SPANISH BROADCASTING SYSTEM INC - Annual Report: 2009 (Form 10-K)

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

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

Or

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

Commission file number 000-27823

Spanish Broadcasting System, Inc.

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

Former name, former address and former fiscal year, if changed since last report: None

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered
Class A common stock, par value $0.0001 per share		The NASDAQ Global Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No þ

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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o 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 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 o		Non-accelerated filer o		Smaller reporting company þ

Indicate by 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 June 30, 2009, the last business day of the registrant’s most recently completed second fiscal quarter, the registrant had 41,499,222 shares of Class A common stock, par value $0.0001 per share, and 23,403,500 shares of Class B common stock, par value $0.0001 per share, outstanding. As of June 30, 2009, the aggregate market value of the Class A common stock held by nonaffiliates of the registrant was approximately $7.4 million and the aggregate market value of the Class B common stock held by nonaffiliates of the registrant was approximately $1 thousand. We calculated the aggregate market value based upon the closing price of our Class A common stock reported on the NASDAQ Global Market on June 30, 2009 of $0.18 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 23, 2010, 41,596,513 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.

Certain information required by Part III of this Annual Report on Form 10-K is incorporated by reference from the registrant’s definitive proxy statement (the Proxy Statement) to be filed pursuant to Regulation 14A with respect to the registrant’s 2010 annual meeting of stockholders. Except with respect to information specifically incorporated by reference in this Annual Report on Form 10-K, the Proxy Statement is not deemed to be filed as part hereof.

 

 

Table of Contents

		Page
PART I
Item 1. Business			3
Item 1A. Risk Factors			24
Item 1B. Unresolved Staff Comments			37
Item 2. Properties			37
Item 3. Legal Proceedings			38
Item 4. Submission of Matters to a Vote of Security Holders			40
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			41
Item 6. Selected Financial Data			42
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			42
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			54
Item 8. Financial Statements and Supplementary Data			54
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure			55
Item 9A(T). Controls and Procedures			55
Item 9B. Other Information			56
PART III
Item 10. Directors, Executive Officers and Corporate Governance			57
Item 11. Executive Compensation			57
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			57
Item 13. Certain Relationships and Related Transactions, and Director Independence			57
Item 14. Principal Accountant Fees and Services			57
PART IV
Item 15. Exhibits, Financial Statement Schedules			58
Exhibit 21.1
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

Special Note Regarding Forward-Looking Statements

CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. 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, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Spanish Broadcasting System, Inc. intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and includes this statement for purposes of such safe harbor provisions. “Forward-looking” statements, as such term is defined by the Securities Exchange Commission (the Commission) in its rules, regulations and releases, represent our expectations or beliefs, including, but not limited to, statements concerning our operations, economic performance, financial condition, growth and acquisition strategies, investments and future operational plans, such as those disclosed under the caption “Risk Factors” appearing in Item 1A of Part I of this Report. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” “might,” or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statements. These statements, by their nature, involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors, including uncertainty related to acquisitions, governmental regulation and any other factors discussed in our filings with the Commission and we do not have any obligation to publicly update any forward-looking statements to reflect subsequent events or circumstances. See Item 1A. Risk Factors.

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, and its subsidiaries. Our executive offices are located at 2601 South Bayshore Drive, PH II, Coconut Grove, Florida 33133, our telephone number is (305) 441-6901, and our corporate website is www.spanishbroadcasting.com.

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. 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. The Los Angeles and New York markets 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 also own two television stations, which operate as one television operation, branded “MegaTV”. MegaTV reaches approximately 2.0 million households in the South Florida market, and through affiliation, programming and local marketing agreements nationally throughout the U.S., including Puerto Rico, we reach approximately 4.5 million households.

As part of our media 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. We also produce live concerts and events throughout the United States, including Puerto Rico.

Mr. Raúl Alarcón, Jr. became Chairman of our 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 member of the Board of Directors since October 1985. The Alarcón family has been involved in Spanish-language radio broadcasting since the 1950’s, when the late Mr. Pablo Raúl Alarcón, Sr., our former Chairman Emeritus and former 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 media broadcasting.

Business Strategy

We focus on maximizing the revenue and profitability of our broadcast portfolio by strengthening the performance of our existing broadcast stations. We evaluate strategic media acquisitions and/or dispositions and strive to expand our media content through distribution and affiliations in order to achieve a significant presence with clusters of stations in the top U.S. Hispanic markets. We generally consider acquisitions and expansion of broadcast stations in markets where we can maximize our revenue through aggressive sales and programming efforts directed at U.S. Hispanic and general market advertisers. The potential acquisitions and expansion may include broadcast stations which do not currently target the U.S. Hispanic market, but which we believe can successfully be reformatted and programmed. We also focus on long-term growth by investing in on-air talent, advertising and from time to time, programming research. Additionally, from time to time, we explore investment opportunities in related media outlets targeting the U.S. Hispanic market.

Hispanic Market Opportunity

We believe that our focus on media formats targeting U.S. Hispanic audiences in the largest Hispanic media markets, together with our experience in programming and marketing to these audiences, provides us with significant opportunities for the following reasons:

•

Hispanic Population Growth. The U.S. Hispanic population is the largest ethnic minority group and the fastest growing consumer market and demographic group of the U.S. population. Between 2000 and 2009, the Hispanic population increased by 35.3%, compared to 4.9% for the non-Hispanic population. By 2014, it is estimated that nearly one out of every six individuals living in the U.S. will be of Hispanic origin.

•

Hispanic Buying Power. The U.S. Hispanic population accounted for an estimated buying power of $978 billion in 2009. Hispanic buying power is expected to increase by 36% between 2009 and 2014 to $1,330 billion, positioning the Hispanic demographic as an extremely attractive group for advertisers.

•

Growth in Spanish Language Advertising Spending. In 2008, advertisers spent an estimated $4.0 billion on Spanish-language media advertising, compared to $3.9 billion in 2007, representing a 1.9% increase from the previous year.

The above market opportunity information is based on data provided by the Selig Center for Economic Growth, Terry College of Business, The University of Georgia, July 2009 and Advertising Age, Hispanic Fact Pack, Annual Guide to Hispanic Marketing and Media, 2009 Edition.

Operating Strategy

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

Format high-quality programming. We format the programming of each of our broadcast stations to capture a significant share of the Spanish-language audience. From time to time, we use market research, including third-party consultants, periodic music testing and focus groups to assess audience preferences among the diverse groups in the Hispanic population in each broadcast 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 culture and heritage, we strive to become very familiar with the tastes and preferences of each of the various Hispanic ethnic groups, and we customize our broadcast 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 broadcast stations. The teams typically consist of a general manager, a sales manager and a programming director. Broadcast stations are staffed with managers who have experience in, and knowledge of, the local 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 media markets we serve.

Utilize focused sales efforts and sales bundling. To capture greater market share, our sales force focuses on converting audience share into rate and revenue increases. We strategically 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. The Spanish-language consumer market is uniquely positioned for national campaigns, regional marketing plans and local promotions in our diverse markets. We believe that our focused sales efforts are working to increase media spending aimed at the Hispanic consumer market and will enable us 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 their communities.

We utilize various sales strategies to sell and market our stations on a stand-alone basis, in combination with our other media properties within a given market, and across markets, where appropriate. We cross-promote, bundle, and sell our media properties to advertisers, thereby enhancing our revenue generating opportunities. We engage in joint sales and promotional activities across our various media properties in order to provide additional value to our advertisers and audience by creating a more efficient medium to reach and expand our Hispanic audience.

Control broadcast station operating costs. We employ a disciplined approach to operating our broadcast stations. We emphasize the control of each broadcast station’s operating costs through detailed budgeting, tight control over staffing levels and constant expense and vendor analysis. While local management is responsible for the day-to-day operation of each broadcast station, corporate management is responsible for long-term and strategic planning, establishing policies and procedures, maximizing cost savings through centralized processes where appropriate, allocating corporate resources and maintaining overall control of our broadcast stations.

Effective use of promotions and special events. We rely on our expertise in marketing to the Hispanic consumer in each of the media markets in which we operate to maximize our share of advertising revenue. We believe that our on-air talent, combined with effective promotional efforts, play a significant role in both adding new listeners and viewers and increasing their 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 method of reaching the Hispanic consumer. In some instances, these events are co-sponsored by local television stations, newspapers, promoters and advertisers, allowing our mutual advertisers to reach a larger combined Hispanic audience.

Maintain strong community involvement. We have been, and will continue to be, actively involved in the local communities that we serve. Our broadcast 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 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 broadcast stations and members of our management have received numerous community service awards and acknowledgments from governmental entities, community and philanthropic organizations for their service. We believe that this involvement helps build and maintain broadcast station awareness and loyalty.

Expand branded content across multiple media platforms. We have found that our brands and the content that we have developed are well positioned for expansion in other media outlets. As part of our long-term strategy, it is essential that we find ways to monetize our content and investments across multiple platforms such as the Internet, television and other new media alternatives, such as personal music and video recording devices, cellular telephones and other new media technology. Since our content is unique to our brands and talent, expansion allows us to capture other advertising and sponsorship revenue. In addition, our key broadcast programs, on-air personalities and brands are being developed for downloadable video, ring-tone and interactive content use. We are also developing content from our production of musical events to create opportunities to sell, market and distribute such content through our websites and other media.

Recent Developments

Lehman Interest Rate Swap

In September and October 2008, the counterparty to one of our interest rate swaps, Lehman Brothers Special Financing Inc., and its parent and credit support provider, Lehman Brothers Holdings Inc., each filed for bankruptcy (the Lehman Bankruptcy). As a result of the Lehman Bankruptcy, a dispute has arisen with respect to payments under the swap agreement. We have agreed to non-binding mediation of our dispute with the counterparty and the mediation session is scheduled to occur at the end of March 2010.

Dividend Payment on the Series B Preferred Stock

Under the terms of our Series B preferred stock, the holders of the outstanding shares of the Series B preferred stock are entitled to receive, when, as and if declared by the Board of Directors, dividends on the Series B preferred stock at a rate of 10¾% per year, of the $1,000 liquidation preference per share, payable quarterly.

On March 24, 2010, our Board of Directors declared to pay the scheduled April 15, 2010 dividend. In determining whether to declare and pay any future cash dividends our Board of Directors will consider management’s recommendation, our financial condition, as well as whether, under Delaware law, sufficient surplus or net profits exist to pay such dividends.

During fiscal year 2009, our Board of Directors, under management’s recommendation, determined that based on, among other things, the then current economic environment and future cash requirements, it would not be prudent to declare or pay the January 15, 2010, October 15, 2009 and July 15, 2009 cash dividends in the aggregate amount of approximately $7.5 million.

NASDAQ Notification Letters

NASDAQ Delisting Letters and Temporary Extension

As we initially announced on August 25, 2008, we received a notice from The NASDAQ Stock Market (NASDAQ) on August 20, 2008 indicating that we failed to comply with the minimum bid price requirement set forth in NASDAQ Listing Rule 5450(a)(1) (formerly Marketplace Rule 4450(a)(5)) for continued listing of our common stock on The NASDAQ Global Market because the bid price of our common stock closed under $1.00 per share for 30 consecutive business days. The notice also stated that, in accordance with NASDAQ Listing Rule 5810(c)(3)(A) (formerly Marketplace Rule 4450(e)(2)), we would be provided 180 calendar days, or until February 17, 2009, to regain compliance with the minimum bid price requirement. Due to NASDAQ’s subsequent suspensions of enforcement of the minimum bid price requirement in 2008 and 2009, and as disclosed by our filings of various Forms 8-K, 10-Q and 10-K, our time period for regaining compliance was extended until December 4, 2009. To regain compliance, the closing bid price of our common stock had to remain at or above $1.00 per share for a minimum of 10 consecutive business days prior to the market close on December 4, 2009.

