |      | 1,551  |      |  |  | 3,592  | 
|Accrued music license fees           |  |      | 841    |      |  |  | 673    | 
|Accrued legal contingencies          |  |      | 1,290  |      |  |  | 3,026  | 
|Accrued taxes                        |  |      | 778    |      |  |  | 842    | 
|Other accrued expenses               |  |      | 2,461  |      |  |  | 1,616  | 
|                                     |  |      |        |      |  |  |        | 
|                                     |  | $    | 15,691 |      |  |  | 18,822 | 
|                                     |  |      |        |      |  |  |        | 

(8) Senior Subordinated Notes and
Preferred Stock

(a) 9 5/8% Senior
Subordinated Notes

On November 2, 1999, concurrently with the
Companys initial public offering of Class A common
stock, 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, as amended (the Securities Act). 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.

(b) 10 3/4% Series A
Cumulative Exchangeable Redeemable Preferred Stock

On October 30, 2003, the Company partially
financed the purchase of radio stations KXOL-FM with proceeds
from the sale through a private placement of 75,000 shares
of the Companys 10 3/4% Series A Cumulative
Exchangeable Redeemable Preferred Stock (Series A Preferred
Stock), par value $.01 per share, with a liquidation
preference of $1,000 per share, without a specified
maturity date. The offering was made

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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

within the United States only to qualified
institutional buyers in reliance on Rule 144A under the
Securities Act and outside the United States only to
non-U.S. persons in reliance on Regulation S under the
Securities Act. The gross proceeds from the issuance of the
Series A Preferred Stock amounted to $75.0 million. In
connection with this transaction, the Company charged issuance
costs of $3.6 million related to the Series A
Preferred Stock to additional paid-in capital.

The Company has the option on or after
October 15, 2008, to redeem all or some of the
Series A Preferred Stock for cash at varying redemption
prices (expressed as a percentage of liquidation preference)
depending on year of the optional redemption, plus accumulated
and unpaid dividends to the redemption date. In addition, before
October 16, 2006 at the Companys option but subject
to certain conditions, the Company may redeem up to 40% of the
aggregate liquidation preference of the Series A Preferred
Stock, whether initially issued or issued in lieu of cash
dividends or interest, with the proceeds of certain equity
offerings. On October 15, 2013, each holder of
Series A Preferred Stock will have the right to require the
Company to redeem all or a portion of such holders
Series A Preferred Stock at a purchase price of 100% of the
liquidation preference thereof plus accumulated and unpaid
dividends. As of December 31, 2003, the Company has
increased the carrying amount of the Series A Preferred
Stock by approximately $1.4 million for accrued dividends,
which was calculated using the interest method.

On February 18, 2004, the Company commenced
an offer to exchange registered shares of our 10 3/4%
Series B cumulative exchangeable redeemable preferred
stock, par value $.01 per share and liquidation preference
of $1,000 per share (Series B Preferred Stock)
for any and all shares of our outstanding Series A
Preferred Stock. The exchange offer will expire at
5:00 p.m., eastern standard time, on March 26, 2004,
unless the Company extends the offer. The Companys
registration statement on Form S-4, which registered the
Series B Preferred Stock and the
10 3/4% subordinated exchange notes due 2013 that may
be issued by us in exchange for the Series B Preferred
Stock under certain circumstances, was declared effective by the
Securities and Exchange Commission on February 13, 2004.

(9) Senior Credit Facilities

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 $3.1 million. This
loss relates to the write-off of the related unamortized
deferred financing costs, and is included in other (expense)
income in the accompanying consolidated statements of operations
as part of (loss) income from continuing operations (see
note 18).

On October 30, 2003, the Company entered
into a $135.0 million senior secured credit facility (the
Senior Credit Facility). The Senior Credit Facility included a
five-year $10.0 million revolving credit line and
$125.0 million of term loans. The Company partially
financed the purchase of radio stations KXOL-FM with the gross
proceeds of the $125.0 million term loan. The
$10.0 million revolving credit facility was undrawn at
December 31, 2003. In connection with this transaction, the
Company capitalized financing costs of $4.1 million related
to the Senior Credit Facility.

The Senior Credit Facility contains a number of
financial covenants which, among other things, require us to
maintain specified financial ratios and impose certain
limitations on us with respect to indebtedness, capital
expenditures, transactions with affiliates and consolidation and
mergers, among other things.

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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Senior credit facilities consists of the
following at December 31, 2003 (in thousands):

|                                                                                                                                                                                                                                       |  |      |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | -
|                                                                                                                                                                                                                                       |  | 2003
|                                                                                                                                                                                                                                       |  |     
|Revolving credit facility of $10.0 million,
    due 2008                                                                                                                                                                               |  |      |        |  
|Term loan payable due in quarterly principal
    repayment of .25% of the original outstanding amount of
    $125.0 million including variable interest based on LIBOR
    plus 325 basis points, with outstanding balance due in 2009 |  |      | 125,000 |  
|                                                                                                                                                                                                                                       |  |      |         |  
|                                                                                                                                                                                                                                       |  |      | 125,000 |  
|Less current portion                                                                                                                                                                                                                   |  |      | (1,250  | )
|                                                                                                                                                                                                                                       |  |      |         |  
|                                                                                                                                                                                                                                       |  |      | 123,750 |  
|                                                                                                                                                                                                                                       |  |      |         |  

The scheduled maturities of the senior credit
facilities is as follows at December 31, 2003 (in
thousands):

|                                 |            |   |         |         | 
|-------------------------------- | ---------- | - | ------- | ------- | 
|Fiscal year ending December 31,: |            |   |         |        
|                                 | 2004       |   | $       | 1,250   | 
|                                 | 2005       |   |         | 1,250   | 
|                                 | 2006       |   |         | 1,250   | 
|                                 | 2007       |   |         | 1,250   | 
|                                 | 2008       |   |         | 1,250   | 
|                                 | Thereafter |   |         | 118,750 | 
|                                 |            |   |         |        
|                                 |            | $ | 125,000 |        
|                                 |            |   |         |        

Per our credit agreement governing our Senior
Credit Facility, a portion ($25.0 million) of the proceeds
received from the sale of KPTI-FM (see note 4), when and if
completed, must be offered to the noteholders to pay down the
Senior Credit Facility term loan.



|     |                     
|---- | --------------------
|(10) | Other Long-Term Debt

Other long-term debt consists of the following at
December 29, 2002 and December 31, 2003 (in thousands):

|                                                                                                                                                                            |  |      |       |      |  |  |       |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- |  |  | ----- | -
|                                                                                                                                                                            |  | 2002 |       | 2003
|                                                                                                                                                                            |  |      |       |     
|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 |  | $    | 765   |      |  |  | 703   |  
|Note payable due in monthly installments of
    $39,196, including interest at 9.75%, commencing August 2000,
    with balance due on June 2005                             |  |      | 3,391 |      |  |  | 3,245 |  
|                                                                                                                                                                            |  |      |       |      |  |  |       |  
|                                                                                                                                                                            |  |      | 4,156 |      |  |  | 3,948 |  
|Less current portion                                                                                                                                                        |  |      | (208  | )    |  |  | (227  | )
|                                                                                                                                                                            |  |      |       |      |  |  |       |  
|                                                                                                                                                                            |  | $    | 3,948 |      |  |  | 3,721 |  
|                                                                                                                                                                            |  |      |       |      |  |  |       |  

F-20



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The scheduled maturities of other long-term debt
are as follows at December 31, 2003 (in thousands):

|                                 |            |   |       |       | 
|-------------------------------- | ---------- | - | ----- | ----- | 
|Fiscal year ending December 31,: |            |   |       |      
|                                 | 2004       |   | $     | 227   | 
|                                 | 2005       |   |       | 3,154 | 
|                                 | 2006       |   |       | 75    | 
|                                 | 2007       |   |       | 79    | 
|                                 | 2008       |   |       | 85    | 
|                                 | Thereafter |   |       | 328   | 
|                                 |            |   |       |      
|                                 |            | $ | 3,948 |      
|                                 |            |   |       |      



|     |                           
|---- | --------------------------
|(11) | Related-Party Transactions

In December 1, 2000, the Company entered
into a lease for its corporate headquarters with a Florida
limited partnership for which the general partner is a company
wholly owned by the Companys Chief Executive Officer (CEO)
and Chairman of the board of directors (Chairman). The Company
is leasing the office space under a 10-year operating lease with
rental payments of approximately $0.6 million per year,
with the right to renew for two consecutive five-year terms.

The Company leased an apartment from its CEO and
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.

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.

During fiscal years September 30, 2001,
December 29, 2002, and December 31, 2003, 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 $4.2 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 for legal services. The Company
had outstanding payables to the law firm for approximately
$0.3 million and $2.3 million, respectively, as of
December 29, 2002 and December 31, 2003.



|     |                     
|---- | --------------------
|(12) | Stockholders Equity

(a) Common Stock

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

F-21



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(b) Warrants

In connection with the purchase of KXOL-FM, as
discussed in note 3, the Company has issued warrants to
purchase an aggregate of 2,700,000 shares of the
Companys Class A common shares. The following table
summarizes information about these warrants:

|                      |  |                     |           |                |  |                    |       |  |  |  |                    | 
|--------------------- |  | ------------------- | --------- | -------------- |  | ------------------ | ----- |  |  |  | ------------------ | 
|                      |  | Number of Class A   |           |                |  |                   
|                      |  | common shares       |           | Per share      |  | Warrant Expiration
|Warrant Date of issue |  | underlying warrants |           | Exercise price |  | date              
|                      |  |                     |           |                |  |                   
|February 8, 2002      |  |                     | 2,000,000 |                |  | $                  | 10.50 |  |  |  | February 7, 2005   | 
|March 31, 2003        |  |                     | 100,000   |                |  | $                  | 6.14  |  |  |  | March 31, 2006     | 
|April 30, 2003        |  |                     | 100,000   |                |  | $                  | 7.67  |  |  |  | April 30, 2006     | 
|May 31, 2003          |  |                     | 100,000   |                |  | $                  | 7.55  |  |  |  | May 31, 2006       | 
|June 30, 2003         |  |                     | 100,000   |                |  | $                  | 8.08  |  |  |  | June 30, 2006      | 
|July 31, 2003         |  |                     | 100,000   |                |  | $                  | 8.17  |  |  |  | July 31, 2006      | 
|August 31, 2003       |  |                     | 100,000   |                |  | $                  | 7.74  |  |  |  | August 31, 2006    | 
|September 30, 2003    |  |                     | 100,000   |                |  | $                  | 8.49  |  |  |  | September 30, 2006 | 
|                      |  |                     |           |                |  |                    |       |  |  |  |                    | 
|                      |  |                     | 2,700,000 |                |  |                    |       |  |  |  |                    | 
|                      |  |                     |           |                |  |                    |       |  |  |  |                    | 



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

Upon the closing of our initial public offering
on November 2, 1999, the Company granted a stock option to
purchase 250,000 shares of Class A common stock to a former
director. These options vested immediately, and expire
10 years from the date of grant.

A summary of the status of the Companys
stock option, as of September 30, 2001, December 30,
2001, December 29, 2002, and December 31, 2003, and
changes during the fiscal year ended September 30, 2001,

F-22



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the three-month transitional period ended
December 30, 2001, and the fiscal years ended
December 29, 2002 and December 31, 2003, is presented
below (in thousands, except per share data):

|                                  |           |        |       |                |   |   |       |       | 
|--------------------------------- | --------- | ------ | ----- | -------------- | - | - | ----- | ----- | 
|                                  |           |        |       | Weighted      
|                                  |           |        |       | average       
|                                  |           | Shares |       | exercise price
|                                  |           |        |       |               
|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 |      
|                                  | Granted   |        |       | 335            |   |   |       | 8.85  | 
|                                  | Exercised |        |       | (11            | ) |   |       | 6.55  | 
|                                  | Forfeited |        |       | (138           | ) |   |       | 13.49 | 
|                                  |           |        |       |                |   |   |       |      
|Outstanding at December 31, 2003  |           |        | 2,351 |                |   | $ | 13.05 |      
|                                  |           |        |       |                |   |   |       |      

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

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

F-23



---



##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following table summarizes information about
stock options outstanding and exercisable at December 31,
2003 (in thousands, except per share data):

|           |  |             |       |              |  |          |     |             |  |          |       |  |  |  |       |  |  |   |       | 
|---------- |  | ----------- | ----- | ------------ |  | -------- | --- | ----------- |  | -------- | ----- |  |  |  | ----- |  |  | - | ----- | 
|           |  |             |       | Weighted     |  |          |     |             |  |         
|           |  |             |       | average      |  | Weighted |     |             |  | Weighted
|Range of   |  |             |       | remaining    |  | average  |     |             |  | average 
|exercise   |  | Number      |       | contractual  |  | exercise |     | Number      |  | exercise
|prices     |  | outstanding |       | life (years) |  | price    |     | exercisable |  | price   
|           |  |             |       |              |  |          |     |             |  |         
|$ 0 - 4.99 |  |             | 100   |              |  |          | 6.9 |             |  | $        | 4.81  |  |  |  | 80    |  |  | $ | 4.81  | 
|5 - 9.99   |  |             | 1,062 |              |  |          | 8.1 |             |  |          | 8.15  |  |  |  | 702   |  |  |   | 8.01  | 
|10 - 14.99 |  |             | 219   |              |  |          | 1.7 |             |  |          | 10.00 |  |  |  | 219   |  |  |   | 10.00 | 
|15 - 19.99 |  |             | 18    |              |  |          | 8.3 |             |  |          | 15.48 |  |  |  | 17    |  |  |   | 15.48 | 
|20 - 24.99 |  |             | 952   |              |  |          | 5.8 |             |  |          | 20.02 |  |  |  | 894   |  |  |   | 20.02 | 
|           |  |             |       |              |  |          |     |             |  |          |       |  |  |  |       |  |  |   |       | 
|           |  |             | 2,351 |              |  |          | 6.5 |             |  | $        | 13.05 |  |  |  | 1,912 |  |  | $ | 13.79 | 
|           |  |             |       |              |  |          |     |             |  |          |       |  |  |  |       |  |  |   |       | 

