SPANISH BROADCASTING SYSTEM INC - Quarter Report: 2008 June (Form 10-Q)

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2008

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from      to

Spanish Broadcasting System, Inc.

Delaware (State or other jurisdiction of incorporation or organization)		13-3827791 (I.R.S. Employer Identification No.)

2601 South Bayshore Drive, PH II
Coconut Grove, Florida 33133
(Address of principal executive offices) (Zip Code)

(305) 441-6901
(Registrant’s telephone number, including area code)

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

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

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

     As of August 7, 2008, 41,401,805 shares of Class A common stock, par value $0.0001 per share, 23,403,500 shares of Class B common stock, par value $0.0001 per share and 380,000 shares of Series C convertible preferred stock, $0.01 par value per share, which are convertible into 7,600,000 shares of Class A common stock, were outstanding.

 

 

SPANISH BROADCASTING SYSTEM, INC.

INDEX

		Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements — Unaudited				4
Unaudited Condensed Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007				4
Unaudited Condensed Consolidated Statements of Operations for the Three- and Six-Months Ended June 30, 2008 and 2007				5
Unaudited Condensed Consolidated Statement of Changes in Stockholders’ (Deficit) Equity and Comprehensive Loss for the Six-Months Ended June 30, 2008				6
Unaudited Condensed Consolidated Statements of Cash Flows for the Six-Months Ended June 30, 2008 and 2007				7
Notes to Unaudited Condensed Consolidated Financial Statements				8
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations				17
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk				23
ITEM 4. Controls and Procedures				23
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings				24
ITEM 1A. Risk Factors				24
ITEM 4. Submission of Matters to a Vote of Security Holders				24
ITEM 6. Exhibits				25
Signatures				27
Ex-31.1 Section 302 Certification of CEO
Ex-31.2 Section 302 Certification of CFO
Ex-32.1 Section 906 Certification of CEO
Ex-32.2 Section 906 Certification of CFO

Special Note Regarding Forward-Looking Statements

     This Quarterly Report on Form 10-Q contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are not based on historical facts, but rather reflect our current expectations concerning future results and events. These forward-looking statements generally can be identified by the use of statements that include phrases such as “believe,” “expect,” “anticipate”, “intend”, “estimate”, “plan”, “project”, “foresee”, “likely”, “will” or other words or phrases with similar meanings. Similarly, statements that describe our objectives, plans or goals are, or may be, forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be different from any future results, performance and anticipated achievements expressed or implied by these statements. We do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in this report, in Part II, “Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2007, and those described from time to time in our future reports filed with the Securities and Exchange Commission.

PART I. FINANCIAL INFORMATION

     Item 1. Financial Statements — Unaudited

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

		June 30,				December 31,
		2008				2007
		(In thousands, except share data)
Assets
Current assets:
Cash and cash equivalents		$	39,010				61,122
Receivables, net of allowance for doubtful accounts of $2,881 in 2008 and $3,623 in 2007			33,540				35,835
Prepaid expenses and other current assets			6,747				4,515
Total current assets			79,297				101,472
Property and equipment, net of accumulated depreciation of $40,945 in 2008 and $38,188 in 2007			53,467				43,739
FCC broadcasting licenses			353,612				749,864
Goodwill			32,806				32,806
Other intangible assets, net of accumulated amortization of $160 in 2008 and $142 in 2007			1,274				1,292
Deferred financing costs, net of accumulated amortization of $3,411 in 2008 and $2,860 in 2007			4,251				4,803
Other assets			2,388				2,153
Total assets		$	527,095				936,129
Liabilities and Stockholders’ (Deficit) Equity
Current liabilities:
Accounts payable and accrued expenses		$	18,186				19,640
Accrued interest			267				246
Unearned revenue			2,881				4,015
Deferred commitment fee			263				300
Other liabilities			66				84
Non-interest bearing promissory note payable due 2009, net of unamortized discount of $719 in 2008			17,781				—
Current portion of the senior credit facilities term loan due 2012			3,250				3,250
Current portion of other long-term debt			434				430
Series B cumulative exchangeable redeemable preferred stock dividends payable			2,014				2,014
Total current liabilities			45,142				29,979
Unearned revenue, less current portion			—				305
Other liabilities, less current portion			172				187
Derivative instruments			4,842				3,582
Senior credit facilities term loan due 2012, less current portion			311,187				312,813
Other long-term debt, less current portion			7,272				7,490
Non-interest bearing promissory note payable due 2009, net of unamortized discount of $1,410 in 2007			—				17,090
Deferred income taxes			69,529				170,148
Total liabilities			438,144				541,594
Cumulative exchangeable redeemable preferred stock:
103/4% Series B cumulative exchangeable redeemable preferred stock, $0.01 par value, liquidation value $1,000 per share. Authorized 280,000 shares; 89,932 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively			89,932				89,932
Stockholders’ (deficit) equity:
Series C convertible preferred stock, $0.01 par value and liquidation value. Authorized 600,000 shares; 380,000 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively			4				4
Class A common stock, $0.0001 par value. Authorized 100,000,000 shares; 41,401,805 and 40,777,805 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively			4				4
Class B common stock, $0.0001 par value. Authorized 50,000,000 shares; 23,403,500 and 24,003,500 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively			2				2
Additional paid-in capital			524,512				524,030
Accumulated other comprehensive loss			(4,842	)			(3,582	)
Accumulated deficit			(520,661	)			(215,855	)
Total stockholders’ (deficit) equity			(981	)			304,603
Total liabilities and stockholders’ (deficit) equity		$	527,095				936,129

See accompanying notes to the unaudited condensed consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