We did not regain compliance with the $1.00 minimum bid price requirement by December 4, 2009. Accordingly, on December 7, 2009, we received written notification from NASDAQ (the Staff Determination) that unless we requested a hearing before the NASDAQ Listing Qualifications Panel (the Panel) on or before 4:00 p.m. Eastern Time on December 14, 2009, our common stock would be delisted from The NASDAQ Global Market at the opening of business on December 16, 2009.

On December 11, 2009, we requested a hearing before the Panel to appeal the Staff Determination in order to present our plan to address the minimum bid price deficiency (the Appeal). A hearing was held on January 7, 2010. At the hearing, we provided NASDAQ with a specific plan of how we intended to regain compliance with the minimum bid price deficiency, including a time frame for completion of such plan.

On February 9, 2010, we received notice from NASDAQ indicating that NASDAQ had granted our request for an extension of time to regain compliance with the Rule (the NASDAQ Extension Notice). Pursuant to the terms of the NASDAQ Extension Notice, we will be required to, on or before June 7, 2010, evidence a closing bid price of $1.00 or more for a minimum of ten consecutive trading days. In the event that we do not evidence compliance with the Rule and all other requirements for continued listing, our securities may be delisted from The NASDAQ Global Market.

NASDAQ Audit Committee Compliance Letter

On August 14, 2009, we notified NASDAQ that due to the vacancy in our Audit Committee created by Antonio Fernandez’ voluntary resignation as a member of the Board, we were no longer in compliance with NASDAQ Marketplace Rule 5605 (Rule 5605), which requires that the Audit Committee be comprised of at least three members, each of whom are independent.

As a result, on August 27, 2009, we received a letter from NASDAQ notifying us that we were not in compliance with the audit committee requirements as set forth in Rule 5605 and advising us that, consistent with NASDAQ Marketplace Rule 5605(c)(4)(A), NASDAQ will provide us the following cure period to regain compliance:

•

until the earlier of our next annual shareholders’ meeting or August 11, 2010; or

•

if the next annual shareholders’ meeting is held before February 8, 2010, no later than February 8, 2010.

Since we intend to hold our next annual shareholders’ meeting after February 8, 2010 and before August 11, 2010, we will have until our next annual shareholders’ meeting to regain compliance. An active search for Mr. Fernandez’ replacement is currently underway and we fully intend to regain compliance with Rule 5605 within the cure period allowed by NASDAQ.

Operating Segments

We report two operating segments, radio and television.

See Item 8. Financial Statements and Supplementary Data below.

Radio Overview

We operate radio stations in some of the top Hispanic markets in the United States, including Puerto Rico. We own and/or operate radio stations in Los Angeles, New York, Puerto Rico, Chicago, Miami and San Francisco.

The following table sets forth certain statistical and demographic information relating to our radio markets:

OUR RADIO MARKETS

										2008 Estimated								2009 Total
						2008 Estimated				% of Total				2008 Estimated				Estimated
Hispanic						Hispanic				Hispanic				% of Total				Market Radio				Number of
Market						Population				Population in				U.S. Hispanic				Revenue				Stations
Rank(a)				Hispanic Market		(000)(a)				Market(a)				Population(a)				($mm)(b)				We Operate
	1			Los Angeles			8,507				48	%			18	%		$	698				2
	2			New York			4,435				21	%			9	%			560				2
	*			Puerto Rico			3,912				99	%			9	%			81				11
	3			Miami			2,152				49	%			5	%			223				4
	4			Chicago			1,972				20	%			4	%			441				1
	6			San Francisco			1,712				24	%			4	%			274				1
Total for our markets							22,690				35	%			48	%		$	2,277				21

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 Financial Network, Inc.’s 2009 Investing in Radio Market Report 4^th Edition, Synovate 2008 Diversity Markets Report and the U.S. Census Bureau Population Estimates for Puerto Rico — 2007.

Los Angeles. The Los Angeles market is the largest radio market in terms of advertising revenue, which was projected to be approximately $698 million in 2009. As a result of the worldwide economic recession, the Los Angeles market experienced an annual radio revenue decrease of 11.0% between 2007 and 2008. Radio revenue in the Los Angeles market is expected to decline at an annual rate of 4.0% between 2008 and 2013.

New York. The New York market is the second largest radio market in terms of advertising revenue, which was projected to be approximately $560 million in 2009. As a result of the worldwide economic recession, the New York market experienced an annual radio revenue decrease of 9.5% between 2007 and 2008. Radio revenue in the New York market is expected to decline at an annual rate of 1.9% between 2008 and 2013.

Puerto Rico. The Puerto Rico market is the twenty-fifth largest radio market in terms of advertising revenue, which was projected to be approximately $81 million in 2009. As a result of the worldwide economic recession, the Puerto Rico market experienced an annual radio revenue decrease of 9.1% between 2007 and 2008. Radio revenue in the Puerto Rico market is expected to decrease at an annual rate of 3.8% between 2008 and 2013.

Miami. The Miami market is the tenth largest radio market in terms of advertising revenue, which was projected to be approximately $223 million in 2009. As a result of the worldwide economic recession, the Miami market experienced an annual radio revenue decrease of 11.1% between 2007 and 2008. Radio revenue in the Miami market is expected to decrease at an annual rate of 3.1% between 2008 and 2013.

Chicago. The Chicago market is the third largest radio market in terms of advertising revenue, which was projected to be approximately $441 million in 2009. As a result of the worldwide economic recession, the Chicago market experienced an annual radio revenue decrease of 6.0% between 2007 and 2008. Radio revenue in the Chicago market is expected to decline at an annual rate of 1.0% between 2008 and 2013.

San Francisco. The San Francisco market is the fifth largest radio market in terms of advertising revenue, which was projected to be approximately $274 million in 2009. As a result of the worldwide economic recession, the San Francisco market experienced an annual radio revenue decrease of 8.5% between 2007 and 2008. Radio revenue in the San Francisco market is expected to decline at an annual rate of 3.7% between 2008 and 2013.

Radio Station Programming

We format the programming of each of our radio 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 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 become 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. By employing listener study groups and surveys, 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.

•

Spanish Tropical. The Spanish Tropical format primarily consists of salsa, merengue, bachata, and reggaeton 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 in the Dominican Republic. Bachata is a softer tempo dance music also originating in the Dominican Republic. Reggaeton is a modern rhythmic dance genre that incorporates certain elements of hip-hop music.

•

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 as well as, international hits from Puerto Rico, Mexico, Latin America and Spain.

•

Spanish Oldies. The Spanish Oldies format includes a variety of Latin and English classics, mainly from the 1960s, 1970s, and 1980s.

•

Top 40. The Top 40 format consists of the most popular current Latin and English chart hits.

•

Latin Rhythmic. The Hispanic Urban (Hurban) format consists of “reggaeton” with a mix of pop and tropical mixes. “Reggaeton” is dance music that originated in Panama and Puerto Rico more than a decade ago and has evolved into a mix of Spanish- and English-language dance hall, traditional reggae, Latin pop and Spanish hip-hop.

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

						Target buying
		FM				demographic
Market		Station		Format		group by age
Los Angeles		KLAX		Regional Mexican		18-49
		KXOL		Latin Rhythmic		18-34
New York		WSKQ		Spanish Tropical		18-49
		WPAT		Spanish Adult Contemporary		18-49
Puerto Rico		WMEG		Top 40		18-34
		WEGM		Top 40		18-34
		WRXD		Spanish Tropical		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		Latin Rhythmic		18-34
		WNOD		Latin Rhythmic		18-34
Chicago		WLEY		Regional Mexican		18-49
Miami		WXDJ		Spanish Tropical		18-49
		WCMQ		Spanish Oldies		25-54
		WRMA		Spanish Adult Contemporary		18-49
		WRZA		Regional Mexican		18-49
San Francisco		KRZZ		Regional Mexican		18-49

On-Line Properties

As part of our media 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 streams our stations’ content, which has broadened our audience reach. In addition, we hope to generate revenue from our key broadcast programs, on-air personalities and brands, which are being developed for downloadable video, ring-tone and interactive content use through our network website, LaMusica.com. We are also developing content from our production of musical events to create opportunities to sell, market, and distribute this content through our websites and other media.

We believe that LaMusica.com, together with our broadcast portfolio, enables our audience to enjoy targeted and culturally specific entertainment options, such as concert listings, music reviews, local entertainment calendars, and interactive content on popular Latin artists and entertainers. At the same time, our online properties enable our advertisers to reach their targeted Hispanic consumers through an additional and dynamic medium.

Television Overview and Programming

On March 1, 2006, we launched MegaTV, our general entertainment Spanish-language television operation. We 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 market’s 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.

The following table lists the distribution outlets of our MegaTV programming.

Market		Station ID		Channel				Programming Type
Charleston, South Carolina		WHDC			40.2			Affiliation Agreement
Chicago, Illinois		WOCK			13			Local Marketing Agreement
Dallas, Texas		KODF			26			Affiliation Agreement
Fresno, California		KSDI			33.2			Affiliation Agreement
Miami, Florida		WSBS			22			Owned & Operated
New York, New York		WRNN			48.2			Local Marketing Agreement
Orlando, Florida		WHDO			38.2			Affiliation Agreement
Palm Springs, California		KPLS			19.2			Affiliation Agreement
Puerto Rico		WMEI			14.1			Programming Agreement
Tampa, Florida		WFHD			63.2			Affiliation Agreement
West Palm Beach, Florida		WBWP			57			Affiliation Agreement
DirecTV Más — Nation Wide		Satellite			405			Affiliation Agreement
DirecTV — Puerto Rico		Satellite			169			Affiliation Agreement

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 commissioned other content from capable Spanish-language production partners. Our television revenue is generated primarily from the sale of local advertising and paid programming. Advertising rates depend primarily on our ability to attract an audience in the demographic groups targeted by our advertisers, the number of stations in the market we compete with for the same audience, and the supply of and demand for television advertising time, as well as other qualitative factors. We also generate revenue from the sale of integrated sponsorships and program syndication.

Advertising Revenue

The vast majority of our revenue is derived from cash advertising sales. Advertising revenue is usually classified by two categories — “national” and “local.” “National” generally refers to advertising that is solicited by a representative firm for national advertisers. A subset category of National advertising revenue is network advertising revenue, which is advertising purchased by our other strategic alliance agreements. Our national sales representative for our radio stations is McGavern Guild, Inc. and Spanish Television Sales, LLC for our television stations. “Local” refers to advertising purchased by advertisers and agencies in the local market served by a particular station.

Current trends in the media advertising market have changed the long-established model for categorizing advertising revenue. In the past, media advertising was usually classified into two categories—”national” or “local” spot sales. We have expanded the conventional model by offering “integrated sponsorship” opportunities, which are highly sought after and command a higher investment from agencies, in order to maximize our advertisers’ opportunities. We expect that our primary source of revenue from our broadcast stations will be generated from the sale of national, local and integrated sponsorship advertising. In addition, we are anticipating that the television, radio and internet offerings will generate more advertising opportunities by offering multi-media packages.

The broadcasting industry is one of the most efficient and cost-effective means for advertisers to reach targeted demographic groups. Advertising rates charged by a station are based primarily on the station’s ability to attract an audience in a given market and on the attractiveness to advertisers of the station’s audience demographics, as well as the demand on available advertising inventory. Rates also vary depending upon a program’s popularity among the listeners/viewers 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. Television advertising rates are higher during prime time evening viewing periods. A broadcaster that has multiple stations in a market appeals to national advertisers because these advertisers can reach more listeners and viewers, 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 exploit our competitiveness advantages as new and existing advertisers recognize the increasing desirability of targeting the growing U.S. Hispanic population.

Each station broadcasts a predetermined number of advertisements per hour with the actual number depending upon the format of a particular station and any programming strategy we are utilizing to attract an audience. We also determine the number of advertisements broadcast hourly that can maximize the station’s revenue without negatively impacting its audience listener/viewer 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 and television industry that the majority of advertising contracts are short-term and generally run for less than three months. This affords broadcasters the opportunity to modify advertising rates as dictated by changes in viewer ratings, changes in competitive dynamics and changes in the business climate within a particular market. In each of our broadcasting markets, we employ sales personnel to obtain local advertising revenue. Our local sales force is responsible for 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 assist in our collection efforts.