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 30, |         | December 30, |  | December 29, |         | December 31,
|                        |  | 2001          |         | 2001         |  | 2002         |         | 2003        
|                        |  |               |         |              |  |              |         |             
|Expected life           |  |               | 5 years |              |  |              | 7 years |              |  |  | 7 years |  |  |  | 7 years | 
|Dividends               |  |               | None    |              |  |              | None    |              |  |  | None    |  |  |  | None    | 
|Risk-free interest rate |  |               | 3.94%   |              |  |              | 4.93%   |              |  |  | 3.36%   |  |  |  | 3.77%   | 
|Expected volatility     |  |               | 88%     |              |  |              | 87%     |              |  |  | 88%     |  |  |  | 80%     | 

Had compensation expense for the Companys
plans been determined consistent with FASB 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   |         | Three-month  |   | Fiscal year  |        | Fiscal year 
|                                                        |                                                                                                                                    | September 30, |         | December 30, |   | December 29, |        | December 31,
|                                                        |                                                                                                                                    | 2001          |         | 2001         |   | 2002         |        | 2003        
|                                                        |                                                                                                                                    |               |         |              |   |              |        |             
|Net loss applicable to common stockholders:             |                                                                                                                                    |               |         |              |   |              |        |              |   |  |         |         |   |  |         |        
|                                                        | As reported                                                                                                                        |               | $       | (7,588       | ) |              |        | (1,227       | ) |  |         | (89,846 | ) |  |         | (10,116 | )
|                                                        | Deduct total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of tax |               |         | (3,152       | ) |              |        | (1,181       | ) |  |         | (5,384  | ) |  |         | (5,069  | )
|                                                        |                                                                                                                                    |               |         |              |   |              |        |              |   |  |         |         |   |  |         |        
|Proforma net loss applicable to common
    stockholders |                                                                                                                                    | $             | (10,740 | )            |   |              | (2,408 | )            |   |  | (95,230 | )       |   |  | (15,185 | )      
|                                                        |                                                                                                                                    |               |         |              |   |              |        |              |   |  |         |         |   |  |         |        
|Net loss per common share:                              |                                                                                                                                    |               |         |              |   |              |        |              |   |  |         |         |   |  |         |        
|                                                        | As reported                                                                                                                        |               | $       | (0.12        | ) |              |        | (0.02        | ) |  |         | (1.39   | ) |  |         | (0.16   | )
|                                                        |                                                                                                                                    |               |         |              |   |              |        |              |   |  |         |         |   |  |         |        
|                                                        | Pro forma                                                                                                                          |               | $       | (0.17        | ) |              |        | (0.04        | ) |  |         | (1.47   | ) |  |         | (0.23   | )
|                                                        |                                                                                                                                    |               |         |              |   |              |        |              |   |  |         |         |   |  |         |        

F-24



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, 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 29, 2002 and December 31, 2003 is as follows
(in thousands):

|                              |  |      |       |      |  |  |       |  
|----------------------------- |  | ---- | ----- | ---- |  |  | ----- | -
|                              |  | 2002 |       | 2003
|                              |  |      |       |     
|Building under capital lease  |  | $    | 1,230 |      |  |  | 1,230 |  
|Less accumulated depreciation |  |      | (651  | )    |  |  | (713  | )
|                              |  |      |       |      |  |  |       |  
|                              |  | $    | 579   |      |  |  | 517   |  
|                              |  |      |       |      |  |  |       |  

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 31, 2003, future minimum lease
payments under such leases are as follows (in thousands):

|                                 |            |                                         |      |           |       |  |  |       |        | 
|-------------------------------- | ---------- | --------------------------------------- | ---- | --------- | ----- |  |  | ----- | ------ | 
|                                 |            | Capital                                 |      | Operating
|                                 |            | lease                                   |      | lease    
|                                 |            |                                         |      |          
|Fiscal year ending December 31,: |            |                                         |      |           |       |  |  |      
|                                 | 2004       |                                         | $    | 149       |       |  |  | 2,576 |       
|                                 | 2005       |                                         |      | 149       |       |  |  | 2,517 |       
|                                 | 2006       |                                         |      | 149       |       |  |  | 2,017 |       
|                                 | 2007       |                                         |      | 149       |       |  |  | 1,662 |       
|                                 | 2008       |                                         |      | 149       |       |  |  | 1,566 |       
|                                 | Thereafter |                                         |      | 509       |       |  |  | 9,687 |       
|                                 |            |                                         |      |           |       |  |  |      
|                                 |            | Total minimum lease payments            |      | $         | 1,254 |  |  | $     | 20,025 | 
|                                 |            |                                         |      |           |       |  |  |      
|Less executory costs             |            |                                         | (345 | )         |       |  |  |      
|                                 |            |                                         |      |           |       |  |  |      
|                                 |            |                                         | 909  |           |       |  |  |      
|Less interest at 6.25%           |            |                                         | (206 | )         |       |  |  |      
|                                 |            |                                         |      |           |       |  |  |      
|                                 |            | Present value of minimum lease payments |      | $         | 703   |  |  |       |        | 
|                                 |            |                                         |      |           |       |  |  |      

Total rent expense for the fiscal years ended
September 30, 2001, December 29, 2002, and
December 31, 2003 amounted to $2.4 million,
$3.0 million, and $2.4 million, respectively. Total
rent expense for the three-month transitional period ended
December 30, 2001 amounted to $0.5 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 31, 2003 is as follows (in thousands):

|                                 |      |   |     |     | 
|-------------------------------- | ---- | - | --- | --- | 
|Fiscal year ending December 31,: |      |   |     |    
|                                 | 2004 |   | $   | 178 | 
|                                 | 2005 |   |     | 222 | 
|                                 | 2006 |   |     | 40  | 
|                                 |      |   |     |    
|                                 |      | $ | 440 |    
|                                 |      |   |     |    

F-25



---



##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(b) Employment
Agreements

At December 31, 2003, the Company is
committed to employment contracts for certain executives, on-air
talent, general managers, and others expiring through 2008.
Future payments under such contracts are as follows (in
thousands):

|                                 |      |   |        |       | 
|-------------------------------- | ---- | - | ------ | ----- | 
|Fiscal year ending December 31,: |      |   |        |      
|                                 | 2004 |   | $      | 9,722 | 
|                                 | 2005 |   |        | 5,389 | 
|                                 | 2006 |   |        | 1,480 | 
|                                 | 2007 |   |        | 428   | 
|                                 | 2008 |   |        | 392   | 
|                                 |      |   |        |      
|                                 |      | $ | 17,411 |      
|                                 |      |   |        |      

Included in the future payments schedule above is
a five-year employment agreement expiring in December 31,
2004, 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
operating income, 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 years ended
September 30, 2001, December 29, 2002, and
December 31, 2003 was $0.8 million, $0.8 million,
and $0.7 million, respectively, of which $0.4 million
is included in accounts payable and accrued expenses in the
accompanying consolidated balance sheet as of December 31,
2003.

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
lands which include the Transmitter Property and offering
compensation to the Landlord for the purchase of the

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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Transmitter Property. The Meadowlands Commission
also initially 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 assert that, in any
condemnation proceedings, the Meadowlands Commission should be
legally bound by its prior statements, foregoing landfill
related claims. 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 the Company as an additional defendant. The
condemnation proceeding, as well as the proposed redevelopment
of the site, are still pending. The Meadowlands Commission did
not claim reimbursement for landfill closure related costs.
While it reserved its rights to assert independently (even
subsequent to the conclusion of the condemnation proceedings),
claims concerning the remediation of any contamination unrelated
to the landfill operations, the Meadowlands Commissions
investigations thus far have disclosed no such contamination
and, to date, no claims have been made against the landlords or
us relating to the environmental condition of the Transmitter
Property. The Company believes that 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.

The radio broadcasting industry is subject to
extensive regulation by the FCC under the Communications Act of
1996. The Company is required to obtain licenses from the FCC to
operate its stations. Licenses are normally granted for a term
of eight years and are renewable. The Company has timely filed
license renewal applications for all of its radio stations,
however, certain licenses were not renewed prior to their
expiration dates. Based on having filed timely renewal
applications, the Company continues to operate the radio
stations operating under these licenses and does not anticipate
that they will not be renewed.

(15) Cumulative Effect of Accounting
Change

In July 2001, the 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 AM/FM 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

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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 $15.6 million and $4.0 million
for the fiscal year ended 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 30, 2001, the
three-month transitional period ended December 30, 2001,
and the fiscal years ended December 29, 2002 and
December 31, 2003, respectively, on a basis consistent with
the new accounting principle.

|                                                                                   |                                                                       |                            |        |              |        |              |        |              |        |   |         |        |        |  |         |   |         |  
|---------------------------------------------------------------------------------- | --------------------------------------------------------------------- | -------------------------- | ------ | ------------ | ------ | ------------ | ------ | ------------ | ------ | - | ------- | ------ | ------ |  | ------- | - | ------- | -
|                                                                                   |                                                                       | Fiscal year                |        | Three-month  |        | Fiscal year  |        | Fiscal year 
|                                                                                   |                                                                       | September 30,              |        | December 30, |        | December 29, |        | December 31,
|                                                                                   |                                                                       | 2001                       |        | 2001         |        | 2002         |        | 2003        
|                                                                                   |                                                                       |                            |        |              |        |              |        |             
|Reported net loss applicable to common
    stockholders                            |                                                                       | $                          | (7,588 | )            |        |              | (1,227 | )            |        |   | (89,846 | )      |        |  | (10,116 | )
|                                                                                   | 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)        |                            |        | 15,635       |        |              |        | 3,983        |        |   |         |       |        |  |         |  |        
|                                                                                   | Income tax expense adjustment(3)                                      |                            |        | (11,369      | )      |              |        | (5,702       | )      |   |         |       |        |  |         |  |        
|                                                                                   |                                                                       |                            |        |              |        |              |        |              |        |   |         |        |        |  |         |  
|                                                                                   |                                                                       | Adjusted net (loss) income |        | $            | (3,322 | )            |        |              | (2,946 | ) |         |        | 10,800 |  |         |   | (10,116 | )
|                                                                                   |                                                                       |                            |        |              |        |              |        |              |        |   |         |        |        |  |         |  
|Basic and diluted (loss) income per share:                                         |                                                                       |                            |        |              |        |              |        |              |        |   |         |        |        |  |         |  
|Reported net loss per share                                                        |                                                                       | $                          | (0.12  | )            |        |              | (0.02  | )            |        |   | (1.39   | )      |        |  | (0.16   | )
|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)                    |                                                                       |                            | 0.24   |              |        |              | 0.06   |              |        |   |        |        |        |  |        |  
|Income tax adjustment per share(3)                                                 |                                                                       |                            | (0.17  | )            |        |              | (0.09  | )            |        |   |        |        |        |  |        |  
|                                                                                   |                                                                       |                            |        |              |        |              |        |              |        |   |         |        |        |  |         |  
|Adjusted net (loss) income per share                                               |                                                                       | $                          | (0.05  | )            |        |              | (0.05  | )            |        |   | 0.17    |        |        |  | (0.16   | )
|                                                                                   |                                                                       |                            |        |              |        |              |        |              |        |   |         |        |        |  |         |  



---



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

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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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
    year ended September 30, 2001 and for the three-month
    transitional period ended December 30, 2001 add back
    noncash goodwill and intangible assets amortization of
    $15.6 million and $4.0 million, respectively, and
    reflect adjusted income tax expense assuming that
    SFAS No. 142 was effective as of September 25,
    2000.

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.

(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 year ended
September 30, 2001, the three-month transitional period
ended December 30, 2001 and the fiscal years ended
December 29, 2002 and December 31, 2003 (in thousands):

|                                       |         |                                    |        |              |        |              |      |              |      |   |         |        |        |  |        |       |        | 
|-------------------------------------- | ------- | ---------------------------------- | ------ | ------------ | ------ | ------------ | ---- | ------------ | ---- | - | ------- | ------ | ------ |  | ------ | ----- | ------ | 
|                                       |         | Fiscal year                        |        | Three-month  |        | Fiscal year  |      | Fiscal year 
|                                       |         | September 30,                      |        | December 30, |        | December 29, |      | December 31,
|                                       |         | 2001                               |        | 2001         |        | 2002         |      | 2003        
|                                       |         |                                    |        |              |        |              |      |             
|Current:                               |         |                                    |        |              |        |              |      |              |      |   |         |        |        |  |        |      
|                                       | Federal |                                    | $      | 150          |        |              |      |             |      |   |         |       |        |  |        |      |       
|                                       | State   |                                    |        | 971          |        |              |      | 282          |      |   |         | 250    |        |  |        | 287   |       
|                                       | Foreign |                                    |        |             |        |              |      |             |      |   |         | 725    |        |  |        | 173   |       
|                                       |         |                                    |        |              |        |              |      |              |      |   |         |        |        |  |        |      
|                                       |         |                                    | 1,121  |              |        |              | 282  |              |      |   | 975     |        |        |  | 460    |      
|                                       |         |                                    |        |              |        |              |      |              |      |   |         |        |        |  |        |      
|Deferred:                              |         |                                    |        |              |        |              |      |              |      |   |         |        |        |  |        |      
|                                       | Federal |                                    |        | (3,653       | )      |              |      | (847         | )    |   |         | 45,648 |        |  |        | 9,499 |       
|                                       | State   |                                    |        | (1,775       | )      |              |      | (121         | )    |   |         | 6,471  |        |  |        | 1,321 |       
|                                       |         |                                    |        |              |        |              |      |              |      |   |         |        |        |  |        |      
|                                       |         |                                    | (5,428 | )            |        |              | (968 | )            |      |   | 52,119  |        |        |  | 10,820 |      
|                                       |         |                                    |        |              |        |              |      |              |      |   |         |        |        |  |        |      
|                                       |         | Total for continuing operations    |        |              | (4,307 | )            |      |              | (686 | ) |         |        | 53,094 |  |        |       | 11,280 | 
|Discontinued operations                |         |                                    | (376   | )            |        |              | (8   | )            |      |   | 4,418   |        |        |  | 769    |      
|Cumulative effect of accounting change |         |                                    |       |              |        |              |     |              |      |   | (30,192 | )      |        |  |       |      
|                                       |         |                                    |        |              |        |              |      |              |      |   |         |        |        |  |        |      
|                                       |         | Total income tax expense (benefit) |        | $            | (4,683 | )            |      |              | (694 | ) |         |        | 27,320 |  |        |       | 12,049 | 
|                                       |         |                                    |        |              |        |              |      |              |      |   |         |        |        |  |        |      

For fiscal years ended September 30, 2001,
December 29, 2002, and December 31, 2003, and for the
three-month transitional period ended December 30, 2001, no
net operating loss carryforwards were utilized.