		Three-Months Ended								Six-Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
		(In thousands, except per share data)
Net revenue		$	45,180				47,871				81,613				86,808
Operating expenses:
Engineering and programming			15,464				12,377				30,118				24,671
Selling, general and administrative			17,623				20,197				37,212				36,104
Corporate expenses			3,672				3,112				7,265				6,715
Depreciation and amortization			1,442				1,105				2,804				2,242
Total operating expenses			38,201				36,791				77,399				69,732
Gain on the disposal of assets, net			(2	)			(1	)			(5	)			(1	)
Impairment of FCC broadcasting licenses			396,252				—				396,252				—
Operating (loss) income			(389,271	)			11,081				(392,033	)			17,077
Other (expense) income:
Interest expense, net			(5,315	)			(4,735	)			(10,399	)			(9,424	)
Other, net			—				—				1,928				1,960
(Loss) income before income taxes			(394,586	)			6,346				(400,504	)			9,613
Income tax (benefit) expense			(100,532	)			3,956				(100,532	)			6,209
Net (loss) income			(294,054	)			2,390				(299,972	)			3,404
Dividends on Series B preferred stock			(2,417	)			(2,417	)			(4,834	)			(4,834	)
Net loss applicable to common stockholders		$	(296,471	)			(27	)			(304,806	)			(1,430	)
Basic and diluted net loss per common share		$	(4.09	)			—				(4.21	)			(0.02	)
Weighted average common shares outstanding:
Basic & diluted			72,405				72,381				72,405				72,381

See accompanying notes to the unaudited condensed consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statement of Changes in Stockholders’ (Deficit) Equity
and Comprehensive Loss for the Six-Months Ended June 30, 2008

		Class C								Class A								Class B												Accumulated								Total
		preferred stock								common stock								common stock								Additional				other								stockholders’
		Number of				Par				Number of				Par				Number of				Par				paid-in				comprehensive				Accumulated				(deficit)
		shares				value				shares				value				shares				value				capital				loss				deficit				equity
		(In thousands, except share data)
Balance at December 31, 2007			380,000			$	4				40,777,805			$	4				24,003,500			$	2			$	524,030			$	(3,582	)		$	(215,855	)		$	304,603
Conversion of Class B common stock to Class A common stock			—				—				600,000				—				(600,000	)			—				—				—				—				—
Issuance of Class A common stock from vesting of restricted stock			—				—				24,000				—				—				—				—				—				—				—
Stock-based compensation			—				—				—				—				—				—				482				—				—				482
Series B preferred stock dividends			—				—				—				—				—				—				—				—				(4,834	)			(4,834	)
Comprehensive income:
Net loss			—				—				—				—				—				—				—				—				(299,972	)			(299,972	)
Unrealized loss on derivative instruments			—				—				—				—				—				—				—				(1,260	)			—				(1,260	)
Comprehensive loss																																							(301,232	)
Balance at June 30, 2008			380,000			$	4				41,401,805			$	4				23,403,500			$	2			$	524,512			$	(4,842	)		$	(520,661	)		$	(981	)

See accompanying notes to the unaudited condensed consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

		Six-Months Ended
		June 30,
		2008				2007
		(In thousands)
Cash flows from operating activities:
Net (loss) income		$	(299,972	)			3,404
Adjustments to reconcile net (loss) income to net cash provided (used in) by operating activities:
Gain on the sale of assets			(5	)			(1	)
Impairment of FCC broadcasting licenses			396,252				—
Stock-based compensation			482				861
Depreciation and amortization			2,804				2,242
Net barter income			(60	)			(174	)
Provision for trade doubtful accounts			576				553
Amortization of deferred financing costs			552				557
Amortization of discount on the non-interest bearing promissory note payable			691				639
Deferred income taxes			(100,619	)			6,122
Decrease in unearned revenue			(1,617	)			(1,899	)
Accretion of the time-value of money component related to unearned revenue			91				125
Amortization of deferred commitment fee			(37	)			(38	)
Amortization of other liabilities			(33	)			(12	)
Changes in operating assets and liabilities:
Decrease (increase) in trade receivables			1,866				(6,184	)
(Increase) decrease in prepaid and other current assets			(2,232	)			165
Increase in other assets			(235	)			(517	)
(Decrease) increase in accounts payable and accrued expenses			(1,646	)			1,435
Increase (decrease) in accrued interest			56				(128	)
Net cash (used in) provided by operating activities			(3,086	)			7,150
Cash flows from investing activities:
Purchases of property and equipment			(7,482	)			(2,428	)
Acquisition of a building and its related building improvements			(4,897	)			(1,982	)
Proceeds from an insurance recovery			27				15
Net cash used in investing activities			(12,352	)			(4,395	)
Cash flows from financing activities:
Payment of senior credit facility term loan 2012			(1,626	)			(1,626	)
Payment of Series B preferred stock cash dividends			(4,834	)			(4,834	)
Payments of other long-term debt			(214	)			(188	)
Net cash used in financing activities			(6,674	)			(6,648	)
Net decrease in cash and cash equivalents			(22,112	)			(3,893	)
Cash and cash equivalents at beginning of period			61,122				66,815
Cash and cash equivalents at end of period		$	39,010				62,922
Supplemental cash flows information:
Interest paid		$	9,920				9,934
Income taxes paid, net			10				—
Noncash investing and financing activities:
Ten-year promissory note issued for the acquisition of a building		$	—				7,650
Unrealized (loss) gain on derivative instruments			(1,260	)			1,669

See accompanying notes to the unaudited condensed consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

     The unaudited condensed consolidated financial statements include the accounts of Spanish Broadcasting System, Inc. and its subsidiaries (the “Company”, “we”, “us”, “our” or “SBS”). All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements as of June 30, 2008 and December 31, 2007 and for the three- and six-month periods ended June 30, 2008 and 2007 have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. They do not include all information and notes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with our consolidated financial statements as of, and for the fiscal year ended December 31, 2007, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.