Seasonality

Seasonal broadcasting revenue fluctuations are common in the broadcasting industry and are primarily due to fluctuations in advertising expenditures by local and national advertisers. Our net broadcasting revenues vary throughout the year. Historically, our 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.

Competition

The success of our broadcast stations depends significantly upon their audience ratings and their share of the overall advertising revenue within their markets. The radio and television broadcasting industries are highly competitive businesses. Each of our radio stations competes with both Spanish-language and English-language radio stations in their market, as well as other media, such as newspapers, broadcast television, cable television, the Internet, magazines, outdoor advertising, satellite radio, transit advertising and direct mail marketing. Our television operations compete for viewers and revenue with both Spanish-language and English-language television stations in our local markets, as well as nationally broadcast television operations, cable television, the Internet and other video media.

Several of the broadcast stations with which we compete are subsidiaries of larger national or regional companies that may have substantially greater financial resources than we do. Factors which are material to our competitive position include:

•

management experience;

•

talent and popularity of on-air personalities and television show hosts and actors;

•

audience ratings and our broadcast 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.

Although the broadcast industry is highly competitive, some barriers to entry do exist. These barriers can be mitigated to some extent by changing existing broadcast station formats and programming and upgrading power, among other actions. The operation of a broadcast station requires a license or other authorization from the Federal Communications Commission (FCC). The number of AM radio stations that can operate in a given market is limited by the availability of AM radio frequencies spectrum in a given market. The number of FM radio frequencies and television stations that can operate in a given market is limited by the availability of those allotted by the FCC to communities in such 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 and Television 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 and by satellite. The FCC has licensed companies for the use of a new technology, satellite digital audio radio services (known as SDARS), to deliver audio programming. SDARS provides a medium for the delivery by satellite of multiple new audio programming formats to local and national audiences. Some radio broadcast stations, including ours, are presently utilizing digital technology on their existing frequencies to deliver audio programming. 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 FCC has selected In-Band On-ChannelTM, or IBOC, as the exclusive technology for introduction of terrestrial digital operations by AM and FM radio stations. The technology is also known as “HD Radio^®.” The FCC has authorized the commencement of “hybrid” IBOC transmissions, that is, simultaneous broadcast in both digital and analog format, pursuant to notification by the station. The advantages of digital audio broadcasting over traditional analog broadcasting technology include improved sound quality and the ability to offer a greater variety of auxiliary services. IBOC technology permits a station to transmit radio programming in both analog and digital formats, and eventually in digital only formats, using the bandwidth that the radio station is currently licensed to use. It is unclear what impact the introduction of digital broadcasting will have on the radio markets in which we compete. The FCC has authorized use of IBOC digital technology developed by iBiquity Digital Corporation, or iBiquity, on AM and FM stations full-time to (1) improve sound quality, (2) provide spectrum for enhanced data services and multiple program streams, and (3) allow radio stations to time broker unused digital bandwidth to third parties, thereby providing new business opportunities for radio broadcasters. Final digital radio rules, including the imposition of new public interest requirements and appropriate limits to the amount of subscription requirements, remain under consideration by the FCC.

We currently utilize HD Radio^® digital technology on some of our stations and will evaluate additional installations over the next few years. This digital technology, which is not required by the FCC, offers the possibility of multiple audio channels in our assigned frequencies.

The delivery of information through the presently unregulated Internet also could create a new form of competition for both radio and television. Internet radio broadcasts have no geographic limitations and can provide listeners with radio programming from around the country and the world. Although we believe that the current sound quality of Internet radio is below standard and may vary depending on factors that can distort or interrupt the broadcast, such as network traffic, we expect that improvements from higher bandwidths, faster modems and wider programming selection may make Internet radio a more significant competitor in the future. 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, portable digital music players and compact discs. Similarly, the television broadcasting industry has grown, notwithstanding the increasing popularity of portable compact disc players, digital video recorders and entertainment and media content delivered through cell phones and other wireless devices. A growing population and the greater availability of televisions and radios, particularly car and portable radios, have contributed to the growth of the radio and television industries. We cannot assure you, however, that the development or introduction of any new media technology will not have an adverse effect on the radio and television broadcasting industries.

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 and Television Broadcasting below.

Trademarks, Copyrights, and Licenses

In the course of our business, we use various trademarks, copyrights, trade names, domain names, and service marks, including logos, with our products and services in our programming, advertising and promotions. Trademarks and copyrights are of material importance to our business and are protected by registration or otherwise in the United States, including Puerto Rico. We believe our trademarks, copyrights, trade names, domain names and service marks are important to our business and we intend to continue to protect and promote them where appropriate and to protect the registration of new trademarks and copyrights, including through legal action. We do not hold or depend upon any material government license, franchise or concession, except the broadcast licenses granted by the FCC and the trademarks granted by the United States Patent and Trademark Office.

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 U.S. Hispanic markets. Since the passage of the Telecommunications Act of 1996, the Federal Trade Commission (FTC) and the Department of Justice (DOJ), the federal agencies responsible for enforcing the federal antitrust laws, have reviewed certain proposed acquisitions of broadcast stations and station networks. The DOJ can be particularly aggressive when the proposed buyer already owns one or more broadcast stations in the market of the station it is seeking to buy. The DOJ has challenged a number of broadcasting transactions. Some of those challenges ultimately resulted in consent decrees requiring, among other things, divestitures of certain stations. As part of its scrutiny of station acquisitions, the DOJ has stated publicly that it believes that commencement of operations under time brokerage agreements, local marketing agreements and other similar agreements customarily entered into in connection with station transfers prior to the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act), could violate the HSR Act. In connection with acquisitions, subject to the waiting period under the HSR Act, so long as the DOJ policy on the issue remains unchanged, we would not expect to commence operation of any affected station under a time brokerage agreement, local marketing agreement or similar agreement until the waiting period has expired or been terminated.

Federal Regulation of Radio and Television Broadcasting

General. The radio and television broadcasting industry is subject to extensive and changing regulation by the FCC of programming, technical operations, employment and other business practices. The FCC regulates broadcast stations pursuant to the Communications Act of 1934, as amended (the Communications Act). The Communications Act permits the operation of 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 and television broadcasting;

•

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

•

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

•

establishes technical requirements for certain transmitting equipment used by radio and television 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 and television broadcast stations;
	•		has the power to impose penalties, including monetary forfeitures and license revocations, for violations of its rules and the Communications Act; and

•

regulates certain aspects of the operation of cable and Direct to Home (DTH) satellite systems and certain other electronic media that compete with broadcast stations.

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 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 broadcasting license or the denial of FCC consent to acquire additional broadcast properties, all of which could have a material adverse impact on our operations.

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 and television broadcast station licenses for specific periods of time and, upon application, may renew them for additional terms. Under the Communications Act, radio and television broadcast station licenses may be granted for a maximum term of eight years.

The following table sets forth the technical information and license expiration dates of each of our owned radio and television stations:

Date of

Broadcast

Date of

license

Operation

station

Market

acquisition

expiration

frequency

FCC class

HAAT

Power

(In meters)

(In kilowatts)

KLAX-FM

Los Angeles, CA

2/24/1988

12/1/2013

97.9 MHz

B

184

33.00

KXOL-FM

Los Angeles, CA

10/30/2003

12/1/2013

96.3 MHz

B

398

6.60

WSKQ-FM

New York, NY

1/26/1989

6/1/2006

(a)

97.9 MHz

B

415

6.00

WPAT-FM

New York, NY

3/25/1996

6/1/2014

93.1 MHz

B

433

5.40

WMEG-FM

Puerto Rico

5/13/1999

2/1/2012

106.9 MHz

B

594

25.00

WEGM-FM

Puerto Rico

1/14/2000

2/1/2012

95.1 MHz

B

600

25.00

WRXD-FM

Puerto Rico

12/1/1998

2/1/2012

96.5 MHz

B

852

11.50

WZET-FM

Puerto Rico

5/13/1999

2/1/2012

92.1 MHz

A

337

3.00

WIOA-FM

Puerto Rico

1/14/2000

2/1/2012

99.9 MHz

B

560

31.00

WIOB-FM

Puerto Rico

1/14/2000

2/1/2012

97.5 MHz

B

302

50.00

WIOC-FM

Puerto Rico

1/14/2000

2/1/2012

105.1 MHz

B

(61

)

47.00

WZNT-FM

Puerto Rico

1/14/2000

2/1/2012

93.7 MHz

B

560

28.00

WZMT-FM

Puerto Rico

1/14/2000

2/1/2012

93.3 MHz

B1

(69

)

14.50

WODA-FM

Puerto Rico

1/14/2000

2/1/2012

94.7 MHz

B

560

31.00

WNOD-FM

Puerto Rico

1/14/2000

2/1/2012

94.l MHz

B

597

25.00

WLEY-FM

Chicago, IL

3/27/1997

12/1/2012

107.9 MHz

B

232

21.00

WXDJ-FM

Miami, FL

3/28/1997

2/1/2012

95.7 MHz

C2

167

40.00

WCMQ-FM

Miami, FL

12/22/1986

2/1/2012

92.3 MHz

C2

188

31.00

WRMA-FM

Miami, FL

3/28/1997

2/1/2012

106.7 MHz

CO

300

100.00

KRZZ-FM

San Francisco, CA

12/23/2004

12/1/2013

93.3 MHz

B

150

50.00

WSBS-DT

Miami, FL (b)

3/1/2006

2/1/2013

CH. 3

DTV

54

1.00

WSBS-CA

Miami, FL

3/1/2006

2/1/2013

CH. 50

CA

236

150.00

License Grant and Renewal. Generally, the FCC renews broadcast licenses without a hearing upon a finding that:

•

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

•

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

•

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

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

The Communications Act authorizes the filing of petitions to deny a license renewal application during specific periods of time after a renewal application has been filed. Interested parties, including members of the public, may use these petitions to raise issues concerning a renewal applicant’s qualifications. If a substantial and material question of fact concerning a renewal application is raised by the FCC or other interested parties, or if for any reason the FCC cannot determine that granting a renewal application would serve the public interest, convenience and necessity, the FCC will hold an evidentiary hearing on the application. If, as a result of an evidentiary hearing, the FCC determines that the licensee has failed to meet the requirements specified above and that no mitigating factors justify the imposition of a lesser sanction, then the FCC may deny a license renewal application. Generally, our licenses have been renewed without any material conditions or sanctions being imposed, but we cannot assure that the licenses of each of our stations will continue to be renewed or will continue to be renewed without conditions or sanctions. In a pending rule-making proceeding, the FCC has sought comments on the adoption of processing guidelines for renewal applications regarding a station’s locally oriented programming performance. The effect of whether and to what extent any such requirements are ultimately adopted and become effective cannot currently be determined.

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, C0, or C radio stations.

Transfers and Assignments of License. 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. citizens 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 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.

Alien Ownership. 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, whom the FCC refers to as “aliens” 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 of record is 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, 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. Our certificate of incorporation provides that the transfer or conversion of our capital stock, whether voluntary or involuntary, shall not be permitted, and shall be ineffective, if such transfer or conversion would violate (or would result in violation of) the Communications Act or any of the rules or regulations promulgated thereunder or require the prior approval of the FCC, unless such prior approval has been obtained.

Ownership Attribution. 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 officer positions and directors of a corporate parent of a broadcasting licensee. The FCC treats all partnership interests as attributable, except for those limited partnership interests that under FCC policies are considered insulated from material involvement in the management or operation of the media-related activities of the partnership. The FCC currently treats limited liability companies like limited partnerships for purposes of attribution. Stock interests held by insurance companies, mutual funds, bank trust departments and certain other passive investors that hold stock for investment purposes only become attributable with the ownership of 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 noncontrolling voting stock interests are deemed proportionally reduced at each noncontrolling 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, nonvoting stock options or other nonvoting 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 nonvoting, 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.

Multiple Ownership. The Communications Act and FCC rules generally restrict ownership, operation or control of, or the common holding of attributable interests in (i) broadcast stations above certain limits serving the same local market, and (ii) broadcast stations and a daily newspaper serving the same local market. The FCC’s multiple ownership rules are briefly summarized below.