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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The tax effect of temporary differences and
carryforwards that give rise to deferred tax assets and deferred
tax liabilities at December 29, 2002 and December 31,
2003 are as follows (in thousands):

|                          |                                          |                                                                  |                            |              |      |        |        |        |        |        | 
|------------------------- | ---------------------------------------- | ---------------------------------------------------------------- | -------------------------- | ------------ | ---- | ------ | ------ | ------ | ------ | ------ | 
|                          |                                          | December 29,                                                     |                            | December 31,
|                          |                                          | 2002                                                             |                            | 2003        
|                          |                                          |                                                                  |                            |             
|Deferred tax assets:      |                                          |                                                                  |                            |              |      |        |        |       
|                          | Net operating loss carryforwards         |                                                                  | $                          | 50,366       |      |        |        | 59,741 |       
|                          | Foreign net operating loss carryforwards |                                                                  |                            | 6,233        |      |        |        | 7,654  |       
|                          | Allowance for doubtful accounts          |                                                                  |                            | 3,406        |      |        |        | 1,915  |       
|                          | Unearned revenue                         |                                                                  |                            | 331          |      |        |        | 276    |       
|                          | AMT credit                               |                                                                  |                            | 1,015        |      |        |        | 1,015  |       
|                          | Fixed assets                             |                                                                  |                            | 1,002        |      |        |        |       |       
|                          | Stock-based programming expense          |                                                                  |                            |             |      |        |        | 1,177  |       
|                          | Other                                    |                                                                  |                            | 1,254        |      |        |        | 2,096  |       
|                          |                                          |                                                                  |                            |              |      |        |        |       
|                          |                                          |                                                                  | 63,607                     |              |      |        | 73,874 |       
|                          | Less valuation allowance                 |                                                                  |                            | 67,126       |      |        |        | 77,051 |       
|Deferred tax liabilities: |                                          |                                                                  |                            |              |      |        |        |       
|                          | Fixed asset                              |                                                                  |                            |             |      |        |        | 341    |       
|                          | Amortization of FCC licenses             |                                                                  |                            | 54,532       |      |        |        | 66,122 |       
|                          |                                          | Less deferred tax liability included in assets
    held for sale |                            |              | (517 | )      |        |        | (1,286 | )     
|                          |                                          |                                                                  |                            |              |      |        |        |       
|                          |                                          |                                                                  | Net deferred tax liability |              | $    | 57,534 |        |        |        | 68,354 | 
|                          |                                          |                                                                  |                            |              |      |        |        |       

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 year ended September 30, 2001, the three-month
transitional period ended December 30, 2001 and the fiscal
years ended December 29, 2002 and December 31, 2003,
as a result of the following:

|                                                          |  |               |       |              |  |              |       |              |  |  |       |   |  |  |       |  
|--------------------------------------------------------- |  | ------------- | ----- | ------------ |  | ------------ | ----- | ------------ |  |  | ----- | - |  |  | ----- | -
|                                                          |  | Fiscal year   |       | Three-month  |  | Fiscal year  |       | Fiscal year 
|                                                          |  | September 30, |       | December 30, |  | December 29, |       | December 31,
|                                                          |  | 2001          |       | 2001         |  | 2002         |       | 2003        
|                                                          |  |               |       |              |  |              |       |             
|Computed expected tax expense
    (benefit)             |  |               | (35.0 | )%           |  |              | (35.0 | )%           |  |  | 35.0  | % |  |  | 35.0  | %
|State income taxes, net of federal income tax
    benefit |  |               | (4.8  | )%           |  |              | (5.4  | )%           |  |  | 5.9   | % |  |  | 10.6  | %
|Foreign taxes                                             |  |               |      |              |  |              |      |              |  |  | 10.9  | % |  |  | 6.3   | %
|Change in valuation allowance                             |  |               |      |              |  |              |      |              |  |  | 744.6 | % |  |  | 339.4 | %
|Nondeductible expenses                                    |  |               | 2.6   | %            |  |              | 5.4   | %            |  |  | 4.0   | % |  |  | 23.4  | %
|Other                                                     |  |               | (1.0  | )%           |  |              | (1.0  | )%           |  |  | 0.9   | % |  |  | 3.3   | %
|                                                          |  |               |       |              |  |              |       |              |  |  |       |   |  |  |       |  
|                                                          |  |               | (38.2 | )%           |  |              | (36.0 | )%           |  |  | 801.3 | % |  |  | 418.0 | %
|                                                          |  |               |       |              |  |              |       |              |  |  |       |   |  |  |       |  

The valuation allowance for deferred tax assets
increased by $49.7 million and $9.9 million during the
years ended December 29, 2002 and December 31, 2003,
respectively. 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 noncash 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

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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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 31, 2003, the Company has
domestic net operating loss carryforwards of approximately
$149.3 million available to offset future taxable income
expiring in 2007 through 2023.

In addition, at December 31, 2003, the
Company has foreign net operating loss carryforwards of
approximately $19.1 million available to offset future
taxable income expiring in December 2006 through 2010.

(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 underwriter defendants, and 1,000 individuals 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. One of the
claims against the individual defendants, specifically the
Section 10b-5 claim, has been dismissed.

In June of 2003, after lengthy negotiations, a
settlement proposal was embodied in a memorandum of
understanding among the investors in the plaintiff class, the
issuer defendants and the issuer defendants insurance
carriers. On July 23, 2003, the Companys Board of
Directors approved both the memorandum of understanding and an
agreement between the issuer defendants and the insurers. An
overwhelming majority of non-bankrupt issuer defendants have
approved the settlement proposal. The principal components of
the settlement include: 1) a release of all claims against
the issuer defendants and their directors, officers and certain
other related parties arising out of the alleged wrongful
conduct in the amended complaint; 2) the

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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

assignment to the plaintiffs of certain of the
issuer defendants potential claims against the underwriter
defendants; and 3) a guarantee by the insurers to the
plaintiffs of the difference between $1.0 billion and any
lesser amount recovered by the plaintiffs against the
underwriter defendants. The payments will be charged to each
issuer defendants insurance policy on a pro rata basis.

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 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 appealed the judgment. In
February 2004, the litigation was resolved pursuant to a
confidential settlement agreement. The parties thereafter sought
dismissal of the pending appeal and seek nothing further from
the other in litigation. The Company adequately reserved for
this matter previous to the settlement and the settlement had no
material impact on the Companys operating results or
financial position.

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 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 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. On August 6, 2003, the
District Court denied the Companys motion for
reconsideration. On September 5, 2003, the Company filed an
appeal to the 11th Circuit Court of Appeals of the District
Courts decisions dated January 31, 2003 and
August 6, 2003. The briefing on that appeal was completed
in December 2003, oral argument occurred in Miami, on
February 26, 2004 and the decision on the matter was
reserved.

On June 14, 2000, an action was filed in the
Eleventh Judicial Circuit in and for Miami-Dade County, Florida
by Jose Antonio Hurtado against the Company, alleging that he
was entitled to a commission related to an acquisition made by
the Company. The case was tried to a jury during the week of
December 1, 2003 and Mr. Hurtado was awarded the sum
of $1.8 million, plus interest. Mr. Hurtado also filed
for an application for attorneys fees, which the Company
opposes on grounds that there is no contractual or statutory
basis for

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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

such an award. The Company has filed a motion for
judgment not withstanding the verdict, which was heard on
February 6, 2004. The Companys motion for judgment
notwithstanding the verdict and the Courts consideration
of granting a new trial have been taken under advisement by the
Court. The Company has accrued for the $1.8 million award,
plus interest, at December 31, 2003 and recorded the amount
in other expense (income), net, in the consolidated statement of
operations during the fiscal year ended December 31, 2003.

(18) New Accounting
Pronouncements

In June 2001, the FASB issued
SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 requires the Company
to record the fair value of an asset retirement obligation as a
liability in the period in which it incurs a legal obligation
associated with the retirement of tangible long-lived assets
that results from the acquisition, construction, development,
and/or normal use of the assets. The Company would also record a
corresponding asset that is depreciated over the life of the
asset. Subsequent to the initial measurement of the asset
retirement obligation, the obligation will be adjusted at the
end of each period to reflect the passage of time and changes in
the estimated future cash flows underlying the obligation. The
Company adopted SFAS No. 143 on December 30,
2002. The adoption of SFAS No. 143 did not have a
material effect on the Companys consolidated financial
statements.

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

In December 2002, the FASB issued
SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure.
SFAS No. 148 amends the transition and disclosure
provisions of SFAS No. 123. Among other items,
SFAS No. 148 allows companies adopting
SFAS No. 123 to utilize one of three alternative
transition methods, one of which was a prospective
method, as defined, that was only available if adopted
during 2003. To date, the Company has not adopted
SFAS No. 123 utilizing any of the transition methods
of SFAS No. 148. The FASB currently is working on a
project to develop a new standard for accounting for stock-based
compensation. Tentative decisions by the FASB indicate that
expensing of stock options will be required beginning
January 1, 2005. The FASB expects to issue an exposure
draft, which will be subject to public comment, in first quarter
2004 and issue its final standard in the second half of 2004.

In December 2003, the FASB issued a revised
Interpretation No. 46, Consolidation of Variable
Interest Entities, an interpretation of Accounting Research
Bulletin No. 51 (FIN 46R). FIN 46R requires
the consolidation of entities in which an enterprise absorbs a
majority of the entitys expected losses, receives a
majority of the entitys expected residual returns, or
both, as a result of ownership, contractual or other financial
interests in the entity. Currently entities are generally
consolidated by an enterprise when it has a controlling
financial interest through ownership of a majority voting
interest in the entity. The provisions of FIN 46R are
generally effective for existing (prior to February 1,
2003) variable interest relationships of a public entity no
later than the end of the first reporting period that ends after
March 15, 2004. However, prior to the required application
of this interpretation a public entity that is not a small
business issuer shall apply

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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

FIN 46R to those entities that are
considered to be special-purpose entities no later than the end
of the first reporting period that ends after December 15,
2003. The Company applied the portion of FIN 46R that is
applicable to special purpose entities effective
December 31, 2003, with no material effect, and will apply
the remainder of FIN 46R to its first quarter 2004
financial statements.

In May 2003, the FASB issued
SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity, effective for financial instruments entered into
or modified after May 31, 2003, and otherwise is effective
at the beginning of the first interim period beginning after
June 15, 2003. This statement establishes standards for how
an issuer classifies and measures certain financial instruments
with characteristics of both liabilities and equity. It requires
that an issuer classify a freestanding financial instrument that
is within its scope as a liability (or an asset in some
circumstances) when that financial instrument embodies an
obligation of the issuer. The adoption of SFAS No. 150
did not have an impact on the Companys consolidated
financial statements.

(19) Quarterly Results of Operations
(UNAUDITED)

As disclosed in note 4, the quarterly dates
in the tables below have been reclassified to reflect
discontinued operations.

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):

|                                                                                                                                                    |                                                    |               |         |                |   |               |        |                |  |  |        |     |   |  |        |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------- | ------------- | ------- | -------------- | - | ------------- | ------ | -------------- |  |  | ------ | --- | - |  | ------ | ------ | -
|                                                                                                                                                    |                                                    | First quarter |         | Second quarter |   | Third quarter |        | Fourth quarter
|                                                                                                                                                    |                                                    | March 31,     |         | June 30,       |   | September 29, |        | December 29,  
|                                                                                                                                                    |                                                    | 2002          |         | 2002           |   | 2002          |        | 2002          
|                                                                                                                                                    |                                                    |               |         |                |   |               |        |               
|Net revenue from continuing operations                                                                                                              |                                                    | $             | 27,859  |                |   |               | 38,222 |                |  |  | 35,124 |     |   |  | 34,483 |       
|(Loss) income from continuing operations before
    discontinued operations and cumulative effect of a change in
    accounting principle           |                                                    | $             | (55,257 | )              |   |               | 12,817 |                |  |  | (1,923 | )   |   |  | (2,105 | )     
|Discontinued operations, net of tax                                                                                                                 |                                                    |               | 70      |                |   |               | 6      |                |  |  | 1,830  |     |   |  | 4      |       
|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 common
    share before discontinued operations 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 common share |               | $       | (1.56          | ) |               |        | 0.20           |  |  |        |    |   |  |        | (0.03  | )
|                                                                                                                                                    |                                                    |               |         |                |   |               |        |                |  |  |        |     |   |  |        |       

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##### Table of Contents



SPANISH BROADCASTING SYSTEM, 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 31, 2003 (in thousands, except per share data):

|                                                                                                                                                    |                                                    |               |        |                |   |               |        |                |  |  |        |        |   |  |        |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------- | ------------- | ------ | -------------- | - | ------------- | ------ | -------------- |  |  | ------ | ------ | - |  | ------ | ------ | -
|                                                                                                                                                    |                                                    | First quarter |        | Second quarter |   | Third quarter |        | Fourth quarter
|                                                                                                                                                    |                                                    | March 31,     |        | June 30,       |   | September 30, |        | December 31,  
|                                                                                                                                                    |                                                    | 2003          |        | 2003           |   | 2003          |        | 2003          
|                                                                                                                                                    |                                                    |               |        |                |   |               |        |               
|Net revenue from continuing operations                                                                                                              |                                                    | $             | 27,923 |                |   |               | 36,535 |                |  |  | 35,700 |        |   |  | 35,108 |       
|(Loss) income from continuing operations before
    discontinued operations and cumulative effect of a change in
    accounting principle           |                                                    | $             | (897   | )              |   |               | 1,000  |                |  |  | (2,174 | )      |   |  | (6,511 | )     
|Discontinued operations, net of tax                                                                                                                 |                                                    |               | 96     |                |   |               | (211   | )              |  |  | (225   | )      |   |  | 172    |       
|                                                                                                                                                    |                                                    |               |        |                |   |               |        |                |  |  |        |        |   |  |        |       
|                                                                                                                                                    | Net (loss) income                                  |               | $      | (801           | ) |               |        | 789            |  |  |        | (2,399 | ) |  |        | (6,339 | )
|                                                                                                                                                    |                                                    |               |        |                |   |               |        |                |  |  |        |        |   |  |        |       
|Dividends on preferred stock                                                                                                                        |                                                    |               |       |                |   |               |       |                |  |  |       |        |   |  | (1,366 | )     
|                                                                                                                                                    |                                                    |               |        |                |   |               |        |                |  |  |        |        |   |  |        |       
|Net loss applicable to common stockholders                                                                                                          |                                                    | $             | (801   | )              |   |               | 789    |                |  |  | (2,399 | )      |   |  | (7,705 | )     
|                                                                                                                                                    |                                                    |               |        |                |   |               |        |                |  |  |        |        |   |  |        |       
|Basic and diluted (loss) earnings per common
    share before discontinued operations and cumulative effect of a
    change in accounting principle |                                                    | $             | (0.01  | )              |   |               | 0.01   |                |  |  | (0.04  | )      |   |  | (0.12  | )     
|Discontinued operations per share                                                                                                                   |                                                    |               |       |                |   |               |       |                |  |  |       |        |   |  |       |       
|                                                                                                                                                    |                                                    |               |        |                |   |               |        |                |  |  |        |        |   |  |        |       
|                                                                                                                                                    | Basic and diluted (loss) earnings per common share |               | $      | (0.01          | ) |               |        | 0.01           |  |  |        | (0.04  | ) |  |        | (0.12  | )
|                                                                                                                                                    |                                                    |               |        |                |   |               |        |                |  |  |        |        |   |  |        |       