     In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which are all of a normal and recurring nature, necessary for a fair presentation of the results of the interim periods. The results of operations for the three- and six-month periods ended June 30, 2008 are not necessarily indicative of the results for a full year.

2. Stockholders’ Equity

  (a) Series C Convertible Preferred Stock

     On December 23, 2004, in connection with the closing of the merger agreement, dated October 5, 2004, with Infinity Media Corporation (“Infinity”), Infinity Broadcasting Corporation of San Francisco (“Infinity SF”) and SBS Bay Area, LLC, a wholly-owned subsidiary of SBS (“SBS Bay Area”), we issued to Infinity (i) an aggregate of 380,000 shares of Series C convertible preferred stock, $0.01 par value per share (the “Series C preferred stock”), each of which is convertible at the option of the holder into twenty fully paid and non-assessable shares of our Class A common stock, $0.0001 par value per share (the “Class A common stock”); and (ii) a warrant to purchase an additional 190,000 shares of Series C preferred stock, exercisable at any time from December 23, 2004 until December 23, 2008, at an exercise price of $300.00 per share (the “Warrant”).

     Under the terms of the certificate of designation governing the Series C preferred stock, the holder of the Series C preferred stock has the right to convert each share into twenty fully paid and non-assessable shares of our Class A common stock. The shares of Series C preferred stock issued at the closing of the merger are convertible into 7,600,000 shares of our Class A common stock, subject to adjustment, and the Series C preferred stock issuable upon exercise of the Warrant is convertible into an additional 3,800,000 shares of our Class A common stock, subject to adjustment. To date, the Warrant has not been exercised.

     In connection with the closing of the merger transaction, we also entered into a registration rights agreement with Infinity, pursuant to which, Infinity may instruct us to file up to three registration statements, on a best efforts basis, with the Securities and Exchange Commission (“SEC”) providing for the registration for resale of the Class A common stock issuable upon conversion of the Series C preferred stock.

     We are required to pay holders of Series C preferred stock dividends on parity with our Class A common stock and Class B common stock, $0.0001 par value per share (the “Class B common stock”), and each other class or series of our capital stock, if created, after December 23, 2004.

  (b) Class A and B 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. The Class A common stock is entitled to one vote per share and the Class B common stock is entitled to ten votes per share. The Class B common stock is convertible to Class A common stock on a share-for-share basis at the option of the holder at any time, or automatically upon the transfer to a person or entity which is not a permitted transferee. 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 our 10 ³/4% Series B cumulative exchangeable redeemable preferred stock, par value $0.01 per share and liquidation preference of $1,000 per share (the “Series B preferred stock”) and on parity with the Series C preferred stock with respect to dividend rights and rights upon liquidation, winding up and dissolution of SBS.

  (c) Warrant

     In connection with the merger agreement with Infinity, as discussed in Note 2(a), we have a Warrant outstanding to ultimately purchase an aggregate of 3,800,000 shares of our Class A common stock, which expires on December 23, 2008.

  (d) Share-based Compensation Plans

  2006 Omnibus Equity Compensation Plan

     On July 16, 2006, we adopted an omnibus equity compensation plan (the “Omnibus Plan”) in which grants can be made to participants in any of the following forms: (i) incentive stock options, (ii) non-qualified stock options, (iii) stock appreciation rights, (iv) stock units, (v) stock awards, (vi) dividend equivalents, and (vii) other stock-based awards. The Omnibus Plan authorizes up to 3,500,000 shares of our Class A common stock for issuance, subject to adjustment in certain circumstances. The Omnibus Plan provides that the maximum aggregate number of shares of Class A common stock that may be granted, other than dividend equivalents, to any individual during any calendar year is 1,000,000 shares, subject to adjustments. In addition, the maximum aggregate number of shares of Class A common stock with respect to grants of stock units, stock awards and other stock-based awards that may be granted to any individual during a calendar year is also 1,000,000 shares, subject to adjustments.

  1999 Stock Option Plans

     In September 1999, we adopted an employee incentive stock option plan (the “1999 ISO Plan”) and a non-employee director stock option plan (the “1999 NQ Plan” and together with the 1999 ISO Plan, the “1999 Stock Option Plans”). Options granted under the 1999 ISO Plan will vest according to terms to be determined by the compensation committee of our board of directors, and will have a contractual life of up to 10 years from the 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 the date of grant. All options granted under the 1999 ISO Plan and the 1999 NQ Plan vest immediately upon a change in control of SBS, as defined therein. A total of 3,000,000 shares and 300,000 shares of Class A common stock were reserved for issuance under the 1999 ISO Plan and the 1999 NQ Plan, respectively. Additionally, on November 2, 1999, we granted a stock option to purchase 250,000 shares of Class A common stock to a former director. This option vested immediately, and expires 10 years from the date of grant.

  (e) Stock-Based Compensation Expense

     The impact on our results of operations of recognizing stock-based compensation for the three- and six-month periods ended June 30, 2008 and 2007 was as follows (in thousands):

		Three-Months Ended								Six-Months Ended
		June 30,								June 30,
		2008				2007				2008				2007
Engineering and programming expenses		$	8				189			$	168				377
Selling, general and administrative expenses			34				33				70				69
Corporate expenses			113				197				244				415
Total stock-based compensation expense		$	155				419			$	482				861

     During the three- and six-month periods ended June 30, 2008 and 2007, no stock options were exercised; therefore, no cash payments were received. In addition, we did not recognize a tax benefit on our stock-based compensation expense due to our valuation allowance on substantially all of our deferred tax assets.