Local Radio Ownership. Although current FCC nationwide radio broadcast ownership rules allow one entity to own, control or hold attributable interests in an unlimited number of AM and FM radio stations nationwide, the Communications Act and the FCC’s rules limit the number of radio broadcast stations in local markets (defined as those counties in the Arbitron^® defined market) in which a single entity may own an attributable interest as follows:

•

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

•

In a radio market with between 15 and 29 (inclusive) full-power commercial and noncommercial 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 full-power commercial and noncommercial 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.

For the purpose of radio ownership caps, the FCC defines a local radio market as the geographic market assigned by Arbitron^®, the private audience measurement service for radio broadcasters. For non-Arbitron^® markets, the FCC is conducting a rulemaking in order to define markets in a manner comparable to Arbitron^®‘s method. In the interim, the FCC will apply a “modified contour approach” to non-Arbitron^® markets. This modified approach will exclude any radio station whose transmitter site is more than 58 miles from the perimeter of the mutual overlap area

Local Television Ownership. Under the ownership rules currently in place, the FCC generally permits an owner to have only one television station per market. A single owner is permitted to have two stations with overlapping signals so long as (i) one of the two commonly owned stations is not ranked in the top four based upon audience share, and (ii) there will remain after the transaction eight independently owned, full power noncommercial or commercial operating television stations in the market. The FCC will consider waiving these ownership restrictions in certain cases involving failing or failed stations or stations which are not yet built.

Television National Audience Reach Limitation. Under the national television ownership rule, one party may not own television stations which reach more than 39% of all U.S. television households. For purposes of calculating the total number of television households reached by a station, the FCC attributes a UHF television station with only 50% of the television households in its market. In establishing a national cap by statute, Congress did not make mention of the FCC’s “UHF discount” policy. The FCC may commence a proceeding to determine if the UHF discount policy should be retained, reused or eliminated.

Radio-Television Cross-Ownership. The radio-television cross-ownership rule generally allows common ownership of one or two television stations and up to six radio stations, or, in certain circumstances, (i) one television station and seven radio stations, in any market where at least 20 independent voices would remain after the combination; (ii) two television stations and up to four radio stations in a market where at least 10 independent voices would remain after the combination; and (iii) one television and one radio station notwithstanding the number of independent voices in the market. A “voice” includes each independently owned and operated full-power television and radio station and each daily newspaper that has a circulation exceeding 5% of the households in the market, plus one voice for all cable television systems operating in the market.

Newspaper-Broadcast Cross-Ownership. Under the currently effective newspaper broadcast cross-ownership rule, unless grandfathered or subject to waiver, no party can have an attributable interest in both a daily English-language newspaper and either a television or radio station in the same market if specified signal contours of the television station or the radio station encompass the entire community in which the newspaper is published.

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, technical operation, the broadcast of obscene or indecent programming, sponsorship identification, the broadcast of contest and lottery information and the conduct of contests. Certain FCC rules affecting programming and operations are briefly summarized below.

Indecency and Profanity. Provisions of federal law regulate the broadcast of obscene, indecent, or profane material. The FCC’s rules prohibit the broadcast of obscene material at any time and indecent or profane material between the hours of 6 a.m. and 10 p.m. Broadcasters risk violating the prohibition against broadcasting indecent or profane material because the vagueness of the FCC’s indecency/profanity definition makes it difficult to apply, particularly with regard to spontaneous, live programming. In recent years, the FCC has increased its enforcement efforts of these indecency and profanity regulations, and has threatened to initiate license revocation proceedings against broadcast licensees for “serious” indecency or profanity violations. The FCC has substantially increased its monetary penalties for violations of these regulations. Legislation enacted in 2006 provides the FCC with authority to impose fines of up to $325,000 per indecent or profane utterance with a maximum forfeiture exposure of $3.0 million for any continuing violation arising from a single act or failure to act. Several appeals of certain of the FCC’s recent enforcement actions and of the FCC’s underlying indecency standards are pending in the federal courts. We cannot predict the outcome of these court proceedings or whether Congress will consider or adopt further legislation in this area.

Equal Employment Opportunities. The FCC requires that licensees not discriminate in hiring practices, develop and implement programs designed to promote equal employment opportunities and maintain reports on these matters annually and submit reports to the FCC in connection with each license renewal application and mid-term between renewal applications.

Simulcasting. 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 and Joint Sales Agreements. Occasionally, stations enter into time brokerage agreements or local marketing agreements. Separately owned and licensed 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 station maintain independent control over the programming and other operations of its own station. Over the past few years, a number of stations have entered into cooperative arrangements commonly known as joint sales agreements or JSAs. The FCC has determined that where two radio stations are both located in the same market and a party with a cognizable interest in one such station sells more than 15% of the advertising per week of the other station, that party shall be treated as if it has an attributable interest in that brokered station.

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 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 rules authorize the Digital Audio Radio Satellite Service, also known as DARS, in the 2310-2360 MHz frequency band. The FCC granted two nationwide licenses, one to XM Satellite Radio and a second to Sirius Satellite Radio. In July 2008, the companies merged into Sirius XM Radio, Inc. The satellite radio systems provide multiple channels of audio programming in exchange for the payment of a subscription fee.

Terrestrial Digital Radio. The FCC has approved a technical standard for the provision of “in band, on channel” terrestrial digital radio broadcasting by existing radio broadcasters, and has allowed radio broadcasters to convert to a hybrid mode of digital/analog operation on their existing frequencies. Digital radio provides additional spectrum segmentation for enhanced data services and additional program streams to complement the existing programming service, which permits new business and multicasting opportunities for radio broadcasters.

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 have limited service areas of 3.5 miles and 1 to 2 miles, respectively. Implementation of a low power radio service provides an additional audio programming service that could compete with our radio stations for listeners, but we cannot predict the effect upon us.

Change of Community. The FCC has adopted rules concerning the FM Table of Allotments to allow radio broadcasters to change their community of license more easily. We are evaluating our current licenses to see if a community of license change would be beneficial. We are aware that competitors may use this rule revision to improve their facilities, and other radio operators may use this rule in a way that would make them newly attractive acquisition targets for us.

Cable and Satellite Carriage of Television Broadcast Stations. The Cable Television Consumer Protection and Competition Act of 1992 (the Cable Act) and implementing FCC regulations govern the retransmission of commercial television stations by cable television operators. Every three years, each station must elect, with respect to cable systems within its DMA, either “must carry” status, pursuant to which the cable system’s carriage of the station is mandatory, or “retransmission consent,” pursuant to which the station gives up its right to mandatory carriage in order to negotiate consideration in return for consenting to carriage. We have elected “must carry” with respect to our full power television station.

Similarly, federal legislation and FCC rules govern the retransmission of broadcast television stations by DTH satellite operators. DTH satellite operators are required to carry the signals of all local television broadcast stations requesting carriage in local markets in which the DTH satellite operator carries at least one signal pursuant to the statutory local-to-local compulsory copyright license. Every three years, each television station in such markets must elect “must carry” or “retransmission consent” status, in a manner similar to that described above with respect to cable systems.

In June 2009, broadcast television transitioned from analog to digital. As a result of this transition, for a three-year period cable television systems are required to carry must-carry signals in an analog format or, in the case of all-digital cable systems, to provide equipment to down-convert must-carry digital signals for viewing on analog television sets. Cable television systems, with some exceptions, are also required to carry such stations’ high definition signals. DTH satellite carriers are also required, but over a four-year phase-in period, to carry the high definition signals of must-carry stations. Neither cable systems nor DTH satellite carriers are required to carry more than a station’s primary video programming channel.

Digital Television Services. As of June 12, 2009, all full-power broadcast television stations were required to cease broadcasting analog programming and convert to all digital broadcasts. The transition to digital television has improved the technical quality of television signals and provides broadcasters the flexibility to offer new services, including high-definition television, broadband data transmission and additional video streams. Our full-power television station has completed construction of its DTV facility and is currently broadcasting solely on its digital channel. No statutory deadline has been established for the mandatory conversion of Class A television stations, such as WSBS-CA, from analog to digital broadcasting. We have FCC authority to flash-cut WSBS-CA to retain the Channel 50 frequency and are constructing the facilities authorized by the FCC.

Children’s Television Programming. The FCC has adopted rules on children’s television programming pursuant to the Children’s Television Act of 1990. The rules limit the amount and content of commercial matter that may be shown on television stations during programming designed for children 12 years of age and younger, and require stations to broadcast on their main program stream three hours per week of educational and informational programming (E/I programming) designed for children 16 years of age and younger. FCC rules also impose E/I programming requirements on each additional digital multicast program stream transmitted by television stations, with the requirement increasing in proportion to the additional hours of free programming offered on multicast channels. These rules also limit the display during children’s programming of Internet addresses of websites that contain or link to commercial material or that use program characters to sell products.

Sponsorship Identification. Both the Communications Act and the FCC rules generally require that, when payment or other consideration has been received or promised to a broadcast licensee for the airing of program material, the station must disclose that fact and identify who paid or promised to provide the consideration at the time of the airing. The FCC has initiated inquiries against several media companies, including the Company, concerning sponsorship identification practices with respect to the music recording industry. The FCC has also initiated inquiries against several dozen television stations seeking to determine whether their broadcast of “video news releases” (VNRs) violated the sponsorship identification rules by failing to disclose the source and sponsorship of the VNR materials. VNRs are news stories and feature materials produced by government agencies and commercial entities, among others, for use by broadcasters. The FCC also has under consideration rule-making proceedings concerning sponsorship identification issues, such as product placement. Whether any new regulations are ultimately adopted and, if so, the effect of such rules on our operations cannot currently be determined.

Proposed and Recent Changes. Congress and the FCC continually consider new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect our operations, ownership and profitability; result in the loss of audience share and advertising revenue; or affect our ability to acquire additional broadcast stations or to finance such acquisitions. We can neither predict what matters might be considered nor judge in advance what impact, if any, the implementation of any of these proposals or changes might have on our business. Such matters may include:

	•		changes to the license authorization and renewal process;
	•		proposals to increase regulatory fees or impose spectrum use or other fees on FCC broadcasting licensees;

•

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;

•

proposals to restrict or prohibit the advertising of on-line casinos or on-line sports-betting services;

•

proposals to require broadcast stations to operate studios in the communities to which they are licensed, which would require construction of new studios, to provide staffing on a 24 hour per day basis, and to increase and/or quantify locally oriented program content and diversity;

•

proposals to change rules regarding studio location and operations;

•

technical and frequency allocation matters;

•

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

•

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

•

proposals to regulate or prohibit payments to stations by independent record promoters, record labels and others for the inclusion of specific content in broadcast programming; and

•

proposals to require radio broadcasters to pay royalties to musicians and record labels for the performance of music played on the stations.

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.

Management and Personnel

As of December 31, 2009, we had approximately 438 full-time employees and 70 part-time employees. None of our employees are represented by a labor organization or are covered by a collective bargaining agreement. We consider our relations with our employees to be satisfactory.

Our business depends upon the efforts, abilities and expertise of our executive officers and other key employees, including on-air talent, and our ability to hire and retain qualified personnel. The loss of any of these executive officers and key employees, particularly Raúl Alarcón, Jr., Chairman of our Board of Directors, Chief Executive Officer and President, could have a material adverse effect on our business.

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 100 F Street, N.E., Washington D.C. 20549, on official business days during the hours of 10:00 am to 3:00 pm. 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 and the investor relations section of our website is 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.

The information on our Internet website is not, and shall not be deemed to be part of this report or incorporated into any other filings we make with the SEC.

Item 1A.		Risk Factors

The following discussion of risk factors contains “forward-looking statements,” as discussed in Item 1. “Business”. These risk factors may be important to understanding any statement in this Annual Report on Form 10-K or elsewhere. You should carefully consider the risks and uncertainties described below and the other information in connection with evaluating our business and the forward-looking statements 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.