(20) Financial Information for Guarantors
and Non-Guarantors

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

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SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

nonguarantors of the senior subordinated notes.
Condensed consolidating financial information for the Company
and its guarantor and nonguarantor subsidiaries is as follows
(in thousands):

|                                            |                      |                           |          |              |         |              |         |              |        |       |          |        |        |  |          |          |   |  |          |         |         | 
|------------------------------------------- | -------------------- | ------------------------- | -------- | ------------ | ------- | ------------ | ------- | ------------ | ------ | ----- | -------- | ------ | ------ |  | -------- | -------- | - |  | -------- | ------- | ------- | 
|                                            |                      |                          
|                                            |                      | As of December 29, 2002  
|                                            |                      |                          
|Condensed Consolidating                     |                      |                           |          | Guarantors   |         | Nonguarantor |         |             
|Balance Sheet                               |                      | Parent                    |          | Subsidiaries |         | Subsidiaries |         | Eliminations |        | Total
|                                            |                      |                           |          |              |         |              |         |              |        |      
|Cash and cash equivalents                   |                      | $                         | 47,447   |              |         |              | 21,806  |              |        |       | 2,177    |        |        |  |         |          |   |  | 71,430   |        
|Net receivables                             |                      |                           |         |              |         |              | 23,837  |              |        |       | 1,679    |        |        |  |         |          |   |  | 25,516   |        
|Other current assets                        |                      |                           | 1,083    |              |         |              | 792     |              |        |       | 377      |        |        |  |         |          |   |  | 2,252    |        
|Assets held for sale                        |                      |                           |         |              |         |              | 2,826   |              |        |       | 23,796   |        |        |  |         |          |   |  | 26,622   |        
|                                            |                      |                           |          |              |         |              |         |              |        |       |          |        |        |  |          |          |   |  |          |        
|                                            |                      | Total current assets      |          |              | 48,530  |              |         |              | 49,261 |       |          |        | 28,029 |  |          |          |  |  |          |         | 125,820 | 
|Property and equipment, net                 |                      |                           | 1,540    |              |         |              | 14,601  |              |        |       | 7,477    |        |        |  |         |          |   |  | 23,618   |        
|Intangible assets, net                      |                      |                           | 56,377   |              |         |              | 9,812   |              |        |       | 410,180  |        |        |  |         |          |   |  | 476,369  |        
|Deferred financing costs, net               |                      |                           | 8,759    |              |         |              |        |              |        |       |         |        |        |  |         |          |   |  | 8,759    |        
|Investment in subsidiaries and intercompany |                      |                           | 496,859  |              |         |              | 210,172 |              |        |       | (399,448 | )      |        |  | (307,583 | )        |   |  |         |        
|Other assets                                |                      |                           | 50       |              |         |              | 150     |              |        |       | 1        |        |        |  |         |          |   |  | 201      |        
|                                            |                      |                           |          |              |         |              |         |              |        |       |          |        |        |  |          |          |   |  |          |        
|                                            |                      | $                         | 612,115  |              |         |              | 283,996 |              |        |       | 46,239   |        |        |  | (307,583 | )        |   |  | 634,767  |        
|                                            |                      |                           |          |              |         |              |         |              |        |       |          |        |        |  |          |          |   |  |          |        
|Current portion of long-term debt           |                      |                           |         |              |         |              | 62      |              |        |       | 146      |        |        |  |         |          |   |  | 208      |        
|Accounts payable and accrued expenses       |                      |                           | 3,099    |              |         |              | 9,234   |              |        |       | 3,358    |        |        |  |         |          |   |  | 15,691   |        
|Accrued interest                            |                      |                           | 5,226    |              |         |              |        |              |        |       |         |        |        |  |         |          |   |  | 5,226    |        
|Deferred commitment fee                     |                      |                           | 581      |              |         |              |        |              |        |       |         |        |        |  |         |          |   |  | 581      |        
|                                            |                      |                           |          |              |         |              |         |              |        |       |          |        |        |  |          |          |   |  |          |        
|                                            |                      | Total current liabilities |          |              | 8,906   |              |         |              | 9,296  |       |          |        | 3,504  |  |          |          |  |  |          |         | 21,706  | 
|Long-term debt                              |                      |                           | 324,153  |              |         |              | 704     |              |        |       | 3,245    |        |        |  |         |          |   |  | 328,102  |        
|Deferred income taxes                       |                      |                           | 51,631   |              |         |              | (6,774  | )            |        |       | 12,677   |        |        |  |         |          |   |  | 57,534   |        
|                                            |                      |                           |          |              |         |              |         |              |        |       |          |        |        |  |          |          |   |  |          |        
|                                            |                      | Total liabilities         |          |              | 384,690 |              |         |              | 3,226  |       |          |        | 19,426 |  |          |          |  |  |          |         | 407,342 | 
|                                            |                      |                           |          |              |         |              |         |              |        |       |          |        |        |  |          |          |   |  |          |        
|Common stock                                |                      |                           | 6        |              |         |              |        |              |        |       | 1        |        |        |  | (1       | )        |   |  | 6        |        
|Additional paid-in capital                  |                      |                           | 444,594  |              |         |              |        |              |        |       | 94,691   |        |        |  | (94,691  | )        |   |  | 444,594  |        
|Accumulated deficit                         |                      |                           | (217,175 | )            |         |              | 280,770 |              |        |       | (67,879  | )      |        |  | (212,891 | )        |   |  | (217,175 | )      
|                                            |                      |                           |          |              |         |              |         |              |        |       |          |        |        |  |          |          |   |  |          |        
|                                            | Stockholders equity |                           |          | 227,425      |         |              |         | 280,770      |        |       |          | 26,813 |        |  |          | (307,583 | ) |  |          | 227,425 |        
|                                            |                      |                           |          |              |         |              |         |              |        |       |          |        |        |  |          |          |   |  |          |        
|                                            |                      | $                         | 612,115  |              |         |              | 283,996 |              |        |       | 46,239   |        |        |  | (307,583 | )        |   |  | 634,767  |        
|                                            |                      |                           |          |              |         |              |         |              |        |       |          |        |        |  |          |          |   |  |          |        

F-36



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##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                            |                      |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |         | 
|------------------------------------------- | -------------------- | ----------------------- | -------- | ------------ |  | ------------ | ------- | ------------ |  | ----- | -------- | ------ |  |  | -------- | -------- | - |  | -------- | ------- | 
|                                            |                      |                        
|                                            |                      | As of December 31, 2003
|                                            |                      |                        
|                                            |                      |                         |          | Non          |  |             
|Condensed Consolidating                     |                      |                         |          | Guarantors   |  | Guarantors   |         |             
|Balance Sheet                               |                      | Parent                  |          | Subsidiaries |  | Subsidiaries |         | Eliminations |  | Total
|                                            |                      |                         |          |              |  |              |         |              |  |      
|Cash and cash equivalents                   |                      | $                       | 24,503   |              |  |              | 18,340  |              |  |       | 2,766    |        |  |  |         |          |   |  | 45,609   |        
|Net receivables                             |                      |                         |         |              |  |              | 23,917  |              |  |       | 1,650    |        |  |  |         |          |   |  | 25,567   |        
|Other current assets                        |                      |                         | 2,379    |              |  |              | 760     |              |  |       | 343      |        |  |  |         |          |   |  | 3,482    |        
|Assets held for sale                        |                      |                         |         |              |  |              | 2,879   |              |  |       | 23,027   |        |  |  |         |          |   |  | 25,906   |        
|                                            |                      |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                            | Total current assets |                         |          | 26,882       |  |              |         | 45,896       |  |       |          | 27,786 |  |  |          |         |   |  |          | 100,564 | 
|Property and equipment, net                 |                      |                         | 1,453    |              |  |              | 15,987  |              |  |       | 7,118    |        |  |  |         |          |   |  | 24,558   |        
|Intangible assets, net                      |                      |                         |         |              |  |              | 9,019   |              |  |       | 696,232  |        |  |  |         |          |   |  | 705,251  |        
|Deferred financing costs, net               |                      |                         | 11,461   |              |  |              |        |              |  |       |         |        |  |  |         |          |   |  | 11,461   |        
|Investment in subsidiaries and intercompany |                      |                         | 780,105  |              |  |              | 267,978 |              |  |       | (688,878 | )      |  |  | (359,205 | )        |   |  |         |        
|Other assets                                |                      |                         | 300      |              |  |              | 147     |              |  |       | 1        |        |  |  |         |          |   |  | 448      |        
|                                            |                      |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                            |                      | $                       | 820,201  |              |  |              | 339,027 |              |  |       | 42,259   |        |  |  | (359,205 | )        |   |  | 842,282  |        
|                                            |                      |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|Current portion of long-term debt           |                      | $                       | 1,250    |              |  |              | 66      |              |  |       | 161      |        |  |  |         |          |   |  | 1,477    |        
|Accounts payable and accrued expenses       |                      |                         | 6,371    |              |  |              | 7,769   |              |  |       | 4,682    |        |  |  |         |          |   |  | 18,822   |        
|Accrued interest                            |                      |                         | 6,370    |              |  |              |        |              |  |       |         |        |  |  |         |          |   |  | 6,370    |        
|Deposit on the sale of station              |                      |                         | 1,500    |              |  |              |        |              |  |       |         |        |  |  |         |          |   |  | 1,500    |        
|                                            |                      |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                            | Current liabilities  |                         |          | 15,491       |  |              |         | 7,835        |  |       |          | 4,843  |  |  |          |         |   |  |          | 28,169  | 
|Long-term debt                              |                      |                         | 448,996  |              |  |              | 637     |              |  |       | 3,084    |        |  |  |         |          |   |  | 452,717  |        
|Deferred income taxes                       |                      |                         | 62,672   |              |  |              | (6,995  | )            |  |       | 12,677   |        |  |  |         |          |   |  | 68,354   |        
|                                            |                      |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                            | Total liabilities    |                         |          | 527,159      |  |              |         | 1,477        |  |       |          | 20,604 |  |  |          |         |   |  |          | 549,240 | 
|                                            |                      |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|Preferred stock                             |                      |                         | 76,366   |              |  |              |        |              |  |       |         |        |  |  |         |          |   |  | 76,366   |        
|Common stock                                |                      |                         | 6        |              |  |              |        |              |  |       | 1        |        |  |  | (1       | )        |   |  | 6        |        
|Additional paid-in capital                  |                      |                         | 443,961  |              |  |              |        |              |  |       | 94,691   |        |  |  | (94,691  | )        |   |  | 443,961  |        
|Accumulated deficit                         |                      |                         | (227,291 | )            |  |              | 337,550 |              |  |       | (73,037  | )      |  |  | (264,513 | )        |   |  | (227,291 | )      
|                                            |                      |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                            | Stockholders equity |                         |          | 216,676      |  |              |         | 337,550      |  |       |          | 21,655 |  |  |          | (359,205 | ) |  |          | 216,676 | 
|                                            |                      |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        
|                                            |                      | $                       | 820,201  |              |  |              | 339,027 |              |  |       | 42,259   |        |  |  | (359,205 | )        |   |  | 842,282  |        
|                                            |                      |                         |          |              |  |              |         |              |  |       |          |        |  |  |          |          |   |  |          |        

|                                     |                       |                                              |         |              |         |              |         |              |        |       |        |        |         |   |        |         |     |  |         |        |        | 
|------------------------------------ | --------------------- | -------------------------------------------- | ------- | ------------ | ------- | ------------ | ------- | ------------ | ------ | ----- | ------ | ------ | ------- | - | ------ | ------- | --- |  | ------- | ------ | ------ | 
|                                     |                       |                                             
|                                     |                       | For the fiscal year ended September 30, 2001
|                                     |                       |                                             
|                                     |                       |                                              |         | Non          |         |             
|Condensed Consolidating              |                       |                                              |         | Guarantor    |         | Guarantor    |         |             
|Statement of Operations              |                       | Parent                                       |         | Subsidiaries |         | Subsidiaries |         | Eliminations |        | Total
|                                     |                       |                                              |         |              |         |              |         |              |        |      
|Net revenue                          |                       | $                                            |        |              |         |              | 112,671 |              |        |       | 12,796 |        |         |   |       |         |     |  | 125,467 |       
|Station operating expenses           |                       |                                              |        |              |         |              | 64,724  |              |        |       | 11,553 |        |         |   |       |         |     |  | 76,277  |       
|Corporate expenses                   |                       |                                              | 9,785   |              |         |              | 730     |              |        |       | 480    |        |         |   | (480   | )       |     |  | 10,515  |       
|Depreciation and amortization        |                       |                                              | 309     |              |         |              | 199     |              |        |       | 16,242 |        |         |   |       |         |     |  | 16,750  |       
|                                     |                       |                                              |         |              |         |              |         |              |        |       |        |        |         |   |        |         |     |  |         |       
|                                     | Operating income from |                                              |         |              |         |              |         |              |        |       |        |        |         |   |        |         |     |  |         |        |       
|                                     |                       | continuing operations                        |         |              | (10,094 | )            |         |              | 47,018 |       |        |        | (15,479 | ) |        |         | 480 |  |         |        | 21,925 | 
|Interest expense, net                |                       |                                              | (25,146 | )            |         |              |        |              |        |       | (5,497 | )      |         |   |       |         |     |  | (30,643 | )     
|Other income (expense), net          |                       |                                              | 5       |              |         |              | (10,977 | )            |        |       | 11,949 |        |         |   | (480   | )       |     |  | 497     |       
|Loss on extinguishment of debt       |                       |                                              | (3,063  | )            |         |              |        |              |        |       |       |        |         |   |       |         |     |  | (3,063  | )     
|Equity in net income of subsidiaries |                       |                                              | (27,076 | )            |         |              |        |              |        |       |       |        |         |   | 27,076 |         |     |  |        |       
|Income tax benefit                   |                       |                                              | (3,634  | )            |         |              | (169    | )            |        |       | (504   | )      |         |   |       |         |     |  | (4,307  | )     
|Discontinued operations, net of tax  |                       |                                              |        |              |         |              | (611    | )            |        |       |       |        |         |   |       |         |     |  | (611    | )     
|                                     |                       |                                              |         |              |         |              |         |              |        |       |        |        |         |   |        |         |     |  |         |       
|                                     | Net (loss) income     |                                              | $       | (7,588       | )       |              |         | 35,599       |        |       |        | (8,523 | )       |   |        | (27,076 | )   |  |         | (7,588 | )     
|                                     |                       |                                              |         |              |         |              |         |              |        |       |        |        |         |   |        |         |     |  |         |       