  Stock Options

     Stock options have only been granted to employees or directors under our 1999 Stock Option Plans. Our stock options have various vesting schedules and are subject to the employees continuing service to SBS. We recognize compensation expense based on the estimated grant date fair value using the Black-Scholes option pricing model and recognize the compensation expense using a straight-line amortization method. When estimating forfeitures, we consider voluntary termination behaviors, as well as trends of

actual option forfeitures. Ultimately, our stock-based compensation expense is based on awards that vest. Our stock-based compensation has been reduced for estimated forfeitures.

     A summary of the status of our stock options, as of December 31, 2007 and June 30, 2008, and changes during the six-months ended June 30, 2008, is presented below (in thousands, except per share data):

														Weighted
						Weighted								Average
						Average				Aggregate				Remaining
						Exercise				Intrinsic				Contractual
		Shares				Price				Value				Life (Years)
Outstanding at December 31, 2007			3,063			$	10.86
Granted			—				—
Exercised			—				—
Forfeited			(23	)			11.78
Outstanding at June 30, 2008			3,040			$	10.86			$	—				4.6
Exercisable at June 30, 2008			2,903			$	11.13			$	—				4.4

     The following table summarizes information about stock options outstanding and exercisable at June 30, 2008 (in thousands, except per share data):

																			Weighted
											Outstanding								Average				Exercisable
															Weighted				Remaining								Weighted
															Average				Contractual								Average
											Unvested				Exercise				Life				Number				Exercise
Range of Exercise Prices							Vested Options				Options				Price				(Years)				Exercisable				Price
$	2.55 - 4.99							310				65			$	3.77				7.2				310			$	4.03
	5.00 - 9.99							1,695				62				8.71				5.2				1,695				8.78
	10.00 - 14.99							193				10				10.77				6.2				193				10.77
	15.00 - 20.00							705				—				20.00				1.3				705				20.00
								2,903				137			$	10.86				4.6				2,903			$	11.13

  Nonvested Shares

     Nonvested shares (restricted stock) are awarded to employees under our Omnibus Plan. In general, nonvested shares vest over three to five years and are subject to the employees continuing service to us. The cost of nonvested shares is determined using the fair value of our common stock on the date of grant. The compensation expense is recognized over the vesting period.

     A summary of the status of our nonvested shares, as of December 31, 2007 and June 30, 2008, and changes during the six-months ended June 30, 2008, is presented below (in thousands, except per share data):

						Weighted
						Average Grant-
						Date Fair Value
		Shares				(per Share)
Nonvested at December 31, 2007			77			$	4.19
Awarded			90				1.57
Vested			(24	)			4.30
Forfeited			—				—
Nonvested at June 30, 2008			143			$	2.52

3. Basic and Diluted Net Loss Per Common 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 and convertible preferred stock outstanding for each period presented, using the “if converted” method. Diluted net loss per common share is computed by giving effect to common stock equivalents as if they were outstanding for the entire period.

     Common stock equivalents were not considered in the calculation for the three- and six-month periods ended June 30, 2008 and 2007, since their effect would be anti-dilutive. If included, the common stock equivalents for these periods would have amounted to zero for all periods, excluding the three-month period ended June 30, 2008 which would have amounted to three.

4. Operating Segments

     Statement of Financial Accounting Standards (“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. We have two reportable segments: radio and television. The following summary table presents separate financial data for each of our operating segments (in thousands):

		Three-Months Ended																Six-Months Ended
		June 30,								Change								June 30,								Change
		2008				2007				$				%				2008				2007				$				%
Net revenue:
Radio		$	41,008				45,256				(4,248	)			(9	%)			74,034				82,088				(8,054	)			(10	%)
Television			4,172				2,615				1,557				60	%			7,579				4,720				2,859				61	%
Consolidated		$	45,180				47,871				(2,691	)			(6	%)			81,613				86,808				(5,195	)			(6	%)
Engineering and programming expenses:
Radio		$	10,236				9,068				1,168				13	%			20,152				17,910				2,242				13	%
Television			5,228				3,309				1,919				58	%			9,966				6,761				3,205				47	%
Consolidated		$	15,464				12,377				3,087				25	%			30,118				24,671				5,447				22	%
Selling, general and administrative expenses:
Radio		$	14,648				18,494				(3,846	)			(21	%)			31,870				32,717				(847	)			(3	%)
Television			2,975				1,703				1,272				75	%			5,342				3,387				1,955				58	%
Consolidated		$	17,623				20,197				(2,574	)			(13	%)			37,212				36,104				1,108				3	%
Corporate expenses:		$	3,672				3,112				560				18	%			7,265				6,715				550				8	%
Depreciation and amortization:
Radio		$	784				711				73				10	%			1,580				1,437				143				10	%
Television			277				128				149				116	%			444				270				174				64	%
Corporate			381				266				115				43	%			780				535				245				46	%
Consolidated		$	1,442				1,105				337				30	%			2,804				2,242				562				25	%
Gain on the disposal of assets, net:
Radio		$	(2	)			(1	)			(1	)			100	%			(5	)			(1	)			(4	)			400	%
Television			—				—				—				0	%			—				—				—				0	%
Corporate			—				—				—				0	%			—				—				—				0	%
Consolidated		$	(2	)			(1	)			(1	)			100	%			(5	)			(1	)			(4	)			400	%
Impairment of FCC broadcasting licenses:
Radio		$	379,415				—				379,415				100	%			379,415				—				379,415				100	%
Television			16,837				—				16,837				100	%			16,837				—				16,837				100	%
Corporate			—				—				—				0	%			—				—				—				0	%
Consolidated		$	396,252				—				396,252				100	%			396,252				—				396,252				100	%
Operating (loss) income:
Radio		$	(364,073	)			16,984				(381,057	)			(2244	%)			(358,978	)			30,025				(389,003	)			(1296	%)
Television			(21,145	)			(2,525	)			(18,620	)			737	%			(25,010	)			(5,698	)			(19,312	)			339	%
Corporate			(4,053	)			(3,378	)			(675	)			20	%			(8,045	)			(7,250	)			(795	)			11	%
Consolidated		$	(389,271	)			11,081				(400,352	)			(3613	%)			(392,033	)			17,077				(409,110	)			(2396	%)
Capital expenditures:
Radio		$	1,226				507				719				142	%			2,317				1,016				1,301				128	%
Television			6,003				392				5,611				1431	%			9,699				2,025				7,674				379	%
Corporate			137				1,122				(985	)			(88	%)			363				1,369				(1,006	)			(73	%)
Consolidated		$	7,366				2,021				5,345				264	%			12,379				4,410				7,969				181	%