The following information should be read in conjunction with Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A), and the consolidated financial statements and related notes in Part II, Item 8. “Financial Statements and Supplementary Data” of this report.

Our businesses routinely encounter and address risks, some of which will cause our future results to be different — sometimes materially different — than we presently anticipate. A discussion about important operational risks that our businesses encounter can be found in the MD&A section and in the business descriptions in Item 1. “Business” of this report. Below, we describe certain important operational and strategic risks. Our reactions to material future developments as well as our competitors’ reactions to those developments will affect our future results.

Risks Related to our Indebtedness

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 B preferred stock. As of December 31, 2009, our ratio of total debt to last twelve months Consolidated EBITDA, as defined in our credit agreement governing our first lien credit facility term loan due 2012, or the First Lien Credit Facility, was 8.6 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 net 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 downturns in our business or in the general economy 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 difficult for us to satisfy our obligations relating to our Series B preferred stock.

Our ability to satisfy all of our debt obligations depends upon our future operating performance which 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 or refinance 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 assignment 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 Series B preferred stock. Our ability to generate cash depends on many factors, some of which are beyond our control.

For the year ended December 31, 2009, we had net cash interest expense of $20.4 million. During 2009, we paid dividends in cash to holders of the Series B preferred stock in an amount equal to $5.0 million. Since October 15, 2008, we have been required to pay dividends in cash on our Series B preferred stock. We did not make the cash dividend payments that would otherwise have been scheduled for July and October of 2009 and January 2010. Our ability to make payments on and to refinance our debt, pay dividends in cash on our Series B preferred stock, repurchase our Series B 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 and maintain cash in the future. Further, our ability to satisfy our obligations, including making the payments described above, and to reduce our total indebtedness will depend upon our future operating performance and on economic, financial, competitive, legislative, regulatory and other factors, many of which may be beyond our control.

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 First Lien Credit Facility and our existing debt instruments, 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 First Lien Credit Facility and our existing debt instruments, 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 broadcasting 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 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, which, if incurred, could further intensify the risks associated with our substantial leverage.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. Although the terms of our First Lien Credit Facility and debt instruments 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. 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 existing debt and our preferred stock impose or will impose restrictions on us that may adversely affect our business.

The terms of our Series B preferred stock, our Series C convertible preferred stock, par value $0.01 per share (the Series C preferred stock, together with the Series B preferred stock, the Preferred Stock) and our First Lien Credit Facility contain covenants that, among other things, limit our ability to:

•

incur additional debt, incur contingent obligations and issue additional preferred stock;

•

redeem or repurchase securities ranking junior to our Series B preferred stock;

•

create liens and encumbrances;

•

pay dividends, distributions or make other specified restricted payments, and restrict 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;

•

issue capital stock or other equity interests;

•

sell capital stock of our subsidiaries; and

•

merge or consolidate with any other person, company or other entity or sell, assign, transfer, lease, convey or otherwise dispose of all, or substantially all, of our assets.

The terms of the First Lien Credit Facility and Series B preferred stock also require us to satisfy certain financial conditions, which 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 our future operating performance and economic, financial, competitive, legislative, regulatory and other factors, many of which may be beyond our control. If one or more of these events occur, we cannot assure you that we will be able to comply with the covenants. 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 First Lien Credit Facility, 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 First Lien Credit Facility and the certificates of designations governing our Series B preferred stock, each of which would cause an acceleration of the applicable indebtedness and/or require us to make an offer to repurchase the 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 Series B preferred stock if holders exercise their repurchase right, or to finance the change of control offer required by our Series B preferred stock.

On October 15, 2013, each holder of Series B preferred stock will have the right to require us to redeem all or a portion of the Series B 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 certificate of designations creating the Series B preferred stock, subject to certain restrictions in our debt instruments we will be required to make an offer to purchase the Series B 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 we will have sufficient funds available to us on favorable terms, or at all, to repurchase all tendered Series B preferred stock, pursuant to these requirements. Our failure to offer to repurchase or to repurchase Series B preferred stock would result in a voting rights triggering event under the certificate of designations governing our Series B preferred stock. Such events could lead to defaults under the terms of our other existing debt. In addition, our First Lien Credit Facility would either prohibit or effectively prohibit us from making any such required repurchases. Prior to repurchasing our Series B preferred stock, on a change of control event, we must either repay outstanding debt under our First Lien Credit Facility or obtain the consent of the lenders under such facility. If we do not obtain the required consents or repay our outstanding debt under our First Lien Credit Facility, we would remain effectively prohibited from offering to repurchase our Series B preferred stock.

We may not have the funds or the ability to obtain additional financing for working capital, capital expenditures, any business strategy or other general corporate purposes.

We believe we have sufficient cash available to fund our operations and to support our acquisition business strategy. We may need additional financing due to future developments or changes in our business plan. We must rely on cash from operations to support our capital expenditures and acquisition business strategy. In addition, our actual funding requirements could vary materially from our current estimates. If additional financing is needed, we may not be able to raise sufficient funds on favorable terms or at all. If we fail to obtain any necessary financing on a timely basis, a number of adverse effects could occur.

A lowering of the ratings assigned to our debt securities by ratings agencies may further increase our future borrowing costs and reduce our access to capital.

Our debt ratings are below the “investment grade” category, which results in higher borrowing costs. There can be no assurance that our debt ratings will not be lowered in the future by a rating agency. A lowering in the rating may further increase our future borrowing costs and reduce our access to capital.

Capital requirements necessary to implement strategic initiatives could pose risks.

The purchase price of possible acquisitions and/or other strategic initiatives could require additional debt or equity financing on our part. Since the terms and availability of this financing depend to a large degree upon general economic conditions and third parties over which we have no control, we can give no assurance that we will obtain the needed financing or that we will obtain such financing on attractive terms. In addition, our ability to obtain financing depends on a number of other factors, many of which are also beyond our control, such as interest rates and national and local business conditions. If the cost of obtaining needed financing is too high or the terms of such financing are otherwise unacceptable in relation to the strategic opportunity we are presented with, we may decide to forego that opportunity. Additional indebtedness could increase our leverage and make us more vulnerable to economic downturns and may limit our ability to withstand competitive pressures. Additional equity financing could result in dilution to our shareholders.

Risks Related to our Business

If U.S. economic conditions continue to deteriorate, our results of operations may be adversely affected.

Revenue generated by our media broadcasting stations depends primarily upon the sale of advertising. Our operating results have been adversely affected by the recession and downturn in the United States economy since advertising expenditures, which we believe to be largely a discretionary business expense, generally decrease as the economy slows down. As a result of the adverse impact on the general economic activity in the United States, advertising revenues have also declined due to advertising cancellations, delays or defaults in payment for advertising time. While the condition of the U.S. economy appears to be improving, if it does not improve or it continues to deteriorate, our results of operations will be adversely affected.

Furthermore, because a substantial portion of our revenue is derived from local advertisers, our ability to generate advertising revenue in specific markets is directly affected by local or regional economic conditions. A concentration of stations in any particular market intensifies our exposure to regional economic declines. We are particularly dependent on advertising revenue from the New York, Los Angeles and Miami markets, which accounted for more than 70% of our revenues for the year ended December 31, 2009. An economic decline in these markets could adversely impact our cash flow and results of operations.

In addition, some of our advertisers and clients could experience serious cash flow problems due to the economic downturn. As a result, they may attempt to increase their prices, pass through increased costs or alter payment terms. Our advertisers may be forced to reduce their production, shut down their operations or file for bankruptcy protection, which could have a material adverse affect on our business. While these difficult economic conditions appear to be improving, there is no guarantee that they will improve in the near future, and any continuation or worsening of the credit markets, or even the fear of such a development, could intensify the adverse effects of these difficult market conditions on our results of operations. We have experienced a decline in the level of business activity of our advertisers which has and could continue to have an adverse effect on our revenues and profit margins.

Even in the absence of a general recession or downturn in the economy, an individual business sector that tends to spend more on advertising than other sectors might be forced to reduce its advertising expenditures if that sector experiences a downturn. If that sector’s spending represents a significant portion of our advertising revenues, any reduction in its expenditures may affect our revenue.

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

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

We compete for advertising revenue with other broadcast stations, as well as other media, many operators of which have greater resources than we do.

The success of our stations is primarily dependent upon their share of overall advertising revenues within their markets, especially in New York, Los Angeles, and Miami. Our broadcast stations compete in their respective markets for audiences and advertising revenues with other broadcast stations of all formats, as well as with other media, such as newspapers, magazines, television, satellite radio, cable services, outdoor advertising, the Internet and direct mail. In addition, a new electronic audience measurement technology, the Arbitron ^® Portable People Meter ^TM, was introduced in all of our radio markets, excluding Puerto Rico. We are monitoring the effects of this new ratings system on a continuous basis and are ascertaining the impact the Arbitron ^® Portable People Meter ^TM has had on ratings and advertising sales in the markets in which we operate. Our stations’ audience ratings, market shares and advertising revenues may decline and any adverse change in a particular market could have a material adverse effect on the financial condition of our business as a whole.

Although we believe that each of our broadcast 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. Specifically, radio stations can change formats quickly. Any other radio station currently broadcasting could shift its format to duplicate the format of, or develop a format which is more popular than, 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.

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

Our New York, Los Angeles and Miami markets accounted for more than 70% of our revenue for the fiscal year ended December 31, 2009. Therefore, any volatility in our revenues or operating income attributable to stations in these markets could have a significant adverse effect on our consolidated net revenues or operating income. A significant decline in net revenue or operating income from our stations in any of these markets could have a material adverse effect on our financial position and results of operations.

Our revenues are, therefore, concentrated in these key markets. As a result, an economic downturn, increased competition, or another significant negative event in any of these markets could reduce our revenues and results of operations more dramatically than other companies that do not depend as much on these markets.

Cancellations or reductions in advertising could adversely affect our net revenues.

We do not generally obtain long-term commitments from our advertisers. As a result, our advertisers may cancel, reduce or postpone orders without penalty. Cancellations, reductions or delays in purchases of advertising could adversely affect our net revenues, especially if we are unable to replace these purchases. Our expense levels are based, in part, on expected future net revenues and are relatively fixed once set. Therefore, unforeseen decreases in advertising sales could have a material adverse impact on our net revenues and operating income.

The success of our television operation depends upon our ability to attract viewers and advertisers to our broadcast television operation.

We cannot assure you that we will be able to attract viewers and advertisers to our broadcast television operation. If we cannot attract viewers, our television operation may suffer from low ratings, which in turn may deter potential advertisers. The inability to successfully attract viewers and advertisers may adversely affect our revenue and operating results for our television operation. Television programming is a highly competitive business. Television stations compete in their respective markets for audiences and advertising revenues with other stations and larger, more established networks. As a result of this competition, our rating share may not grow and an adverse change in our local markets could have a material adverse impact on the revenue of our television operation.

Our industry is subject to technological changes and, if we are unable to match or surpass such change, it may result in a loss of competitive advantage and market opportunity. The success of the television operation is largely dependent on certain factors, such as the extent of distribution of the developed programming, the ability to attract viewers, advertisers and acquire programming, and the market and advertiser acceptance of our programming. We cannot assure you that we will be successful in our initiative or that such initiatives will generate revenues or ultimately be profitable.

Our growth depends on successfully executing our expansion strategy.

We have pursued, and will continue to pursue, the expansion of our media business, through acquisitions and affiliations, primarily in the largest U.S. Hispanic markets, as a growth strategy. We cannot assure you that our growth strategy will be successful. Our growth strategy is subject to a number of risks, including, but not limited to:

•

the limits on our ability to acquire additional stations due to our substantial level of debt;

•

the need to raise additional financing, which may be limited by the terms of our debt instruments and market conditions;

•

the failure to increase our station operating income or yield other anticipated benefits for future acquired stations;

•

the need for required regulatory approvals, including FCC and antitrust approvals;

•

the challenges of managing any rapid growth; and

•

the difficulties of programming newly acquired stations to attract listenership or viewership.