F-37



---



##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                     |                                             |                                               |        |              |   |              |        |              |  |       |        |        |   |  |       |        |   |  |        |        |  
|------------------------------------ | ------------------------------------------- | --------------------------------------------- | ------ | ------------ | - | ------------ | ------ | ------------ |  | ----- | ------ | ------ | - |  | ----- | ------ | - |  | ------ | ------ | -
|                                     |                                             |                                              
|                                     |                                             | For the three-month transitional period ended
|                                     |                                             | December 30, 2001                            
|                                     |                                             |                                              
|                                     |                                             |                                               |        | Non          |   |             
|Condensed consolidating              |                                             |                                               |        | Guarantors   |   | guarantor    |        |             
|statement of operations              |                                             | Parent                                        |        | Subsidiaries |   | Subsidiaries |        | Eliminations |  | Total
|                                     |                                             |                                               |        |              |   |              |        |              |  |      
|Net revenue                          |                                             | $                                             |       |              |   |              | 28,777 |              |  |       | 2,992  |        |   |  |      |        |   |  | 31,769 |       
|Station operating expenses           |                                             |                                               |       |              |   |              | 17,791 |              |  |       | 1,656  |        |   |  |      |        |   |  | 19,447 |       
|Corporate expenses                   |                                             |                                               | 2,387  |              |   |              |       |              |  |       | 120    |        |   |  | (480  | )      |   |  | 2,027  |       
|Depreciation and amortization        |                                             |                                               | 71     |              |   |              | 11     |              |  |       | 4,193  |        |   |  |      |        |   |  | 4,275  |       
|                                     |                                             |                                               |        |              |   |              |        |              |  |       |        |        |   |  |       |        |   |  |        |       
|                                     | Operating income from continuing operations |                                               |        | (2,458       | ) |              |        | 10,975       |  |       |        | (2,977 | ) |  |       | 480    |   |  |        | 6,020  |  
|Interest expense, net                |                                             |                                               | (6,835 | )            |   |              |       |              |  |       | (1,377 | )      |   |  |      |        |   |  | (8,212 | )     
|Other income (expense), net          |                                             |                                               |       |              |   |              | (2,297 | )            |  |       | 3,067  |        |   |  | (480  | )      |   |  | 290    |       
|Equity in net income of subsidiaries |                                             |                                               | (7,240 | )            |   |              |       |              |  |       |       |        |   |  | 7,240 |        |   |  |       |       
|Income tax expense (benefit)         |                                             |                                               | (826   | )            |   |              | 83     |              |  |       | 57     |        |   |  |      |        |   |  | (686   | )     
|Discontinued operations, net of tax  |                                             |                                               |       |              |   |              | (11    | )            |  |       |       |        |   |  |      |        |   |  | (11    | )     
|                                     |                                             |                                               |        |              |   |              |        |              |  |       |        |        |   |  |       |        |   |  |        |       
|                                     | Net (loss) income                           |                                               | $      | (1,227       | ) |              |        | 8,584        |  |       |        | (1,344 | ) |  |       | (7,240 | ) |  |        | (1,227 | )
|                                     |                                             |                                               |        |              |   |              |        |              |  |       |        |        |   |  |       |        |   |  |        |       

|                                                                      |                                             |                                             |         |              |   |              |         |              |  |       |         |         |   |  |       |        |   |  |         |         |  
|--------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------------- | ------- | ------------ | - | ------------ | ------- | ------------ |  | ----- | ------- | ------- | - |  | ----- | ------ | - |  | ------- | ------- | -
|                                                                      |                                             |                                            
|                                                                      |                                             | For the fiscal year ended December 29, 2002
|                                                                      |                                             |                                            
|                                                                      |                                             |                                             |         | Non          |   |             
|Condensed consolidating                                               |                                             |                                             |         | Guarantors   |   | guarantor    |         |             
|statement of operations                                               |                                             | Parent                                      |         | Subsidiaries |   | Subsidiaries |         | Eliminations |  | Total
|                                                                      |                                             |                                             |         |              |   |              |         |              |  |      
|Net revenue                                                           |                                             | $                                           |        |              |   |              | 124,241 |              |  |       | 11,447  |         |   |  |      |        |   |  | 135,688 |        
|Station operating expenses                                            |                                             |                                             |        |              |   |              | 68,838  |              |  |       | 8,941   |         |   |  |      |        |   |  | 77,779  |        
|Corporate expenses                                                    |                                             |                                             | 13,537  |              |   |              | 9       |              |  |       | 480     |         |   |  | (480  | )      |   |  | 13,546  |        
|Depreciation and amortization                                         |                                             |                                             | 340     |              |   |              | 1,841   |              |  |       | 690     |         |   |  |      |        |   |  | 2,871   |        
|                                                                      |                                             |                                             |         |              |   |              |         |              |  |       |         |         |   |  |       |        |   |  |         |        
|                                                                      | Operating income from continuing operations |                                             |         | (13,877      | ) |              |         | 53,553       |  |       |         | 1,336   |   |  |       | 480    |   |  |         | 41,492  |  
|Interest expense, net                                                 |                                             |                                             | (28,773 | )            |   |              |        |              |  |       | (5,373  | )       |   |  |      |        |   |  | (34,146 | )      
|Other income (expense), net                                           |                                             |                                             | (1,636  | )            |   |              | 1,394   |              |  |       | 2       |         |   |  | (480  | )      |   |  | (720    | )      
|Equity in net income of subsidiaries                                  |                                             |                                             | (6,648  | )            |   |              |        |              |  |       |        |         |   |  | 6,648 |        |   |  |        |        
|Income tax expense                                                    |                                             |                                             | 52,208  |              |   |              | 250     |              |  |       | 636     |         |   |  |      |        |   |  | 53,094  |        
|Discontinued operations, net of tax                                   |                                             |                                             |        |              |   |              | 1,910   |              |  |       |        |         |   |  |      |        |   |  | 1,910   |        
|Cumulative effect of a change in accounting
    principle, net of tax |                                             |                                             |        |              |   |              |        |              |  |       | (45,288 | )       |   |  |      |        |   |  | (45,288 | )      
|                                                                      |                                             |                                             |         |              |   |              |         |              |  |       |         |         |   |  |       |        |   |  |         |        
|                                                                      | Net (loss) income                           |                                             | $       | (89,846      | ) |              |         | 56,607       |  |       |         | (49,959 | ) |  |       | (6,648 | ) |  |         | (89,846 | )
|                                                                      |                                             |                                             |         |              |   |              |         |              |  |       |         |         |   |  |       |        |   |  |         |        

F-38



---



##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                     |                                                         |                                             |         |              |   |              |         |              |  |       |        |        |   |  |        |         |   |  |         |         |  
|------------------------------------ | ------------------------------------------------------- | ------------------------------------------- | ------- | ------------ | - | ------------ | ------- | ------------ |  | ----- | ------ | ------ | - |  | ------ | ------- | - |  | ------- | ------- | -
|                                     |                                                         |                                            
|                                     |                                                         | For the fiscal year ended December 31, 2003
|                                     |                                                         |                                            
|                                     |                                                         |                                             |         | Non          |   |             
|Condensed consolidating              |                                                         |                                             |         | Guarantors   |   | guarantors   |         |             
|statement of operations              |                                                         | Parent                                      |         | Subsidiaries |   | Subsidiaries |         | Eliminations |  | Total
|                                     |                                                         |                                             |         |              |   |              |         |              |  |      
|Net revenue                          |                                                         | $                                           |        |              |   |              | 124,130 |              |  |       | 11,136 |        |   |  |       |         |   |  | 135,266 |        
|Station operating expenses           |                                                         |                                             |        |              |   |              | 68,261  |              |  |       | 8,056  |        |   |  |       |         |   |  | 76,317  |        
|Corporate expenses                   |                                                         |                                             | 17,853  |              |   |              |        |              |  |       | 480    |        |   |  | (480   | )       |   |  | 17,853  |        
|Depreciation and amortization        |                                                         |                                             | 389     |              |   |              | 2,053   |              |  |       | 459    |        |   |  |       |         |   |  | 2,901   |        
|                                     |                                                         |                                             |         |              |   |              |         |              |  |       |        |        |   |  |        |         |   |  |         |        
|                                     | Operating income from continuing operations             |                                             |         | (18,242      | ) |              |         | 53,816       |  |       |        | 2,141  |   |  |        | 480     |   |  |         | 38,195  |  
|Interest expense, net                |                                                         |                                             | (31,284 | )            |   |              |        |              |  |       | (5,338 | )      |   |  |       |         |   |  | (36,622 | )      
|Other income (expense), net          |                                                         |                                             |        |              |   |              | 3,388   |              |  |       | (1,783 | )      |   |  | (480   | )       |   |  | 1,125   |        
|Equity in net income of subsidiaries |                                                         |                                             | (51,622 | )            |   |              |        |              |  |       |       |        |   |  | 51,622 |         |   |  |        |        
|Income tax expense                   |                                                         |                                             | 10,846  |              |   |              | 256     |              |  |       | 178    |        |   |  |       |         |   |  | 11,280  |        
|Discontinued operations, net of tax  |                                                         |                                             |        |              |   |              | (168    | )            |  |       |       |        |   |  |       |         |   |  | (168    | )      
|                                     |                                                         |                                             |         |              |   |              |         |              |  |       |        |        |   |  |        |         |   |  |         |        
|                                     | Net (loss) income                                       |                                             | $       | (8,750       | ) |              |         | 56,780       |  |       |        | (5,158 | ) |  |        | (51,622 | ) |  |         | (8,750  | )
|                                     |                                                         |                                             |         |              |   |              |         |              |  |       |        |        |   |  |        |         |   |  |         |        
|Dividends on preferred stock         |                                                         |                                             | (1,366  | )            |   |              |        |              |  |       |       |        |   |  |       |         |   |  | (1,366  | )      
|                                     |                                                         |                                             |         |              |   |              |         |              |  |       |        |        |   |  |        |         |   |  |         |        
|                                     | Net (loss) income applicable to common
    stockholders |                                             |         | (10,116      | ) |              |         | 56,780       |  |       |        | (5,158 | ) |  |        | (51,622 | ) |  |         | (10,116 | )
|                                     |                                                         |                                             |         |              |   |              |         |              |  |       |        |        |   |  |        |         |   |  |         |        

|                                     |  |                                              |         |              |  |              |         |              |  |       |        |   |  |  |         |   |  |  |         |  
|------------------------------------ |  | -------------------------------------------- | ------- | ------------ |  | ------------ | ------- | ------------ |  | ----- | ------ | - |  |  | ------- | - |  |  | ------- | -
|                                     |  |                                             
|                                     |  | For the fiscal year ended September 30, 2001
|                                     |  |                                             
|                                     |  |                                              |         | Non          |  |             
|Condensed Consolidating              |  |                                              |         | Guarantors   |  | Guarantors   |         |             
|Statement of Cash Flows              |  | Parent                                       |         | Subsidiaries |  | Subsidiaries |         | Eliminations |  | Total
|                                     |  |                                              |         |              |  |              |         |              |  |      
|Cash flows from operating activities |  | $                                            | (33,580 | )            |  |              | 48,381  |              |  |       | 2,222  |   |  |  |        |   |  |  | 17,023  |  
|                                     |  |                                              |         |              |  |              |         |              |  |       |        |   |  |  |         |   |  |  |         |  
|Cash flows from investing activities |  | $                                            | 14,940  |              |  |              | (4,666  | )            |  |       | (1,629 | ) |  |  | (43,826 | ) |  |  | (35,181 | )
|                                     |  |                                              |         |              |  |              |         |              |  |       |        |   |  |  |         |   |  |  |         |  
|Cash flows from financing activities |  | $                                            | 18,670  |              |  |              | (43,882 | )            |  |       | (115   | ) |  |  | 43,826  |   |  |  | 18,499  |  
|                                     |  |                                              |         |              |  |              |         |              |  |       |        |   |  |  |         |   |  |  |         |  