		June30,				December 31,
		2008				2007
Total Assets:
Radio		$	456,250				862,048
Television			60,635				62,462
Corporate			10,210				11,619
Consolidated		$	527,095				936,129

5. Comprehensive (Loss) Income

     Our total comprehensive (loss) income, comprised of net (loss) income and unrealized gain (loss) on derivative instruments, for the three- and six-months ended June 30, 2008 and 2007, respectively, was as follows (in thousands):

		Three-Months ended								Six-Months ended
		June 30,								June 30,
		2008				2007				2008				2007
Net (loss) income		$	(294,054	)			2,390				(299,972	)			3,404
Other comprehensive loss:
Unrealized gain (loss) on derivative instruments			7,930				3,555				(1,260	)			1,669
Total comprehensive (loss) income		$	(286,124	)			5,945				(301,232	)			5,073

6. New Accounting Pronouncements

     In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141R, Business Combinations (“SFAS No. 141R”) and SFAS No. 160, Non-controlling Interests in Consolidated Financial Statements — an amendment to ARB No. 51 (“SFAS No. 160”). SFAS No. 141R and SFAS No. 160 require most identifiable assets, liabilities, non-controlling interests, and goodwill acquired in a business combination to be recorded at “full fair value” and require noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity, which changes the accounting for transactions with non-controlling interest holders. Both SFAS No. 141R and SFAS No. 160 are effective for periods beginning on or after December 15, 2008 or fiscal year 2009 for us. SFAS No. 141R will be applied to business combinations occurring after the effective date. SFAS No. 160 will be applied prospectively to all non-controlling interests, including any that arose before the effective date. We are currently evaluating the impact of adopting SFAS No. 141R and SFAS No. 160 on our results of operations and financial position.

     In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (“SFAS No. 161”), which amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (“SFAS No. 133”). SFAS No. 161 requires companies with derivative instruments to disclose information that should enable financial statement users to understand how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133, and how derivative instruments and related hedged items affect a company’s financial position, financial performance, and cash flows. The required disclosures include the fair value of derivative instruments and their gains or losses in tabular format, information about credit risk-related contingent features in derivative agreements, counterparty credit risk, and a company’s strategies and objectives for using derivative instruments. SFAS No. 161 expands the current disclosure framework in SFAS No. 133 and is effective prospectively for periods beginning on or after November 15, 2008 or fiscal year 2009 for us.

7. Income Taxes

     During the three-months ended June 30, 2008, we determined we are no longer able to estimate our annual effective tax rate which would be applied to our pre-tax ordinary income. In accordance with FASB Interpretation No. 18, Accounting for Income Taxes in Interim Periods, we are calculating our effective income tax rate using a year to date income tax calculation. Our income tax expense differs from the statutory federal tax rate of 35% and related statutory state tax rates, primarily as a result of the application of SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”). Under 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 carry forward period. Therefore, our effective book tax rate is impacted by establishing a valuation allowance on substantially all of our deferred tax assets.

     On January 1, 2007, we adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement 109, Accounting for Income Taxes, and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

     We file federal, state and local income tax returns in the United States and Puerto Rico. The tax years that remain subject to assessment of additional liabilities by the United States federal, state, and local tax authorities are 2004 through 2007. The tax years that remain subject to assessment of additional liabilities by the Puerto Rico tax authority are 2003 through 2007.

     Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our consolidated financial statements. On implementation of FIN 48, we reviewed prior year tax filings and other corporate records for any uncertain tax positions in accordance with recognition standards established for which the statute of limitations remained open.

8. Litigation

     We are subject to certain legal proceedings and claims that have arisen in the ordinary course of business and have not been fully adjudicated. In our opinion, we do not have a potential liability related to any current legal proceedings and claims that would individually or in the aggregate have a material adverse effect on our financial condition or operating results. However, the results of legal proceedings cannot be predicted with certainty. Should we fail to prevail in any of these legal matters or should all of these legal matters be resolved against us in the same reporting period, the operating results of a particular reporting period could be materially adversely affected.

Wolf, et al., Litigation

     On November 28, 2001, a complaint was filed against us in the United States District Court for the Southern District of New York (the “Southern District of New York”) and was amended on April 19, 2002. The amended complaint alleges that the named plaintiff, Mitchell Wolf, purchased shares of our Class A common stock pursuant to the October 27, 1999, prospectus and registration statement relating to our initial public offering which closed on November 2, 1999 (the “IPO”). The complaint was brought on behalf of Mr. Wolf and an alleged class of similarly situated purchasers against us, eight underwriters and/or their successors-in-interest who led or otherwise participated in our IPO, two members of our senior management team, one of whom is our Chairman of the Board, 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.