In addition, we may finance acquisitions with the issuance, 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 First Lien Credit Facility, the certificates of designations governing our Preferred Stock and our ability to raise additional funds. Additionally, our competitors, who may have greater resources than we do, may have an advantage over us in pursuing and completing strategic acquisitions.

Our business is dependent upon the performance of key employees, on-air talent and program hosts.

Our business depends upon the efforts, abilities and expertise of our executive officers and other key employees, including on-air talent, and our ability to hire and retain qualified personnel. We employ or independently contract with several on-air personalities and hosts with significant loyal audiences in their respective markets. Although we have entered into long-term agreements with some of our executive officers, key on-air talent and program hosts to protect our interests in those relationships, we can give no assurance that all or any of these key employees will remain with us or will retain their audiences. Competition for these individuals is intense and many of our key employees are at-will employees who are under no legal obligation to remain with us. Our competitors may choose to extend offers to any of these individuals on terms which we may be unwilling to meet. In addition, any or all of our key employees may decide to leave for a variety of personal or other reasons beyond our control. Furthermore, the popularity and audience loyalty of our key on-air talent and program hosts is highly sensitive to rapidly changing public tastes. A loss of such popularity or audience loyalty is beyond our control and could limit our ability to generate ratings and revenues.

The loss of any of these executive officers and key employees, particularly Raúl Alarcón, Jr., Chairman of our Board of Directors, Chief Executive Officer and President, could have a material adverse effect on our business. We do not maintain key man life insurance on any of our personnel.

Increased programming and content costs may adversely affect our profits.

We produce and acquire programming and content and incur costs for all types of creative talent, including actors, authors, writers and producers. An increase in the costs of such programming and content or in the costs for creative talent may lead to decreased profitability.

Piracy of our programming and other content, including digital and internet piracy, may decrease revenue received from the exploitation of our programming and other content and adversely affect our businesses and profitability.

Piracy of programming is prevalent in many parts of the world and is made easier by technological advances allowing conversion of programming and other content into digital formats, which facilitates the creation, transmission and sharing of high quality unauthorized copies of our content. The proliferation of unauthorized copies and piracy of these products has an adverse effect on our businesses and profitability because these products reduce the revenue that we potentially could receive from the legitimate sale and distribution of our products and services.

Risks Related to Legislative and Regulatory Matters

Changes in U.S. communications laws or other regulations may have an adverse effect on the company’s business.

The television and radio broadcasting and distribution industries in the U.S. are highly regulated by U.S. federal laws and regulations issued and administered by various federal agencies, including the FCC. The television and radio broadcasting industry is subject to extensive regulation by the FCC under the Communications Act. For example, we are required to obtain licenses from the FCC to operate our radio and television stations. We cannot assure you that the FCC will approve our future renewal applications or that the renewals will be for full terms or will not include conditions or qualifications. The non-renewal, or renewal with substantial conditions or modifications, of one or more of our licenses could have a material adverse effect on our revenues.

We must also comply with extensive FCC regulations and policies in the ownership and operation of our television and radio stations and our television network. FCC regulations limit the number of television and radio stations that a licensee can own in a market and the number of television stations that can be owned nationwide. Under the Cable Act, every three years each broadcast station is required to elect to exercise the right, either to require cable television system operators in its local market to carry its signal, or to prohibit cable carriage or condition it upon payment of a fee or other consideration. Under these “must carry” provisions of the Cable Act, a broadcaster may demand carriage on a specific channel on cable systems within its market. These “must carry” rights are not absolute, and under some circumstances, a cable system may be entitled not to carry a given station. Under current FCC rules, cable systems and direct broadcast satellite, or DBS, will also be required to carry our post-transition digital signal. The FCC’s current rules require cable and DBS operators to carry only one channel of the digital signal of our television stations, despite the capability of digital broadcasters to broadcast multiple program streams within one station’s digital allotment.

The U.S. Congress and the FCC currently have under consideration, and may in the future adopt, new laws, regulations, and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation and ownership of our radio and television properties. For example, from time to time, proposals have been advanced in the U.S. Congress and at the FCC to require radio and television broadcast stations to provide advertising time to political candidates for free or at a reduced charge. Any restrictions on political advertising may adversely affect our advertising revenues. The FCC has initiated a proceeding to examine and potentially regulate more closely embedded advertising such as product placement and product integration. Enhanced restrictions affecting these means of delivering advertising messages may adversely affect our advertising revenues. Changes to the media ownership and other FCC rules may affect the competitive landscape in ways that could increase the competition faced by us. There is legislation currently pending in the U.S. Congress which could remove over-the-air broadcasters’ existing exemption from payment of a performance royalty to record companies and performers of music which is broadcast on radio stations. The proposal could have an adverse impact on the cost of music programming for us. We are unable to predict the effect that any such laws, regulations or policies may have on our operations.

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

The radio broadcasting industry is subject to technological change, evolving industry standards and the emergence of new media technologies and services. For example, the FCC has implemented new technologies in the broadcast industry, including satellite, and is considering introducing terrestrial delivery of digital audio broadcasting, and the standardization of available technologies which significantly enhance the sound quality of AM and FM broadcasts. In some cases, our ability to compete will be dependent on our acquisition of new technologies and our provision of new services, and we cannot assure you that we will have the resources to acquire those new technologies or provide those new services; in other cases, the introduction of new technologies and services could increase competition and have an adverse effect on our revenue. Recent new media technologies and services include the following:

•

audio programming by cable television operators, direct broadcast satellite systems, personal communications and wireless systems, Internet content providers and other digital audio broadcast formats;

•

the Internet offers new, diverse and evolving forms of video and audio program distribution;

•

direct satellite broadcast television companies are supplying subscribers with several high quality music channels;

•

satellite digital audio radio technology has resulted in new satellite radio services with multi-channel programming and enhanced sound quality;

•

the introduction of in-band on-channel digital radio provides multi-channel, multi-format digital radio services in the same bandwidth currently occupied by traditional AM and FM radio services;

•

the provision of video programming to cellular telephones, digital handheld devices and gaming consoles; and

•

low power FM radio, which could result in additional FM radio broadcast stations in markets where we have stations.

We also cannot assure you that we will continue to have the resources to acquire other new technologies or to introduce new services that could compete with other new technologies. We cannot predict the effect, if any, that competition arising from new technologies may have on the radio broadcasting industry or on our business.

Impairment of our goodwill and other intangible assets deemed to have indefinite useful lives can cause our net income or net loss to fluctuate significantly.

As of December 31, 2009, we had approximately $345.4 million of unamortized intangible assets, including goodwill of $32.8 million and FCC broadcasting licenses of $312.6 million on our consolidated balance sheets. These unamortized intangible assets represented approximately 72% of our total assets. Accounting standards require that goodwill and other intangible assets deemed to have indefinite useful lives, such as FCC broadcasting licenses, cease to be amortized. Accounting standards require that goodwill and certain intangible assets be tested at least annually for impairment. If we find that the carrying value of goodwill or FCC broadcasting licenses exceeds its fair value, we will reduce the carrying value of the goodwill or intangible asset to the fair value, and will recognize an impairment loss in our results of operations.

We currently account for our FCC broadcasting licenses as indefinite lived assets. In the event we are no longer able to conclude that our FCC broadcasting licenses have indefinite lives, we may be required to amortize such licenses. The amortization of our FCC broadcasting licenses would affect our earnings and earnings per share.

The impairment tests require us to make estimates of the fair value of our intangible assets, which is determined by using a discounted cash flow methodology. Since a number of factors may influence the fair value of our intangible assets, we are unable to predict whether impairments of goodwill or other indefinite lived intangibles will occur in the future. Any such impairment would result in our recognizing a corresponding operating loss, which could have an adverse effect on our business, financial condition and results of operations.

The FCC has begun more vigorous enforcement of its indecency and other program content rules against the broadcast industry, which could have a material adverse effect on our business.

The FCC’s rules and regulations prohibit the broadcast of obscene material at any time and indecent material between the hours of 6:00 a.m. and 10:00 p.m. Broadcasters risk violating the prohibition against broadcasting indecent material because of the vagueness of the FCC’s indecency/profanity definition, coupled with the spontaneity of live programming. The FCC in the last few years has stepped up its enforcement activities as they apply to indecency and has threatened on more than one occasion to initiate license revocation or license renewal proceedings against a broadcast licensee who commits a “serious” indecency violation. The FCC has substantially increased its monetary penalties for violations of these regulations pursuant to law enacted in 2006 that provides the FCC with authority to impose fines of up to $325,000 per incident or profane utterance with a maximum forfeiture exposure of $3.0 million for any continuing violation arising from a single act or failure to act. Moreover, the FCC has in some instances imposed separate fines for each allegedly indecent “utterance,” in contrast with its previous policy, which generally considered all indecent words or phrases within a given program as constituting a single violation. In addition, the FCC’s heightened focus on the indecency regulatory scheme against the broadcast industry generally, may encourage third parties to oppose our license renewal applications or applications for consent to acquire broadcast stations. We have in the past been the subject and may in the future become subject to additional inquiries or proceedings related to our stations’ broadcast of indecent or obscene material. To the extent that these pending inquiries or other proceedings result in the imposition of fines, revocation of any of our station licenses or denials of license renewal applications, our results of operations and business could be materially adversely affected. We also face increased potential costs in the form of fines for indecency violations, and we cannot predict whether Congress will consider or adopt further legislation in this area.

Our operation of various real properties and station facilities could lead to environmental liability and increased compliance costs.

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

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

Our Class A common stock has been publicly traded since November 1999. The market price for our Class A common stock has been subject to fluctuations since the date of our initial public offering. The stock market has from time to time experienced price and volume 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, but not limited to:

•

fluctuations in our financial results;

•

general conditions or developments in the media broadcasting industry and other media, and the national economy;

	•		significant sales of our common stock into and/or in the marketplace;
	•		significant decreases in our stations’ audience ratings;

•

inability to implement our expansion and operating 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 operating performance.

The liquidity of our common stock could be adversely affected if we are delisted from the NASDAQ Global Market.

We do not currently satisfy the minimum bid price requirement for continued listing of our Class A common stock on the NASDAQ Global Market. The NASDAQ Stock Market, or NASDAQ has granted us additional time to try to regain compliance with the minimum bid price requirements. We have until June 7, 2010 to regain such compliance, failing to do so will cause our Class A common stock to be delisted. NASDAQ, requires compliance with the $1.00 minimum bid price requirement for continued inclusion on the NASDAQ Global Market pursuant to Marketplace Rule 4450(a)(5). Delisting from NASDAQ would make trading our common stock more difficult for investors, potentially leading to further declines in our share price. Without a NASDAQ listing, stockholders may have a difficult time getting a quote for the sale or purchase of our stock, the sale or purchase of our stock would likely be made more difficult and the trading volume and liquidity of our stock would likely decline. Delisting from NASDAQ would also result in negative publicity and would also make it more difficult for us to raise additional capital. The absence of such a listing may adversely affect the acceptance of our common stock as currency or the value accorded by other parties. Further, if we are delisted, we would also incur additional costs under state blue sky laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our common stock and the ability of our stockholders to sell our common stock in the secondary market.

If our common stock is delisted by NASDAQ, our common stock may be eligible to trade on the OTC Bulletin Board, an over-the-counter quotation system, or on the pink sheets where an investor may find it more difficult to dispose of or obtain accurate quotations as to the market value of our common stock. We cannot assure you that our common stock, if delisted from the NASDAQ Global Market, will be listed on a national securities exchange, a national quotation service, the OTC Bulletin Board or the pink sheets.

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, par value $0.0001 per share (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.

Our failure to comply with the Sarbanes-Oxley Act of 2002 could cause a loss of confidence in the reliability of our financial statements and could have a material adverse effect on our business and the price of our Class A common stock.