|                                     |  |                                                                |         |              |  |              |        |              |  |       |       |   |  |  |        |   |  |  |        |  
|------------------------------------ |  | -------------------------------------------------------------- | ------- | ------------ |  | ------------ | ------ | ------------ |  | ----- | ----- | - |  |  | ------ | - |  |  | ------ | -
|                                     |  |                                                               
|                                     |  | For the three-month traditional period ended December 30, 2001
|                                     |  |                                                               
|                                     |  |                                                                |         | Non          |  |             
|Condensed Consolidating              |  |                                                                |         | Guarantors   |  | Guarantors   |        |             
|Statement of Cash Flows              |  | Parent                                                         |         | Subsidiaries |  | Subsidiaries |        | Eliminations |  | Total
|                                     |  |                                                                |         |              |  |              |        |              |  |      
|Cash flows from operating activities |  | $                                                              | (18,823 | )            |  |              | 9,876  |              |  |       | 1,570 |   |  |  |       |   |  |  | (7,377 | )
|                                     |  |                                                                |         |              |  |              |        |              |  |       |       |   |  |  |        |   |  |  |        |  
|Cash flows from investing activities |  | $                                                              | 6,019   |              |  |              | (909   | )            |  |       | 79    |   |  |  | (6,026 | ) |  |  | (837   | )
|                                     |  |                                                                |         |              |  |              |        |              |  |       |       |   |  |  |        |   |  |  |        |  
|Cash flows from financing activities |  | $                                                              |        |              |  |              | (6,041 | )            |  |       | (31   | ) |  |  | 6,026  |   |  |  | (46    | )
|                                     |  |                                                                |         |              |  |              |        |              |  |       |       |   |  |  |        |   |  |  |        |  

|                                     |  |                                             |         |              |  |              |         |              |  |       |      |   |  |  |         |   |  |  |        |  
|------------------------------------ |  | ------------------------------------------- | ------- | ------------ |  | ------------ | ------- | ------------ |  | ----- | ---- | - |  |  | ------- | - |  |  | ------ | -
|                                     |  |                                            
|                                     |  | For the fiscal year ended December 29, 2002
|                                     |  |                                            
|                                     |  |                                             |         | Non          |  |             
|Condensed Consolidating              |  |                                             |         | Guarantors   |  | Guarantors   |         |             
|Statement of Cash Flows              |  | Parent                                      |         | Subsidiaries |  | Subsidiaries |         | Eliminations |  | Total
|                                     |  |                                             |         |              |  |              |         |              |  |      
|Cash flows from operating activities |  | $                                           | (38,412 | )            |  |              | 49,435  |              |  |       | (357 | ) |  |  |        |   |  |  | 10,666 |  
|                                     |  |                                             |         |              |  |              |         |              |  |       |      |   |  |  |         |   |  |  |        |  
|Cash flows from investing activities |  | $                                           | 65,347  |              |  |              | (3,762  | )            |  |       | (232 | ) |  |  | (52,088 | ) |  |  | 9,265  |  
|                                     |  |                                             |         |              |  |              |         |              |  |       |      |   |  |  |         |   |  |  |        |  
|Cash flows from financing activities |  | $                                           | 50      |              |  |              | (52,146 | )            |  |       | (133 | ) |  |  | 52,088  |   |  |  | (141   | )
|                                     |  |                                             |         |              |  |              |         |              |  |       |      |   |  |  |         |   |  |  |        |  

F-39



---



##### Table of Contents



SPANISH BROADCASTING SYSTEM, INC.


AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                     |  |                                             |          |              |  |              |         |              |  |       |      |   |  |  |         |   |  |  |          |  
|------------------------------------ |  | ------------------------------------------- | -------- | ------------ |  | ------------ | ------- | ------------ |  | ----- | ---- | - |  |  | ------- | - |  |  | -------- | -
|                                     |  |                                            
|                                     |  | For the fiscal year ended December 31, 2003
|                                     |  |                                            
|                                     |  |                                             |          | Non          |  |             
|Condensed Consolidating              |  |                                             |          | Guarantors   |  | Guarantors   |         |             
|Statement of Cash Flows              |  | Parent                                      |          | Subsidiaries |  | Subsidiaries |         | Eliminations |  | Total
|                                     |  |                                             |          |              |  |              |         |              |  |      
|Cash flows from operating activities |  | $                                           | (41,226  | )            |  |              | 53,617  |              |  |       | 835  |   |  |  |        |   |  |  | 13,226   |  
|                                     |  |                                             |          |              |  |              |         |              |  |       |      |   |  |  |         |   |  |  |          |  
|Cash flows from investing activities |  | $                                           | (174,049 | )            |  |              | (3,465  | )            |  |       | (100 | ) |  |  | (53,556 | ) |  |  | (231,170 | )
|                                     |  |                                             |          |              |  |              |         |              |  |       |      |   |  |  |         |   |  |  |          |  
|Cash flows from financing activities |  | $                                           | 192,331  |              |  |              | (53,618 | )            |  |       | (146 | ) |  |  | 53,556  |   |  |  | 192,123  |  
|                                     |  |                                             |          |              |  |              |         |              |  |       |      |   |  |  |         |   |  |  |          |  

F-40



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##### Table of Contents



SPANISH BROADCASTING
SYSTEM, INC.

AND SUBSIDIARIES


FINANCIAL STATEMENT SCHEDULE 
VALUATION AND QUALIFYING ACCOUNTS

Fiscal year ended September 30, 2001,
three-month


transitional period ended December 30,
2001, and fiscal


years ended December 29, 2002 and
December 31, 2003


(In thousands)

|                                                       |                                       |              |   |                 |  |                |  |               |   |             |  |   |  |  |  |       |  |  |  |        | 
|------------------------------------------------------ | ------------------------------------- | ------------ | - | --------------- |  | -------------- |  | ------------- | - | ----------- |  | - |  |  |  | ----- |  |  |  | ------ | 
|                                                       |                                       | Column B     |   |                 |  |                |  |               |   |            
|                                                       |                                       | Balance      |   |                 |  |                |  |               |   | Column E   
|                                                       |                                       | beginning of |   | Charged to cost |  | Charged to     |  | Column D      |   | Balance at 
|Column A Description                                   |                                       | year         |   | and expense     |  | other accounts |  | deductions(1) |   | end of year
|                                                       |                                       |              |   |                 |  |                |  |               |   |            
|Fiscal year ended September 30, 2001:                  |                                       |              |   |                 |  |                |  |               |   |             |  |   |  |  |  |       |  |  |  |       
|                                                       | Allowance for doubtful accounts       |              | $ | 5,712           |  |                |  | 2,137         |   |             |  |  |  |  |  | 2,849 |  |  |  | 5,000  | 
|                                                       | Valuation allowance on deferred taxes |              |   | 17,396          |  |                |  |              |   |             |  |  |  |  |  |      |  |  |  | 17,396 | 
|                                                      
|Three-month transitional period December 30,
    2001: |                                       |              |   |                 |  |                |  |               |   |             |  |   |  |  |  |       |  |  |  |       
|                                                       | Allowance for doubtful accounts       |              | $ | 5,000           |  |                |  | 707           |   |             |  |  |  |  |  | 256   |  |  |  | 5,451  | 
|                                                       | Valuation allowance on deferred taxes |              |   | 17,396          |  |                |  |              |   |             |  |  |  |  |  |      |  |  |  | 17,396 | 
|                                                      
|Fiscal year ended December 29, 2002:                   |                                       |              |   |                 |  |                |  |               |   |             |  |   |  |  |  |       |  |  |  |       
|                                                       | Allowance for doubtful accounts       |              | $ | 5,451           |  |                |  | (123          | ) |             |  |  |  |  |  | 1,286 |  |  |  | 4,042  | 
|                                                       | Valuation allowance on deferred taxes |              |   | 17,396          |  |                |  | 49,730        |   |             |  |  |  |  |  |      |  |  |  | 67,126 | 
|                                                      
|Fiscal year ended December 31, 2003:                   |                                       |              |   |                 |  |                |  |               |   |             |  |   |  |  |  |       |  |  |  |       
|                                                       | Allowance for doubtful accounts       |              | $ | 4,042           |  |                |  | 335           |   |             |  |  |  |  |  | 1,479 |  |  |  | 2,898  | 
|                                                       | Valuation allowance on deferred taxes |              |   | 67,126          |  |                |  | 9,925         |   |             |  |  |  |  |  |      |  |  |  | 77,051 | 



---



|    |                                    
|--- | -----------------------------------
|(1) | Cash write-offs, net of recoveries.

See accompanying independent auditors
report.

F-41



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##### Table of Contents



(a) 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 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).                                                                                                                                                                                                                                                                                                                    
| | 3.4  |  |  |  |  |  |  | Certificate of Elimination of
    14 1/4% Senior Exchangeable Preferred Stock,
    Series A of the Company, dated October 28, 2003
    (incorporated by reference to Exhibit 3.3 of the
    Companys Quarterly Report on Form 10-Q, dated
    November 14, 2003 (the 11/14/03 Quarterly
    Report)).                                                                                                                                         
| | 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 Designations dated
    October 29, 2003 Setting Forth the Voting Power,
    Preferences and Relative, Participating, Optional and Other
    Special Rights and Qualifications, Limitations and Restrictions
    of the 10 3/4% Series A Cumulative Exchangeable
    Redeemable Preferred Stock of Spanish Broadcasting
    System, Inc. (incorporated by reference to Exhibit 4.1
    of the Companys 11/14/03 Quarterly Report).
| | 4.3  |  |  |  |  |  |  | Certificate of Designations dated
    October 29, 2003 Setting Forth the Voting Power,
    Preferences and Relative, Participating, Optional and Other
    Special Rights and Qualifications, Limitations and Restrictions
    of the 10 3/4% Series B Cumulative Exchangeable
    Redeemable Preferred Stock of Spanish Broadcasting
    System, Inc. (incorporated by reference to Exhibit 4.2
    of the Companys 11/14/03 Quarterly Report).
| | 4.4  |  |  |  |  |  |  | Indenture dated June 29, 1994 among the
    Company, IBJ Schroder Bank & Trust Company, as Trustee,
    the Guarantors named therein and the Purchasers named therein
    (incorporated by reference to Exhibit 4.1 of the
    Companys 1994 Registration Statement on Form S-4, the
    1994 Registration Statement).                                                                                                                        
| | 4.5  |  |  |  |  |  |  | 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).                                                                                                                                                                     
| | 4.6  |  |  |  |  |  |  | Second Supplemental Indenture dated as of
    March 1, 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).                                                                                                                                                                     
| | 4.7  |  |  |  |  |  |  | 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).                                                                                                                                                       
| | 4.8  |  |  |  |  |  |  | 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)).                                                                                                                                                                               
| | 4.9  |  |  |  |  |  |  | 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).                                                                                                                                                                       
| | 4.10 |  |  |  |  |  |  | Form of stock certificate for the Class A common
    stock of the Company (incorporated by reference to the
    Companys 1999 Registration Statement).                                                                                                                                                                                                                                                                                          
| | 10.1 |  |  |  |  |  |  | Warrant Agreement dated as of March 15, 1997
    among the Company and IBJ Schroder Bank & Trust
    Company, as Warrant Agent (incorporated by reference to the 1996
    Current Report).                                                                                                                                                                                                                                                       
| | 10.2 |  |  |  |  |  |  | National Radio Sales Representation Agreement
    dated as of February 3, 1997 between Caballero Spanish
    Media, L.L.C. and the Company (incorporated by reference to the
    1996 Current Report).                                                                                                                                                                                                                                           

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| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----- |  |  |  | - |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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).                                                                                                                                                                                                                                                                                                
| | 10.5  |  |  |  |  |  |  | Employment Agreement dated April 1, 1999, by and
    between the Company and Jesus Salas (incorporated by reference
    to the Companys 1999 Registration Statement).                                                                                                                                                                                                                                                                                                                                        
| | 10.6  |  |  |  |  |  |  | Letter Agreement dated January 13, 1997
    between the Company and Caballero Spanish Media, LLC
    (incorporated by reference to the 1996 Current Report).                                                                                                                                                                                                                                                                                                                                                  
| | 10.7  |  |  |  |  |  |  | Ground Lease dated December 18, 1995 between
    Louis Viola Company and SBS-NJ (incorporated by reference to the
    1996 Current Report).                                                                                                                                                                                                                                                                                                                                                                   
| | 10.8  |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                                                                          
| | 10.9  |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                   
| | 10.10 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                      
| | 10.11 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                  
| | 10.12 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                                                       
| | 10.13 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                               
| | 10.14 |  |  |  |  |  |  | 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)).                                                                 
| | 10.15 |  |  |  |  |  |  | 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)).
| | 10.16 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                           
| | 10.17 |  |  |  |  |  |  | Indemnification Agreement with Raúl
    Alarcón, Jr. dated as of November 2, 1999
    (incorporated by reference to the 1999 Current Report).                                                                                                                                                                                                                                                                                                                                                                 
| | 10.18 |  |  |  |  |  |  | Spanish Broadcasting System 1999 Stock Option
    Plan (incorporated by reference to the Companys 1999
    Registration Statement).                                                                                                                                                                                                                                                                                                                                                                          
| | 10.19 |  |  |  |  |  |  | Spanish Broadcasting System 1999 Company Stock
    Option Plan for Nonemployee Directors (incorporated by reference
    to the Companys 1999 Registration Statement).                                                                                                                                                                                                                                                                                                                                        
| | 10.20 |  |  |  |  |  |  | Form of Lock-Up Letter Agreement (incorporated by
    reference in the Companys 1999 Registration Statement).                                                                                                                                                                                                                                                                                                                                                                                                
| | 10.21 |  |  |  |  |  |  | Option Grant not under the Stock Option Plans
    with Arnold Sheiffer, dated October 27, 1999 (incorporated
    by reference to the 1999 Current Report).                                                                                                                                                                                                                                                                                                                                                    

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| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ----- |  |  |  | - |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.22 |  |  |  |  |  |  | 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).                                                                                                                                                     
| | 10.23 |  |  |  |  |  |  | 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)).
| | 10.24 |  |  |  |  |  |  | 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).                                         
| | 10.25 |  |  |  |  |  |  | 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).                                                                                                                                                                                     
| | 10.26 |  |  |  |  |  |  | Employment Agreement dated December 7, 2000,
    between Joseph García and the Company (incorporated by
    reference to Exhibit 10.46 of the Companys 2000
    Form 10-K).                                                                                                                                                                                                                                                                                                                   
| | 10.27 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                                                   
| | 10.28 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                        
| | 10.29 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                                   
| | 10.30 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                                       
| | 10.31 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                    
| | 10.32 |  |  |  |  |  |  | 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)).                                                                                                                                                                                      
| | 10.33 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                 
| | 10.34 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                        
| | 10.35 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                        
| | 10.36 |  |  |  |  |  |  | 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).                                                                                                                                                                                           
| | 10.37 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                       