     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 Southern District of New York. One of the claims against the individual defendants, specifically the Section 10b-5 claim, has been dismissed. On September 21, 2007, Kaye Scholer, on behalf of the individual defendants, executed a tolling agreement with plaintiffs providing for the dismissal without prejudice of all claims against the individual defendants upon the provision to plaintiffs of documentation showing that SBS has entity coverage for the period in question. Documentation of such coverage was subsequently provided to plaintiffs on December 19, 2007.

     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. 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 February 15, 2005, the Southern District of New York granted preliminary approval to the proposed settlement agreement, subject to a narrowing of the proposed bar on underwriter and non-settling defendant claims against the issuer defendants to cover only contribution claims. The court directed the parties to submit revised settlement documents consistent with its opinion and scheduled a conference for March 18, 2005 in order to (a) make final determinations as to the form, substance and program of notice and (b) schedule a Rule 23 fairness hearing. Pursuant to the court’s request, on May 2, 2005 the parties submitted an Amendment to Stipulation and Agreement of Settlement with Defendant Issuers and Individuals (the “Amendment”). Our Board of Directors approved the Amendment on May 4, 2005 and it has since received unanimous approval from all the non-bankrupt issuers. On

August 31, 2005, the court issued an order of preliminary approval, reciting that the Amendment had been entered into by the parties to the Issuers’ Settlement Stipulation.

     On December 5, 2006, the United States Court of Appeals for the Second Circuit (the “Second Circuit”) reversed the Southern District Of New York’s October 13, 2004 order granting a motion for class certification in six “focus cases” out of the more than 300 consolidated class actions, holding that Plaintiffs could not satisfy the predominance requirement for a Federal Rule of Civil Procedure 23(b)(3) class action. On December 14, 2006, the court held a conference with all counsel in the IPO cases to consider the impact of the Second Circuit’s reversal of class certification on these cases, including whether a class can be certified for settlement purposes when it cannot otherwise be certified for litigation purposes. The court determined to defer deciding the motion for final approval of the Issuers’ Settlement until further word from the Second Circuit about whether or not it will want to consider rehearing. On January 5, 2007, Plaintiffs filed a petition with the Second Circuit for a rehearing or rehearing en banc.

     On May 30, 2007, the Southern District of New York held a status conference to discuss the impact of the Second Circuit’s December 5, 2006 decision and plaintiffs made an oral motion for class certification with respect to all of the consolidated actions, based on newly proposed class definitions.

     On August 14, 2007, plaintiffs filed amended complaints in the six “focus cases” and amended master allegations in the consolidated actions. On November 13, 2007, the issuer defendants moved to dismiss the amended complaints in the six “focus cases.” On March 26, 2008, the court granted in part the motion as to a subset of plaintiffs’ Section 11 claims, but denied the motion as to plaintiffs’ other claims. We are not named in any of the six “focus cases.”

     On December 21, 2007, the underwriter defendants and issuer defendants filed oppositions to plaintiffs’ motion for class certification in the six “focus cases.” Plaintiffs’ reply brief was filed on March 28, 2008 and the underwriter defendants’ and issuer defendants’ surreply briefs are due on April 22, 2008. The court has not indicated that it will hold oral argument.

     On January 7, 2008, the underwriter defendants filed a motion (in which the issuer defendants joined) to strike class allegations in 26 of the consolidated cases, including the case against us, on the ground that plaintiffs lacked a putative class representative in those cases at the time of their May 30, 2007 oral motion.

     On May 13, 2008, the Court issued an order granting the motion in part and striking certain of the class allegations relating to the Section 10b-5 claims in 8 of the 26 actions, including the action against us. The order also requires Plaintiffs to make certain disclosures with respect to the putative class representatives in the remaining 18 actions. Once the disclosures are filed, Defendants may seek clarification of the Court’s May 13, 2008 order with respect to the status of the remaining 10b-5-related class allegations in the other 8 actions, including our action, as well as the status of the Section 11-related class allegations.

Amigo Broadcasting Litigation

     On December 5, 2003, Amigo Broadcasting, L.P. (“Amigo”) filed an original petition and application for temporary injunction in the District Court of Travis County, Texas (the “Court”), against us, Raul Bernal (“Bernal”) and Joaquin Garza (“Garza”) (the “Amigo Broadcasting Litigation”). Amigo filed a first and second amended petition and application for temporary injunction on June 25, 2004 and February 18, 2005, respectively. The second amended petition alleged that we (1) misappropriated Amigo’s proprietary interests by broadcasting the characters and concepts portrayed by the Bernal and Garza radio show (the Property); (2) wrongfully converted the Property to our own use and benefit; (3) induced Bernal and Garza to breach their employment agreements with Amigo; (4) used and continued to use Amigo’s confidential information and property with the intention of diverting profits from Amigo and of inducing Amigo’s potential customers to do business with us and our syndicators; (5) invaded Amigo’s privacy by misappropriating the names and likenesses of Bernal and Garza; and (6) committed violations of the Lanham Act by diluting and infringing on Amigo’s trademarks. Based on these claims, Amigo seeks damages in excess of $5.0 million.