We have undergone a comprehensive effort to comply with Section 404 of the Sarbanes-Oxley Act of 2002. Pursuant to Section 404, and the rules and regulations promulgated by the SEC to implement Section 404, we are required to furnish a report by our management to include in our annual report on Form 10-K regarding the effectiveness of our internal controls over financial reporting. This effort included documenting and testing our internal controls. As of December 31, 2009, we did not identify any material weaknesses in our internal controls over financial reporting as defined by the Public Company Accounting Oversight Board. In future years, there can be no assurance that we will not have material weaknesses that would be required to be reported. If we are unable to assert that our internal controls over financial reporting are effective in any future period (or if our independent registered public accounting firm was unable to express an opinion on the effectiveness of our internal controls), we could lose investor confidence in the accuracy and completeness of our financial reports, which would have a material adverse impact on our business and possibly, the price of our Class A common stock.

We may be adversely affected by the occurrence of extraordinary events, such as terrorist attacks or natural disasters.

The occurrence of extraordinary events, such as terrorist attacks, natural disasters, intentional or unintentional mass casualty incidents or similar events may substantially impact our operations in specific geographic areas, as well as nationally, and it may decrease the use of and demand for advertising, which may decrease our revenues or expose us to substantial liability. The September 11, 2001 terrorist attacks, for example, caused a nationwide disruption of commercial activities. The occurrence of future terrorist attacks, military actions by the U.S., contagious disease outbreaks or other unforeseen similar events cannot be predicted, and their occurrence can be expected to further negatively affect the economies where we do business generally, specifically the market for advertising. In addition, natural disasters, such as hurricanes or earthquakes, could adversely impact any one or more of the markets where we do business.

Risks related to our Chairman, Chief Executive Officer, and President’s Controlling Position

Raúl Alarcón, Jr., the Chairman of our 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., Chairman of our Board of Directors, Chief Executive Officer and President, beneficially owns shares of common stock representing approximately 80% of the combined voting power of our outstanding shares of common stock. As a result, Mr. Alarcón, Jr. will generally have the ability to control the outcome of all matters requiring stockholder approval, including the election of our entire board of directors, the approval of any merger or consolidation and the sale of all or substantially all of our assets. In addition, Mr. Alarcón Jr.’s voting power may have the effect of discouraging offers to acquire us because any such acquisition would require his consent.

We cannot assure you that Mr. Alarcón, Jr. will maintain all or any portion of his ownership or that he would continue as an officer or director if he sold a significant part of his stock. The disposition by Mr. Alarcón, Jr. of a sufficient number of shares could result in a change in control of our company, and we cannot assure you that a change of control would not adversely affect our business, financial condition or results of operations. As noted above, it could also result in a default under our credit agreement, could trigger a variety of federal, state and local regulatory consent requirements and potentially limit our utilization of net operating losses for income tax purposes.

We may be influenced by the Chairman of our Board, Chief Executive Officer and President, whose interests may conflict with those of our other stockholders.

Mr. Alarcón, Jr. beneficially owns approximately 80% of the total voting power of our outstanding common stock. As such, he may be able to:

•

influence the election of our Board of Directors;

•

influence our management and policies; and

•

influence the outcome of any corporate transaction or other matter submitted to our stockholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets.

Under Delaware law, although our directors and officers have a duty of loyalty to SBS, transactions that we enter into in which a director or officer has a conflict of interest are generally permissible so long as the material facts as to the director’s or officer’s relationship or interest as to the transaction are disclosed to our board of directors and a majority of our disinterested directors approves the transaction, or the transaction is otherwise fair to us.

Future common stock sales by Raúl Alarcón, Jr. could adversely affect the price of our Class A common stock.

The price for our Class A common stock could substantially fluctuate if Mr. Alarcón, Jr. sells large amounts of shares in the public market, including any shares of our Class B common stock, which are automatically converted to Class A common stock when sold. These sales, or the possibility of such sales, could make it more difficult for us to raise capital by selling equity or equity-related securities in the future.

Item 1B.		Unresolved Staff Comments.

None.

Item 2.		Properties

Each of our media segments requires offices, broadcasting studios, and transmission facilities to support our operations. Our corporate headquarters are located at 2601 South Bayshore Drive, Coconut Grove, Florida, where we rent executive offices in space indirectly owned by Raúl Alarcón, Jr. The lease expires in 2015, with the right to renew for two consecutive five-year terms thereafter.

As of December 31, 2009, the principal buildings owned or leased by us and used primarily by our radio and television and radio segments are described below:

Aggregate

size of

property in

Lease

square feet

Owned or

expiration

Location

(approximate)(1)

leased

date

New York, NY (2)

12,100

Owned

N/A

Los Angeles, CA (3)

40,000

Owned

N/A

Miami, FL (4)

12,100

Leased

2012

Miami, FL (5)

70,000

Owned

N/A

Miami, FL (6)

42,000

Leased

2015

Guaynabo, PR (7)

29,000

Owned

N/A

In addition, we own the transmitter sites for five of our eleven radio 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 (i) all of our other transmitter sites, with lease terms that expire between 2010 and 2044, assuming all renewal options are exercised, and (ii) the office and studio facilities for our radio stations in Chicago and San Francisco.

We lease backup transmitter facilities for our stations WSKQ-FM and WPAT-FM in New York, KLAX-FM and KXOL-FM in Los Angeles, WLEY-FM in Chicago, WRMA-FM, WCMQ-FM and WXDJ-FM in Miami, and KRZZ-FM in San Francisco. We own the back-up transmitter site in San Juan, Puerto Rico for the five radio stations covering the San Juan metropolitan area.

These backup transmitter facilities are a significant part of our disaster recovery plan to continue broadcasting to the public and to maintain our stations’ revenue streams in the event of an emergency. We have implemented a backup studio site for KRZZ-FM serving the San Francisco market in San Jose.

We own most of the properties used for the operations of our television stations. These properties include offices, studios, master control, and production facilities located in Miami, Los Angeles, and Puerto Rico. We lease a combined studio and tower site in Key West, Florida for WSBS-TV and a transmitter site for WSBS-CA, in Pembroke Park.

The studio, office, and transmitter sites of our media stations are vital to our overall operation. Management believes that our properties are in good condition and are suitable for our operations. We, however, continually assess the need to upgrade and to improve our properties and facilities.

See Item 13. Certain Relationships and Related Transactions.

Item 3.		Legal Proceedings

From time to time we are involved in various routine legal and administrative proceedings and 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 condition.

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 the Chairman of our Board of Directors, and an additional director, referred to collectively as the individual defendants. The complaint was never 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 underwriters and 1,000 individual defendants alleging, in general, violations of federal securities laws in connection with initial public offerings, in particular, failing to disclose that the underwriters 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. The issuer defendants in the consolidated cases (collectively, the Issuer Defendants) filed motions to dismiss the consolidated cases. These motions to dismiss covered issues common among all Issuer Defendants and issues common among all underwriter defendants (collectively, the Underwriter Defendants) in the consolidated cases. As a result of these motions, the Individual Defendants were dismissed from one of the claims against them, specifically the Section 10b-5 claim. On September 21, 2007, Kaye Scholer LLP, 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.

On August 31, 2005, the Southern District of New York issued an order of preliminary approval of a settlement proposal among the investors in the plaintiff class, the issuer defendants (including us) and the issuer defendants’ insurance carriers (the Issuers Settlement). The principal components of the Issuers Settlement were: (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 Underwriters; 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 from the Underwriter Defendants. The payments were to be charged to each issuer defendant’s insurance policy on a pro rata basis.

On October 13, 2004, the Southern District of New York granted plaintiffs’ motion for class certification in six “focus cases” out of the more than 300 consolidated class actions, but on December 5, 2006, the United States Court of Appeals for the Second Circuit (the Second Circuit) reversed the order, holding that plaintiffs could not satisfy the predominance requirement for a Federal Rule of Civil Procedure 23(b)(3) class action. On June 25, 2007, in light of the Second Circuit’s reversal of the class certification order and its subsequent denial of plaintiffs’ petition for a rehearing or rehearing en banc, the Southern District of New York entered a stipulation between plaintiffs and the Issuer Defendants, terminating the proposed Issuers Settlement which the Southern District of New York had preliminarily approved on August 31, 2005. On September 27, 2007, plaintiffs filed a renewed motion for class certification with respect to the six focus cases, based on newly proposed class definitions. On October 10, 2008, at plaintiffs’ request, the Southern District of New York ordered the withdrawal without prejudice of plaintiffs’ renewed motion, which had been fully briefed and was sub judice.

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 Underwriter Defendants and Issuer Defendants moved to dismiss the amended complaints in the six “focus cases.” On March 26, 2008, the Southern District of New York 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 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 Southern District of New York 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 SBS. 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 Southern District of New York’s May 13, 2008 order with respect to the status of the remaining 10b-5-related class allegations in the other 8 actions, including the SBS action, as well as the status of the Section 11-related class allegations.

On June 11, 2009, pursuant to a motion filed on April 2, 2009, the Southern District of New York issued a preliminary order of approval of a settlement of all of the consolidated cases, including the case against us. On September 19, 2009, the Southern District of New York conducted a hearing regarding the final approval of the settlement of all consolidated cases and, on October 5, 2009, issued an opinion finally approving the settlement. The settlement, which is subject to appeal, will result in a release of all claims against the Underwriter and Issuer Defendants, and their officers and directors, in exchange for an aggregate sum of approximately $600 million (the settlement amount) to be paid into a settlement fund for the benefit of the class plaintiffs. SBS’ and the individual defendants’ share of the settlement amount would be fully funded by insurance.

On October 23, 2009, several Objectors filed a petition for leave to appeal the Southern District of New York’s class definition for purposes of settlement in the Second Circuit Court of Appeals (the Objectors’ petition). Several Objectors have also filed notices of appeal in the Second Circuit from the Southern District of New York’s order approving the settlement. On October 29, 2009 Plaintiffs filed an answer in opposition to the Objectors’ petition. On November 2, 2009, the Underwriter Defendants filed a response to the Objectors petition, taking no position on the petition, but noting that the classes were approved for settlement purposes only and reserving the right to oppose class certification in the event the settlement is not finally approved. The Issuer Defendants do not intend to file a response to the Objectors’ petition.

Item 4.		(Removed and Reserved)

PART II

Item 5.		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a) Market Information

Our Class A common stock is traded on the NASDAQ Global 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 Global Market.

		2009								2008
		High				Low				High				Low
First quarter		$	0.28				0.08				2.08				1.33
Second quarter			0.39				0.12				1.95				0.98
Third quarter			0.61				0.16				1.12				0.21
Fourth quarter			1.04				0.41				0.48				0.06

(b) Record Holders

As of March 16, 2010, there were approximately 119 record holders of our Class A common stock, par value $0.0001 per share (Class A common stock) and 4 record holders of our Class B common stock, par value $0.0001 per share (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. There is no established trading market for our Class B common stock, par value $0.0001 per share. However, the Class B common stock is convertible to our Class A common stock on a share-for-share basis.

(c) Dividends

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 based upon our earnings, financial position, capital requirements and other factors that our Board of Directors deems relevant. Furthermore, our First Lien Credit Facility contains some restrictions on our ability to pay dividends.

Under the terms of our Series C preferred stock, we are required to pay dividends on parity with our Class A common stock and Class B common stock and any other class or series of capital stock we create after December 23, 2004.

Under the terms of our Series B preferred stock, we are required to pay dividends at a rate of 10¾% per year of the $1,000 liquidation preference per share of Series B preferred stock. On January 15, 2008, April 15, 2008, and July 15, 2008, the dividends were paid in cash. On October 15, 2008, the dividends were paid with additional shares of Series B preferred stock. Since October 15, 2008, we have been required to pay the dividends on our Series B preferred stock in cash. On January 15, 2009 and April 15, 2009, the dividends were paid in cash.

Under management’s recommendation, our Board of Directors determined that based on, among other things, the then current economic environment and future cash requirements, it would not be prudent to declare or pay the July 15, 2009, October 15, 2009 and January 15, 2010 cash dividends in the aggregate amount of approximately $7.5 million. Our Board of Directors has not yet determined whether to pay the scheduled April 15, 2010 dividend.

Our ability to satisfy our obligations, including making the payments described above, and to reduce our total indebtedness will depend upon our future operating performance and on economic, financial, competitive, legislative, regulatory and other factors, many of which may be beyond our control.