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| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                                                                              
| | ----- |  |  |  | - |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.38 |  |  |  |  |  |  | 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 by reference to the Companys 2001
    Form S-3).                                                                                                                                                                          
| | 10.39 |  |  |  |  |  |  | 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).                                                                                                                                                                                                     
| | 10.40 |  |  |  |  |  |  | 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).                                                                                                                                                                                                  
| | 10.41 |  |  |  |  |  |  | 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).                                                                                                                                                                               
| | 10.42 |  |  |  |  |  |  | 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).                                                                                                                                                         
| | 10.43 |  |  |  |  |  |  | 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).                                                                                                                                                      
| | 10.44 |  |  |  |  |  |  | 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).    
| | 10.45 |  |  |  |  |  |  | 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).                   
| | 10.46 |  |  |  |  |  |  | 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).
| | 10.47 |  |  |  |  |  |  | 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).                                                                                                                                                                        
| | 10.48 |  |  |  |  |  |  | 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).                                                                                                                                                                                   
| | 10.49 |  |  |  |  |  |  | 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).                                                                                                                                     
| | 10.50 |  |  |  |  |  |  | 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).                                                                                                                    
| | 10.51 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                     
| | 10.52 |  |  |  |  |  |  | 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).                                                                                                                                                                                      
| | 10.53 |  |  |  |  |  |  | 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).                                                                                                                                                                             
| | 10.54 |  |  |  |  |  |  | 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).                                                                                                                                                                            

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##### Table of Contents



| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                   
| | ----- |  |  |  | - |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.55 |  |  |  |  |  |  | Asset Purchase Agreement dated as of
    December 31, 2002 by and among Spanish Broadcasting System
    of Illinois, Inc., Big City Radio, Inc. and Big City
    Radio-CHI, L.L.C. (incorporated by reference to
    Exhibit 10.59 to the Companys Annual Report on Form
    10-K filed March 31, 2003 (the 2003 Form 10-K)).                  
| | 10.56 |  |  |  |  |  |  | Time Brokerage Agreement dated as of
    December 31, 2002 between Big City Radio-CHI, L.L.C. as
    Licensee and Spanish Broadcasting System of Illinois, Inc.
    as Programmer (incorporated by reference to Exhibit 10.60
    to the Companys 2003 Form 10-K).                                                                               
| | 10.57 |  |  |  |  |  |  | Guaranty Agreement dated as of December 31,
    2002 by the Company in favor of Big City Radio, Inc. and
    Big City Radio-CHI, L.L.C. (incorporated by reference to
    Exhibit 10.61 to the Companys 2003 Form 10-K).                                                                                                                         
| | 10.58 |  |  |  |  |  |  | Warrant dated March 31, 2003 by the Company
    in favor of International Church of the FourSquare Gospel
    (incorporated by reference to Exhibit 10.4 of the
    Companys Quarterly Report on Form 10-Q, dated
    May 15, 2003 (the 5/15/03 Quarterly Report)).                                                                            
| | 10.59 |  |  |  |  |  |  | Warrant dated April 30, 2003 by the Company
    in favor of International Church of the FourSquare Gospel
    (incorporated by reference to Exhibit 10.5 of the
    Companys 5/15/03 Quarterly Report).                                                                                                                                          
| | 10.60 |  |  |  |  |  |  | Warrant dated May 31, 2003 by the Company in
    favor of International Church of the FourSquare Gospel
    (incorporated by reference to Exhibit 10.1 of the
    Companys Quarterly Report on Form 10-Q, dated
    August 13, 2003 (the 8/13/03 Quarterly Report)).                                                                           
| | 10.61 |  |  |  |  |  |  | Warrant dated June 30, 2003 by the Company
    in favor of International Church of the FourSquare Gospel
    (incorporated by reference to Exhibit 10.2 of the
    Companys 8/13/03 Quarterly Report).                                                                                                                                           
| | 10.62 |  |  |  |  |  |  | Warrant dated July 31, 2003 by the Company
    in favor of International Church of the FourSquare Gospel
    (incorporated by reference to Exhibit 10.3 of the
    Companys 8/13/03 Quarterly Report).                                                                                                                                           
| | 10.63 |  |  |  |  |  |  | Asset Purchase Agreement dated as of
    September 18, 2003 between Spanish Broadcasting
    System, Inc. and Border Media Partners, LLC (incorporated
    by reference to Exhibit 10.1 of the Companys Current
    Report on Form 8-K, dated September 25, 2003).                                                                               
| | 10.64 |  |  |  |  |  |  | Asset Purchase Agreement dated as of
    October 2, 2003 between Spanish Broadcasting
    System, Inc., Spanish Broadcasting
    System-San Francisco, Inc., KPTI Licensing, Inc.
    and 3 Point Media-San Francisco, LLC (incorporated by
    reference to Exhibit 10.1 of the Companys Current
    Report on Form 8-K, dated October 9, 2003).
| | 10.65 |  |  |  |  |  |  | Warrant dated August 31, 2003 by the Company
    in favor of International Church of the FourSquare Gospel
    (incorporated by reference to Exhibit 10.1 of the
    Companys 11/14/03 Quarterly Report).                                                                                                                                        
| | 10.66 |  |  |  |  |  |  | Warrant dated September 30, 2003 by the
    Company in favor of International Church of the FourSquare
    Gospel (incorporated by reference to Exhibit 10.2 of the
    Companys 11/14/03 Quarterly Report).                                                                                                                                     
| | 10.67 |  |  |  |  |  |  | Credit Agreement between the Company and Merrill
    Lynch, Pierce Fenner & Smith Incorporated, Deutsche
    Bank Securities Inc. and Lehman Commercial Paper Inc. dated
    October 30, 2003 (incorporated by reference to
    Exhibit 10.3 of the Companys 11/14/03 Quarterly
    Report).                                                     
| | 10.68 |  |  |  |  |  |  | Guarantee and Collateral Agreement between the
    Company and certain of its subsidiaries in favor of Lehman
    Commercial Paper Inc. dated October 30, 2003 (incorporated
    by reference to Exhibit 10.4 of the Companys 11/14/03
    Quarterly Report).                                                                                    
| | 10.69 |  |  |  |  |  |  | Assignment of Leases and Rents by the Company in
    favor of Lehman Commercial Paper Inc. dated October 30,
    2003 (incorporated by reference to Exhibit 10.5 of the
    Companys 11/14/03 Quarterly Report).                                                                                                                                 
| | 10.70 |  |  |  |  |  |  | Deed of Trust, Assignment of Leases and Rents,
    Security Agreement and Fixture Filing by the Company in favor of
    Lehman Commercial Paper Inc. dated October 30, 2003
    (incorporated by reference to Exhibit 10.6 of the
    Companys 11/14/03 Quarterly Report).                                                                       
| | 10.71 |  |  |  |  |  |  | Transmission Facilities Lease between the Company
    and International Church of the FourSquare Gospel, dated
    October 30, 2003 (incorporated by reference to
    Exhibit 10.7 of the Companys 11/14/03 Quarterly
    Report).                                                                                                               

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| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                                                           
| | ----- |  |  |  | - |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.72 |  |  |  |  |  |  | Purchase Agreement dated October 30, 2003
    between the Company and Merrill Lynch, Pierce Fenner &
    Smith Incorporated, Deutsche Bank Securities Inc. and Lehman
    Brothers Inc. with respect to 10 3/4% Series A
    Cumulative Exchangeable Redeemable Preferred Stock (incorporated
    by reference to Exhibit 10.8 of the Companys 11/14/03
    Quarterly Report).           
| | 10.73 |  |  |  |  |  |  | Registration Rights Agreement dated
    October 30, 2003 between the Company and Merrill Lynch,
    Pierce Fenner & Smith Incorporated, Deutsche Bank
    Securities Inc. and Lehman Brothers Inc. with respect to
    10 3/4% Series A Cumulative Exchangeable Redeemable
    Preferred Stock (incorporated by reference to Exhibit 10.9
    of the Companys 11/14/03 Quarterly Report).
| | 10.74 |  |  |  |  |  |  | Nonqualified Stock Option Agreement dated
    July 11, 2003 between the Company and Jack Langer.                                                                                                                                                                                                                                                                                          
| | 10.75 |  |  |  |  |  |  | Nonqualified Stock Option Agreement dated
    July 11, 2003 between the Company and Dan Mason.                                                                                                                                                                                                                                                                                            
| | 10.76 |  |  |  |  |  |  | Incentive Stock Option Agreement dated
    September 8, 2003 between the Company and William B.
    Tanner Jr.                                                                                                                                                                                                                                                                            
| | 10.77 |  |  |  |  |  |  | Nonqualified Stock Option Agreement dated
    September 8, 2003 between the Company and William B.
    Tanner Jr.                                                                                                                                                                                                                                                                         
| | 10.78 |  |  |  |  |  |  | Nonqualified Stock Option Agreement dated
    October 27, 2003 between the Company and Raúl
    Alarcón, Jr.                                                                                                                                                                                                                                                                              
| | 10.79 |  |  |  |  |  |  | Nonqualified Stock Option Agreement dated
    December 10, 2003 between the Company and Marko Radlovic.                                                                                                                                                                                                                                                                                   
| | 10.80 |  |  |  |  |  |  | Incentive Stock Option Agreement dated
    December 10, 2003 between the Company and Marko Radlovic.                                                                                                                                                                                                                                                                                      
| | 10.81 |  |  |  |  |  |  | Amended and Restated Employment Agreement dated
    October 31, 2003 between the Company and Marko Radlovic.                                                                                                                                                                                                                                                                              
| | 14.1  |  |  |  |  |  |  | Code of Business Conduct and Ethics.                                                                                                                                                                                                                                                                                                                                                      
| | 21.1  |  |  |  |  |  |  | List of Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                                                      
| | 24.1  |  |  |  |  |  |  | Power of Attorney (included on the signature page
    of this Annual Report on Form 10-K).                                                                                                                                                                                                                                                                                                
| | 31.1  |  |  |  |  |  |  | Chief Executive Officers Certification
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                    
| | 31.2  |  |  |  |  |  |  | Chief Financial Officers Certification
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                    
| | 32.1  |  |  |  |  |  |  | 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.                                                                                                                                                                                                                                 
| | 32.2  |  |  |  |  |  |  | Chief Financial Officers Certification
    pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                 

(b) Reports on Form 8-K:

We did not file any current reports on
Form 8-K during the last quarter of fiscal year 2003.

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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 15th day of
March, 2004.



| |                                      
| | -------------------------------------
| | 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

Each person whose signature appears below hereby
constitutes and appoints Raúl Alarcón, Jr. and
Joseph A. García, and each of them, his true and lawful
agent, proxy and attorney-in-fact, with full power of
substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to (i) act on, sign
and file with the Securities and Exchange Commission any and all
amendments to this report together with all schedules and
exhibits thereto, (ii) act on, sign and file such
certificates, instruments, agreements and other documents as may
be necessary or appropriate in connection therewith, and
(iii) take any and all actions which may be necessary or
appropriate in connection therewith, granting unto such agent,
proxy and attorney-in-fact full power and authority to do and
perform each and every act and thing necessary or appropriate to
be done, as fully for all intents and purposes as he might or
could do in person, hereby approving, ratifying and confirming
all that such agents, proxies and attorneys-in-fact or any of
their substitutes may lawfully do or cause to be done by virtue
thereof.

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 15th day of March, 2004.

|                                                       |  |                                                                                                                      
|------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------
|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/ CARL PARMERCarl Parmer                             |  | Director                                                                                                             
|                                                      
|/s/ JACK LANGERJack Langer                             |  | Director                                                                                                             

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|                                       |  |         
|-------------------------------------- |  | --------
|Signature                              |  |         
|                                       |  |         
|                                      
|/s/ DAN MASONDan Mason                 |  | Director
|                                      
|/s/ JASON L. SHRINSKYJason L. Shrinsky |  | Director

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EXHIBIT INDEX

(a) 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 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).                                                                                                                                                                                                                                                                                                                    
| | 3.4  |  |  |  |  |  |  | Certificate of Elimination of
    14 1/4% Senior Exchangeable Preferred Stock,
    Series A of the Company, dated October 28, 2003
    (incorporated by reference to Exhibit 3.3 of the
    Companys Quarterly Report on Form 10-Q, dated
    November 14, 2003 (the 11/14/03 Quarterly
    Report)).                                                                                                                                         
| | 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 Designations dated
    October 29, 2003 Setting Forth the Voting Power,
    Preferences and Relative, Participating, Optional and Other
    Special Rights and Qualifications, Limitations and Restrictions
    of the 10 3/4% Series A Cumulative Exchangeable
    Redeemable Preferred Stock of Spanish Broadcasting
    System, Inc. (incorporated by reference to Exhibit 4.1
    of the Companys 11/14/03 Quarterly Report).
| | 4.3  |  |  |  |  |  |  | Certificate of Designations dated
    October 29, 2003 Setting Forth the Voting Power,
    Preferences and Relative, Participating, Optional and Other
    Special Rights and Qualifications, Limitations and Restrictions
    of the 10 3/4% Series B Cumulative Exchangeable
    Redeemable Preferred Stock of Spanish Broadcasting
    System, Inc. (incorporated by reference to Exhibit 4.2
    of the Companys 11/14/03 Quarterly Report).
| | 4.4  |  |  |  |  |  |  | Indenture dated June 29, 1994 among the
    Company, IBJ Schroder Bank & Trust Company, as Trustee,
    the Guarantors named therein and the Purchasers named therein
    (incorporated by reference to Exhibit 4.1 of the
    Companys 1994 Registration Statement on Form S-4, the
    1994 Registration Statement).                                                                                                                        
| | 4.5  |  |  |  |  |  |  | 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).                                                                                                                                                                     
| | 4.6  |  |  |  |  |  |  | Second Supplemental Indenture dated as of
    March 1, 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).                                                                                                                                                                     
| | 4.7  |  |  |  |  |  |  | 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).                                                                                                                                                       
| | 4.8  |  |  |  |  |  |  | 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)).                                                                                                                                                                               
| | 4.9  |  |  |  |  |  |  | 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).                                                                                                                                                                       
| | 4.10 |  |  |  |  |  |  | Form of stock certificate for the Class A common
    stock of the Company (incorporated by reference to the
    Companys 1999 Registration Statement).                                                                                                                                                                                                                                                                                          
| | 10.1 |  |  |  |  |  |  | Warrant Agreement dated as of March 15, 1997
    among the Company and IBJ Schroder Bank & Trust
    Company, as Warrant Agent (incorporated by reference to the 1996
    Current Report).                                                                                                                                                                                                                                                       