     On December 5, 2003, the Court issued a temporary injunction against all of the defendants and scheduled a hearing before the Court on December 17, 2003. The temporary injunction dissolved by its terms on December 1, 2004. On December 17, 2003, the parties entered into a settlement agreement, whereby the Court entered an Order on Consent of the settling parties, permitting Bernal and Garza’s radio show to be broadcast on our radio stations. In addition, we agreed that we would not broadcast the Bernal and Garza radio show in certain prohibited markets and that we would not distribute certain promotional materials that were developed by Amigo. On January 5, 2004, we answered the remaining claims asserted by Amigo for damages. On March 18, 2005, the case was removed to the United States District Court for the Western District of Texas (the “District Court”) and a trial date was scheduled for

May 2006. On January 17, 2006, we filed a motion for summary judgment with the District Court. On March 2, 2006, the parties conducted mediation but were unable to reach a settlement. The case was thereafter tried before a jury the week of May 1, 2006. At the close of plaintiff’s evidence, defendants presented a motion for judgment as a matter of law and the motion was granted on all counts. The District Court entered judgment for the defendants — Garza, Bernal and us.

     On June 2, 2006, Plaintiff filed a notice of appeal to the Fifth Circuit Court of Appeals. All briefs were submitted and the Fifth Circuit Court of Appeals heard oral arguments on December 5, 2007. On August 1, 2008, the litigation was resolved pursuant to a confidential settlement and release agreement. The parties are seeking dismissal of the pending appeal and seek nothing further from the litigation. The settlement was reflected in our results of operations for the three- and six-month periods ended June 30, 2008.

9. Impairment of FCC Broadcasting Licenses

     Our indefinite-lived intangible assets consist of FCC broadcast licenses. FCC broadcasting licenses are granted to stations for up to eight years under the Telecommunications Act of 1996 (the Act). The Act requires the FCC to renew a broadcast license if: (i) it finds that the station has served the public interest, convenience and necessity; (ii) there have been no serious violations of either the Communications Act of 1934 or the FCC’s rules and regulations by the licensee; and (iii) there have been no other serious violations, which taken together, constitute a pattern of abuse. We intend to renew our licenses indefinitely and evidence supports our ability to do so. Historically, there has been no material challenge to our license renewals. In addition, the technology used in broadcasting is not expected to be replaced by another technology any time in the foreseeable future.

     In accordance with SFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), we do not amortize our FCC broadcasting licenses. We test these indefinite-lived intangible assets for impairment at least annually or when an event occurs that may indicate that impairment may have occurred. Our valuations principally use the discounted cash flow methodology. This income approach consists of a quantitative model, which assumes the FCC broadcasting licenses are acquired and operated by a third-party. This income approach incorporates variables such as types of signals, media competition, audience share, market advertising revenue, market revenue projections, anticipated operating profit margins and discount rates. In the preparation of the FCC broadcasting license appraisals, we make estimates and assumptions that affect the valuation of the intangible assets. These estimates and assumptions could differ from actual results.

     We generally test for impairment on our FCC broadcasting license intangible assets at the individual license level. However, we have applied the guidance in EITF 02-07, Unit of Accounting for Testing Impairment of Indefinite-Lived Intangible Assets (“EITF 02-07”), to certain of our FCC broadcasting license intangible assets. EITF 02-07 states that separately recorded indefinite-lived intangible assets should be combined into a single unit of accounting for purposes of testing impairment if they are operated as a single asset and, as such, are essentially inseparable from one another. We aggregate FCC broadcasting licenses for impairment testing if their signals are simulcast and are operating as one revenue-producing asset.

     Our “goodwill” consists of the excess of the purchase price over the fair value of tangible and identifiable intangible net assets acquired in business combinations, when a “business” has been acquired under the applicable accounting literature. SFAS No. 142 requires us to test goodwill for impairment at least annually at the reporting unit level in lieu of being amortized. We have determined that we have two reporting units under SFAS No. 142, Radio and Television.

     The goodwill impairment test is a two-step test. Under the first step, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit. Accordingly, the enterprise must perform step two of the impairment test (measurement).

     During the three-months ended June 30, 2008, we performed an impairment review of our indefinite-lived intangible assets and determined that there was an impairment of our FCC broadcasting licenses. We recorded a non-cash impairment loss of approximately $396.3 million related to the FCC broadcasting licenses for certain individual stations in our Los Angeles, San Francisco, Puerto Rico, Miami and New York markets. The tax impact of the impairment loss was approximately $109 million tax benefit, which related to the reduction of the book/tax basis differences on our FCC broadcasting licenses. The impairment loss was due to market changes in estimates and assumptions which (a) decreased advertising revenue growth projections for the broadcasting industry, and (b) increased the discount rate. Also, the current decline in cash flow multiples for recent station sales were considered in the estimates and assumptions used. Additionally, we performed an impairment review of our goodwill and determined that there was no impairment.

10. Fair Value of Derivative Instruments

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We adopted SFAS No. 157 effective January 1, 2008. The adoption of SFAS No. 157 did not impact our consolidated financial position and results of operations. In accordance with SFAS No. 157, the following table represents our liabilities that are measured at fair value on a recurring basis at June 30, 2008 and the level within the fair value hierarchy in which the fair value measurements are included.

		Fair Value Measurements at
		June 30, 2008
		Using Significant Other
Description		Observable Inputs (Level 2)
Derivatives — Liabilities		$	4,842

     In February 2008, the FASB issued Staff Position FAS 157-2, Effective Date of FASB Statement No. 157 (“FSP No. 157-2”), which defers the effective date of SFAS No. 157 for non-financial assets and liabilities, except for items that are recognized or disclosed at fair value on a recurring basis, to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years. The Company has elected the deferral option permitted by FSP No. 157-2 for its non-financial assets and liabilities initially measured at fair value in prior business combinations including intangible assets and goodwill.

11. 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, prepaids and other current assets, as well as accounts payable, accrued expenses, deposit on the sales of stations and other current liabilities, as reflected in the condensed consolidated balance sheets, approximate fair value because of the short-term maturity of these instruments. The estimated fair value of our other long-term debt instruments, approximate their carrying amounts as the interest rates approximate our current borrowing rate for similar debt instruments of comparable maturity, or have variable interest rates.