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| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----- |  |  |  | - |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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).                                                                                                                                                                                                                                                                                                
| | 10.5  |  |  |  |  |  |  | Employment Agreement dated April 1, 1999, by and
    between the Company and Jesus Salas (incorporated by reference
    to the Companys 1999 Registration Statement).                                                                                                                                                                                                                                                                                                                                        
| | 10.6  |  |  |  |  |  |  | Letter Agreement dated January 13, 1997
    between the Company and Caballero Spanish Media, LLC
    (incorporated by reference to the 1996 Current Report).                                                                                                                                                                                                                                                                                                                                                  
| | 10.7  |  |  |  |  |  |  | Ground Lease dated December 18, 1995 between
    Louis Viola Company and SBS-NJ (incorporated by reference to the
    1996 Current Report).                                                                                                                                                                                                                                                                                                                                                                   
| | 10.8  |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                                                                          
| | 10.9  |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                   
| | 10.10 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                      
| | 10.11 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                  
| | 10.12 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                                                       
| | 10.13 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                               
| | 10.14 |  |  |  |  |  |  | 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)).                                                                 
| | 10.15 |  |  |  |  |  |  | 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)).
| | 10.16 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                           
| | 10.17 |  |  |  |  |  |  | Indemnification Agreement with Raúl
    Alarcón, Jr. dated as of November 2, 1999
    (incorporated by reference to the 1999 Current Report).                                                                                                                                                                                                                                                                                                                                                                 
| | 10.18 |  |  |  |  |  |  | Spanish Broadcasting System 1999 Stock Option
    Plan (incorporated by reference to the Companys 1999
    Registration Statement).                                                                                                                                                                                                                                                                                                                                                                          
| | 10.19 |  |  |  |  |  |  | Spanish Broadcasting System 1999 Company Stock
    Option Plan for Nonemployee Directors (incorporated by reference
    to the Companys 1999 Registration Statement).                                                                                                                                                                                                                                                                                                                                        
| | 10.20 |  |  |  |  |  |  | Form of Lock-Up Letter Agreement (incorporated by
    reference in the Companys 1999 Registration Statement).                                                                                                                                                                                                                                                                                                                                                                                                

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| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ----- |  |  |  | - |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.21 |  |  |  |  |  |  | Option Grant not under the Stock Option Plans
    with Arnold Sheiffer, dated October 27, 1999 (incorporated
    by reference to the 1999 Current Report).                                                                                                                                                                                                                                                                                                                                     
| | 10.22 |  |  |  |  |  |  | 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).                                                                                                                                                     
| | 10.23 |  |  |  |  |  |  | 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)).
| | 10.24 |  |  |  |  |  |  | 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).                                         
| | 10.25 |  |  |  |  |  |  | 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).                                                                                                                                                                                     
| | 10.26 |  |  |  |  |  |  | Employment Agreement dated December 7, 2000,
    between Joseph García and the Company (incorporated by
    reference to Exhibit 10.46 of the Companys 2000
    Form 10-K).                                                                                                                                                                                                                                                                                                                   
| | 10.27 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                                                   
| | 10.28 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                        
| | 10.29 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                                   
| | 10.30 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                                                       
| | 10.31 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                    
| | 10.32 |  |  |  |  |  |  | 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)).                                                                                                                                                                                      
| | 10.33 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                 
| | 10.34 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                        
| | 10.35 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                        
| | 10.36 |  |  |  |  |  |  | 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).                                                                                                                                                                                           
| | 10.37 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                                                                       

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| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                                                                              
| | ----- |  |  |  | - |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.38 |  |  |  |  |  |  | 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 by reference to the Companys 2001
    Form S-3).                                                                                                                                                                          
| | 10.39 |  |  |  |  |  |  | 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).                                                                                                                                                                                                     
| | 10.40 |  |  |  |  |  |  | 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).                                                                                                                                                                                                  
| | 10.41 |  |  |  |  |  |  | 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).                                                                                                                                                                               
| | 10.42 |  |  |  |  |  |  | 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).                                                                                                                                                         
| | 10.43 |  |  |  |  |  |  | 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).                                                                                                                                                      
| | 10.44 |  |  |  |  |  |  | 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).    
| | 10.45 |  |  |  |  |  |  | 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).                   
| | 10.46 |  |  |  |  |  |  | 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).
| | 10.47 |  |  |  |  |  |  | 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).                                                                                                                                                                        
| | 10.48 |  |  |  |  |  |  | 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).                                                                                                                                                                                   
| | 10.49 |  |  |  |  |  |  | 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).                                                                                                                                     
| | 10.50 |  |  |  |  |  |  | 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).                                                                                                                    
| | 10.51 |  |  |  |  |  |  | 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).                                                                                                                                                                                                                     
| | 10.52 |  |  |  |  |  |  | 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).                                                                                                                                                                                      
| | 10.53 |  |  |  |  |  |  | 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).                                                                                                                                                                             
| | 10.54 |  |  |  |  |  |  | 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).                                                                                                                                                                            

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| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                   
| | ----- |  |  |  | - |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.55 |  |  |  |  |  |  | Asset Purchase Agreement dated as of
    December 31, 2002 by and among Spanish Broadcasting System
    of Illinois, Inc., Big City Radio, Inc. and Big City
    Radio-CHI, L.L.C. (incorporated by reference to
    Exhibit 10.59 to the Companys Annual Report on Form
    10-K filed March 31, 2003 (the 2003 Form 10-K)).                  
| | 10.56 |  |  |  |  |  |  | Time Brokerage Agreement dated as of
    December 31, 2002 between Big City Radio-CHI, L.L.C. as
    Licensee and Spanish Broadcasting System of Illinois, Inc.
    as Programmer (incorporated by reference to Exhibit 10.60
    to the Companys 2003 Form 10-K).                                                                               
| | 10.57 |  |  |  |  |  |  | Guaranty Agreement dated as of December 31,
    2002 by the Company in favor of Big City Radio, Inc. and
    Big City Radio-CHI, L.L.C. (incorporated by reference to
    Exhibit 10.61 to the Companys 2003 Form 10-K).                                                                                                                         
| | 10.58 |  |  |  |  |  |  | Warrant dated March 31, 2003 by the Company
    in favor of International Church of the FourSquare Gospel
    (incorporated by reference to Exhibit 10.4 of the
    Companys Quarterly Report on Form 10-Q, dated
    May 15, 2003 (the 5/15/03 Quarterly Report)).                                                                            
| | 10.59 |  |  |  |  |  |  | Warrant dated April 30, 2003 by the Company
    in favor of International Church of the FourSquare Gospel
    (incorporated by reference to Exhibit 10.5 of the
    Companys 5/15/03 Quarterly Report).                                                                                                                                          
| | 10.60 |  |  |  |  |  |  | Warrant dated May 31, 2003 by the Company in
    favor of International Church of the FourSquare Gospel
    (incorporated by reference to Exhibit 10.1 of the
    Companys Quarterly Report on Form 10-Q, dated
    August 13, 2003 (the 8/13/03 Quarterly Report)).                                                                           
| | 10.61 |  |  |  |  |  |  | Warrant dated June 30, 2003 by the Company
    in favor of International Church of the FourSquare Gospel
    (incorporated by reference to Exhibit 10.2 of the
    Companys 8/13/03 Quarterly Report).                                                                                                                                           
| | 10.62 |  |  |  |  |  |  | Warrant dated July 31, 2003 by the Company
    in favor of International Church of the FourSquare Gospel
    (incorporated by reference to Exhibit 10.3 of the
    Companys 8/13/03 Quarterly Report).                                                                                                                                           
| | 10.63 |  |  |  |  |  |  | Asset Purchase Agreement dated as of
    September 18, 2003 between Spanish Broadcasting
    System, Inc. and Border Media Partners, LLC (incorporated
    by reference to Exhibit 10.1 of the Companys Current
    Report on Form 8-K, dated September 25, 2003).                                                                               
| | 10.64 |  |  |  |  |  |  | Asset Purchase Agreement dated as of
    October 2, 2003 between Spanish Broadcasting
    System, Inc., Spanish Broadcasting
    System-San Francisco, Inc., KPTI Licensing, Inc.
    and 3 Point Media-San Francisco, LLC (incorporated by
    reference to Exhibit 10.1 of the Companys Current
    Report on Form 8-K, dated October 9, 2003).
| | 10.65 |  |  |  |  |  |  | Warrant dated August 31, 2003 by the Company
    in favor of International Church of the FourSquare Gospel
    (incorporated by reference to Exhibit 10.1 of the
    Companys 11/14/03 Quarterly Report).                                                                                                                                        
| | 10.66 |  |  |  |  |  |  | Warrant dated September 30, 2003 by the
    Company in favor of International Church of the FourSquare
    Gospel (incorporated by reference to Exhibit 10.2 of the
    Companys 11/14/03 Quarterly Report).                                                                                                                                     
| | 10.67 |  |  |  |  |  |  | Credit Agreement between the Company and Merrill
    Lynch, Pierce Fenner & Smith Incorporated, Deutsche
    Bank Securities Inc. and Lehman Commercial Paper Inc. dated
    October 30, 2003 (incorporated by reference to
    Exhibit 10.3 of the Companys 11/14/03 Quarterly
    Report).                                                     
| | 10.68 |  |  |  |  |  |  | Guarantee and Collateral Agreement between the
    Company and certain of its subsidiaries in favor of Lehman
    Commercial Paper Inc. dated October 30, 2003 (incorporated
    by reference to Exhibit 10.4 of the Companys 11/14/03
    Quarterly Report).                                                                                    
| | 10.69 |  |  |  |  |  |  | Assignment of Leases and Rents by the Company in
    favor of Lehman Commercial Paper Inc. dated October 30,
    2003 (incorporated by reference to Exhibit 10.5 of the
    Companys 11/14/03 Quarterly Report).                                                                                                                                 
| | 10.70 |  |  |  |  |  |  | Deed of Trust, Assignment of Leases and Rents,
    Security Agreement and Fixture Filing by the Company in favor of
    Lehman Commercial Paper Inc. dated October 30, 2003
    (incorporated by reference to Exhibit 10.6 of the
    Companys 11/14/03 Quarterly Report).                                                                       
| | 10.71 |  |  |  |  |  |  | Transmission Facilities Lease between the Company
    and International Church of the FourSquare Gospel, dated
    October 30, 2003 (incorporated by reference to
    Exhibit 10.7 of the Companys 11/14/03 Quarterly
    Report).                                                                                                               

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| |       |  |  |  |   |  |  |                                                                                                                                                                                                                                                                                                                                                                                           
| | ----- |  |  |  | - |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.72 |  |  |  |  |  |  | Purchase Agreement dated October 30, 2003
    between the Company and Merrill Lynch, Pierce Fenner &
    Smith Incorporated, Deutsche Bank Securities Inc. and Lehman
    Brothers Inc. with respect to 10 3/4% Series A
    Cumulative Exchangeable Redeemable Preferred Stock (incorporated
    by reference to Exhibit 10.8 of the Companys 11/14/03
    Quarterly Report).           
| | 10.73 |  |  |  |  |  |  | Registration Rights Agreement dated
    October 30, 2003 between the Company and Merrill Lynch,
    Pierce Fenner & Smith Incorporated, Deutsche Bank
    Securities Inc. and Lehman Brothers Inc. with respect to
    10 3/4% Series A Cumulative Exchangeable Redeemable
    Preferred Stock (incorporated by reference to Exhibit 10.9
    of the Companys 11/14/03 Quarterly Report).
| | 10.74 |  |  |  |  |  |  | Nonqualified Stock Option Agreement dated
    July 11, 2003 between the Company and Jack Langer.                                                                                                                                                                                                                                                                                          
| | 10.75 |  |  |  |  |  |  | Nonqualified Stock Option Agreement dated
    July 11, 2003 between the Company and Dan Mason.                                                                                                                                                                                                                                                                                            
| | 10.76 |  |  |  |  |  |  | Incentive Stock Option Agreement dated
    September 8, 2003 between the Company and William B.
    Tanner Jr.                                                                                                                                                                                                                                                                            
| | 10.77 |  |  |  |  |  |  | Nonqualified Stock Option Agreement dated
    September 8, 2003 between the Company and William B.
    Tanner Jr.                                                                                                                                                                                                                                                                         
| | 10.78 |  |  |  |  |  |  | Nonqualified Stock Option Agreement dated
    October 27, 2003 between the Company and Raúl
    Alarcón, Jr.                                                                                                                                                                                                                                                                              
| | 10.79 |  |  |  |  |  |  | Nonqualified Stock Option Agreement dated
    December 10, 2003 between the Company and Marko Radlovic.                                                                                                                                                                                                                                                                                   
| | 10.80 |  |  |  |  |  |  | Incentive Stock Option Agreement dated
    December 10, 2003 between the Company and Marko Radlovic.                                                                                                                                                                                                                                                                                      
| | 10.81 |  |  |  |  |  |  | Amended and Restated Employment Agreement dated
    October 31, 2003 between the Company and Marko Radlovic.                                                                                                                                                                                                                                                                              
| | 14.1  |  |  |  |  |  |  | Code of Business Conduct and Ethics.                                                                                                                                                                                                                                                                                                                                                      
| | 21.1  |  |  |  |  |  |  | List of Subsidiaries of the Company.                                                                                                                                                                                                                                                                                                                                                      
| | 24.1  |  |  |  |  |  |  | Power of Attorney (included on the signature page
    of this Annual Report on Form 10-K).                                                                                                                                                                                                                                                                                                
| | 31.1  |  |  |  |  |  |  | Chief Executive Officers Certification
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                    
| | 31.2  |  |  |  |  |  |  | Chief Financial Officers Certification
    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                    
| | 32.1  |  |  |  |  |  |  | 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.                                                                                                                                                                                                                                 
| | 32.2  |  |  |  |  |  |  | Chief Financial Officers Certification
    pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                 

(b) Reports on Form 8-K:

We did not file any current reports on
Form 8-K during the last quarter of fiscal year 2003.

75