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

     The estimated fair value of our financial instruments are as follows (in millions):

		June 30,								December 31,
		2008								2007
		Gross								Gross
		carrying								carrying
Description		amount				Fair value				amount				Fair value
Senior credit facilities		$	314.4				252.3				316.1				291.6
103/4% Series B cumulative exchangeable redeemable preferred stock		$	89.9				54.0				89.9				89.9

     The fair value estimates of the financial instruments were based upon quotes from major financial institutions taking into consideration current rates offered to us for debt or equity instruments of the same remaining maturities.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

     We are the largest publicly traded Hispanic-controlled media and entertainment company in the United States. We own and/or operate 21 radio stations in markets that reach approximately 48% of the U.S. Hispanic population, and two television stations, which reach approximately 3.0 million households throughout the U.S. and Puerto Rico.

     The success of each of our stations depends significantly upon its audience ratings and share of the overall advertising revenue within its market. The broadcasting industry is a highly competitive business, but some barriers to entry do exist. Each of our stations competes with both Spanish-language and English-language stations in its market, as well as with other advertising media, such as newspapers, cable television, the Internet, magazines, outdoor advertising, satellite radio and television, transit advertising and direct mail marketing. Factors which are material to our competitive position include management experience, our stations’ rank in their markets, signal strength and frequency, and audience demographics, including the nature of the Spanish-language market targeted by a particular station.

     Our primary source of revenue is the sale of advertising time on our stations to local and national advertisers. Our revenue is affected primarily by the advertising rates that our stations are able to charge, as well as the overall demand for advertising time in each respective market. Seasonal net broadcasting revenue fluctuations are common in the broadcasting industry and are primarily due to fluctuations in advertising demand from local and national advertisers. Typically for the broadcasting industry, the first calendar quarter generally produces the lowest revenue. Our most significant operating expenses are compensation expenses, programming expenses, professional fees, 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, including vendors.

     Our radio stations are located in six of the top-ten Hispanic markets of Los Angeles, New York, Puerto Rico, Chicago, Miami and San Francisco. Los Angeles and New York have the largest and second largest Hispanic populations, and are also the largest and second largest radio markets in the United States in terms of advertising revenue, respectively. We format the programming of each of our radio stations to capture a substantial share of the U.S. Hispanic audience in their respective markets. The U.S. Hispanic population is diverse, consisting of numerous identifiable groups from many different countries of origin and 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 maintain familiarity 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. Our radio revenue is generated primarily from the sale of local and national advertising.

     Our two television stations operate as one television operation, branded “MegaTV”. We have created a unique television format which focuses on entertainment, events and variety with high-quality production. Our programming is formatted to capture shares of the U.S. Hispanic audience by focusing on our core strengths as an “entertainment” company, thus offering a new alternative compared to the traditional Latino channels. MegaTV’s programming is based on a strategy designed to showcase a combination of programs, ranging from televised radio-branded shows to general entertainment programs, such as music, celebrity, debate, interviews and personality based shows. As part of our strategy, we have incorporated certain of our on-air personalities into our programming, as well as including interactive elements to complement our Internet websites. We have developed approximately 70% of our programming and have obtained other content from Spanish-language production partners. Our television revenue is generated primarily from the sale of local advertising and paid programming.

     As part of our operating business, we also operate LaMusica.com, Mega.tv, and our radio station websites which are bilingual (Spanish — English) websites providing content related to Latin music, entertainment, news and culture. LaMusica.com and our network of station websites generate revenue primarily from advertising and sponsorship. In addition, the majority of our station websites simultaneously stream our stations’ content, which has broadened the audience reach of our radio stations. We also occasionally produce live concerts and events throughout the United States, including Puerto Rico.

Comparison Analysis of the Operating Results for the Three-Month Periods Ended June 30, 2008 and 2007

     The following summary table presents financial data for each of our operating segments (in thousands):

		Three-Months Ended
		June 30,								Change
		2008				2007				$				%
Net revenue:
Radio		$	41,008				45,256				(4,248	)			(9	%)
Television			4,172				2,615				1,557				60	%
Consolidated		$	45,180				47,871				(2,691	)			(6	%)
Engineering and programming expenses:
Radio		$	10,236				9,068				1,168				13	%
Television			5,228				3,309				1,919				58	%
Consolidated		$	15,464				12,377				3,087				25	%
Selling, general and administrative expenses:
Radio		$	14,648				18,494				(3,846	)			(21	%)
Television			2,975				1,703				1,272				75	%
Consolidated		$	17,623				20,197				(2,574	)			(13	%)
Corporate expenses:		$	3,672				3,112				560				18	%
Depreciation and amortization:
Radio		$	784				711				73				10	%
Television			277				128				149				116	%
Corporate			381				266				115				43	%
Consolidated		$	1,442				1,105				337				30	%
Gain on the disposal of assets, net:
Radio		$	(2	)			(1	)			(1	)			100	%
Television			—				—				—				0	%
Corporate			—				—				—				0	%
Consolidated		$	(2	)			(1	)			(1	)			100	%
Impairment of FCC broadcasting licenses:
Radio		$	379,415				—				379,415				100	%
Television			16,837				—				16,837				100	%
Corporate			—				—				—				0	%
Consolidated		$	396,252				—				396,252				100	%
Operating (loss) income:
Radio		$	(364,073	)			16,984				(381,057	)			(2244	%)
Television			(21,145	)			(2,525	)			(18,620	)			737	%
Corporate			(4,053	)			(3,378	)			(675	)			20	%
Consolidated		$	(389,271	)			11,081				(400,352	)			(3613	%)