See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations below.

Recent Sales of Unregistered Securities

We have not made any sales of unregistered securities for the period covered by this annual report on Form 10-K.

Issuer Purchases of Equity Securities

We did not repurchase any of our outstanding equity securities for the period covered by this annual report on Form 10-K.

(d) Equity Compensation Plans

Information called for by Item 5 is set forth under the heading “Directors, Executive Officers and Corporate Governance” in Item 10 of this annual report and in our proxy statement relating to the 2010 Annual Meeting of Stockholders (the Proxy Statement), which information is incorporated herein by this reference.

Item 6.		Selected Financial Data

Not required for smaller reporting companies.

Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We own and/or operate 21 radio stations in markets that reach approximately 48% of the U.S. Hispanic population. In addition, we own and operate two television stations and have various affiliation, distribution and/or programming agreements, which allow us to reach approximately 6.5 million households throughout the U.S., including 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. 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 usually compensation expenses, programming expenses, professional fees, and advertising and promotional expenses. 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 television stations and related affiliates operate under the “MegaTV” brand. We have created a unique television format which focuses on entertainment, current 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 develop and produce more than 70% of our programming and obtain 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.

Fiscal Year Ended 2009 Compared to Fiscal Year Ended 2008

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

		2009				2008
		(In thousands)
Net revenue
Radio		$	123,602				145,421
Television			15,787				18,296
Consolidated		$	139,389				163,717
Engineering and programming expenses:
Radio		$	27,435				37,744
Television			13,944				23,268
Consolidated		$	41,379				61,012
Selling, general and administrative:
Radio		$	41,766				59,645
Television			8,263				11,075
Consolidated		$	50,029				70,720
Corporate expenses		$	9,686				12,806
Depreciation and amortization:
Radio		$	3,111				3,213
Television			2,202				1,595
Corporate			949				1,453
Consolidated		$	6,262				6,261
(Gain) loss on sale of assets, net:
Radio		$	(7	)			(3	)
Television			15				(10	)
Corporate			(22	)			—
Consolidated		$	(14	)			(13	)
Impairment of assets and restructuring costs:
Radio		$	14,188				402,243
Television			7,405				18,710
Corporate			48				163
Consolidated		$	21,641				421,116
Operating income (loss):
Radio		$	37,109				(357,421	)
Television			(16,042	)			(36,342	)
Corporate			(10,661	)			(14,422	)
Consolidated		$	10,406				(408,185	)

The following summary table presents a comparison of our operating results of operations for the fiscal years ended December 31, 2009 and 2008. Various fluctuations illustrated in the table are discussed below. This section should be read in conjunction with our consolidated financial statements and notes.

		2009				2008
		(In thousands)
Net revenue		$	139,389				163,717
Engineering and programming expenses			41,379				61,012
Selling, general and administrative expenses			50,029				70,720
Corporate expenses			9,686				12,806
Depreciation and amortization			6,262				6,261
Gain on disposal of assets, net			(14	)			(13	)
Impairment of assets and restructuring costs			21,641				421,116
Operating income (loss)			10,406				(408,185	)
Interest expense, net			(26,869	)			(22,062	)
Change in fair value of a derivative instrument			5,790				(3,813	)
Other (expense) income, net			(414	)			3,851
Income tax expense (benefit)			2,691				(101,486	)
Net loss		$	(13,778	)			(328,723	)

Net Revenue

The decrease in our consolidated net revenue of $24.3 million or 15% was mainly due to the decrease in our radio segment net revenue. Our radio segment net revenue decreased $21.8 million or 15%, primarily due to lower local, national, and barter sales caused mainly by the decline in economic conditions. The decrease in local, national and barter sales occurred in all of our markets. Our television segment net revenue decreased $2.5 million or 14%, primarily due to a decrease in barter and local sales and sponsorship revenue.

Engineering and Programming Expenses

The decrease in our consolidated engineering and programming expenses of $19.6 million or 32% was due to the decreases in both our radio and television segment expenses. Our radio segment expenses decreased $10.3 million or 27%, primarily related to decreases in compensation and benefits for technical and programming personnel and audience research expenses due to headcount reductions. Our television segment expenses decreased $9.3 million or 40%, primarily due to decreases in original produced programming and compensation and benefits for our technical and programming personnel due to headcount reductions.

Selling, General and Administrative Expense

The decrease in our consolidated selling, general and administrative expenses of $20.7 million or 29% was primarily due to decreases in both our radio and television segment expenses. Our radio segment expenses decreased $17.9 million or 30%, primarily due to a decrease in advertising, promotional and marketing costs, barter expenses, sales commissions, special event expenses, compensation and benefits for our selling, general and administrative personnel due to headcount reductions and a reduction of the allowance for doubtful account provision. Our television segment expenses decreased $2.8 million or 25%, primarily due to a decrease in advertising, promotional and marketing costs, barter expenses and compensation and benefits for our selling, general and administrative personnel due to headcount reductions.

Corporate Expenses

The decrease in corporate expenses was primarily a result of decreases in professional fees, travel and entertainment expenses and compensation and benefits for our corporate personnel due to headcount reductions.

Impairment of Assets and Restructuring Costs

As a result of the impairment testing of our indefinite-lived intangible assets and goodwill, we recorded a non-cash impairment loss of approximately $18.6 million that reduced the carrying values of our FCC broadcasting licenses. The impairment loss was due to changes in estimates and assumptions which were primarily: (a) lower industry advertising revenue growth projections in our respective markets, and (b) lower industry profit margins.

In addition, we entered into a sublease of office space and determined that $1.4 million of property and equipment related to leasehold improvements and furniture and fixtures were impaired.

As a result of the deterioration of the economy and the decrease in the demand for advertising, we began to implement a restructuring plan in 2008 to reduce expenses throughout the Company. During 2009, we incurred expenses of $1.6 million related to the termination of various programming contracts and personnel and a loss on a sublease of office space.

Operating Income

The increase in operating income was mainly due to the decrease in the impairment of assets and restructuring costs. Also contributing to the increase in operating income was a decrease in our operating expenses, offset by a decrease in our net revenue.

Interest Expense, Net

In September and October 2008, the counterparty to one of our interest rate swaps, Lehman Brothers Special Financing Inc., and its parent and credit support provider, Lehman Brothers Holdings Inc., each filed for bankruptcy. Based on these bankruptcy filings and the information obtained prior to the filings, this cash flow hedge no longer qualifies for hedge accounting. On September 15, 2008, the Accumulated Other Comprehensive Loss associated with this hedge was $7.8 million and this amount will be reclassified into earnings (interest expense) over the remaining life of the hedge, which terminates on June 30, 2010. During fiscal year 2009, $5.4 million was reclassified and recorded as interest expense primarily causing the increase in interest expense, net.

Change in Fair Value of a Derivative Instrument

The change in fair value of a derivative instrument is related to the aforementioned cash flow hedge that no longer qualified for hedge accounting. The change in fair value from December 31, 2008 to December 31, 2009 impacted our earnings by $5.8 million for the fiscal year 2009.

Income Taxes

The income tax expense of $2.7 million arose primarily from the tax amortization of our FCC broadcasting licenses, offset by the impact of the reduction of our deferred tax liabilities related to the impairment of our FCC broadcasting licenses of approximately $0.6 million.

Net Loss

The decrease in net loss was due to the decrease in operating loss related primarily to the decrease in impairment of assets and restructuring costs and the decrease in operating expenses, partially offset by the decreases in net revenue and income tax benefit.

Liquidity and Capital Resources

Our primary sources of liquidity are cash and cash equivalents ($53.6 million as of December 31, 2009) and cash expected to be provided by operations. Our cash flow from operations is subject to such factors as overall advertising demand, shifts in population, station listenership and viewership, demographics, audience tastes and fluctuations in preferred advertising media. Our ability to raise funds by increasing our indebtedness is limited by the terms of the certificates of designation governing our Series B preferred stock and the credit agreement governing our senior secured credit facility. Additionally, our certificates of designation and credit agreement each 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.

Our strategy is to primarily utilize cash flows from operations to meet our capital needs and contractual obligations. Management continually projects anticipated cash requirements and 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, among other things, required quarterly interest and principal payments pursuant to the credit agreement governing our senior secured credit facility revolver due 2010 and senior secured credit facility term loan due 2012, and capital expenditures, excluding the acquisitions of FCC broadcasting licenses. While not significant to us to date, the disruptions in the capital and credit markets may result in increased borrowing costs associated with our short-term and long-term debt. Assumptions (none of which can be assured) which underlie management’s beliefs, include the following:

•

the demand for advertising within the broadcasting industry and economic conditions in general will not deteriorate further in any material respect;

•

we will continue to successfully implement our business strategy; and

•

we will not incur any material unforeseen liabilities, including but not limited to taxes, environmental liabilities, regulatory matters and legal judgments.

As a result of the decrease in the demand for advertising and the deterioration of the economy, we began to implement a restructuring plan in the third quarter of fiscal year 2008 to reduce expenses throughout the Company. We incurred expenses related to the termination of various programming contracts and personnel and a loss on a sublease of office space. During the fiscal year 2009, we incurred restructuring expenses of $1.6 million, of which $1.0 million was paid. As of December 31, 2009, the total accrued expenses on our consolidated balance sheet related to restructuring activities were $0.9 million, of which $0.1 million was included in accounts payable and accrued expenses and $0.8 million was included in other liabilities.

We evaluate strategic media acquisitions and/or dispositions and strive to expand our media content through distribution and affiliations in order to achieve a significant presence with clusters of stations in the top U.S. Hispanic markets. We engage in discussions regarding potential acquisitions and/or dispositions and expansion of our content through media outlets from time to time in the ordinary course of business. 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 or other available sources. However, there can be no assurance that financing from any of these sources, if necessary and available, can be obtained on favorable terms for future acquisitions.

The following summary table presents a comparison of our capital resources for the fiscal years ended December 31, 2009 and 2008, with respect to certain of our key measures affecting our liquidity. The changes set forth in the table are discussed below. This section should be read in conjunction with the consolidated financial statements and notes.

		2009				2008				Change
		(in thousands)
Capital expenditures:
Radio		$	525				2,779				(2,254	)
Television			380				12,871				(12,491	)
Corporate			49				447				(398	)
Consolidated		$	954				16,097				(15,143	)
Net cash flows provided by operating activities		$	30,084				1,989				28,095
Net cash flows used in investing activities			(705	)			(15,978	)			15,273
Net cash flows used in financing activities			(8,651	)			(14,281	)			5,630
Net decrease in cash and cash equivalents		$	20,728				(28,270	)			48,998

Capital Expenditures

The decrease in our capital expenditures is a result of the completion of various capital projects in 2008, including the build-out and furnishing of the SBS Miami Broadcast Center.

Net Cash Flows Provided by Operating Activities

Changes in our net cash flows from operating activities were primarily a result of the improved operations and a decrease in cash paid to vendors, including interest.

Net Cash Flows Used in Investing Activities

Changes in our net cash flows from investing activities were a result of the decrease in our capital expenditures due to the completion of various capital projects in 2008, primarily the build-out and furnishing of the SBS Miami Broadcast Center.

Net Cash Flows Used in Financing Activities

Changes in our net cash flows from financing activities were primarily a result of a decrease of $2.3 million of cash dividends paid on the Series B preferred stock and, in fiscal year 2008, the repayment of the non-interest bearing promissory note totaling approximately $18.3 million, which was offset by the proceeds of $15.0 million related to the draw-down of our senior credit facility revolver.

Recent Developments

Lehman Interest Rate Swap

In September and October 2008, the counterparty to one of our interest rate swaps, Lehman Brothers Special Financing Inc., and its parent and credit support provider, Lehman Brothers Holdings Inc., each filed for bankruptcy (the Lehman Bankruptcy). As a result of the Lehman Bankruptcy, a dispute has arisen with respect to payments under the swap agreement. We have agreed to non-binding mediation of our dispute with the counterparty and the mediation session is scheduled to occur at the end of March 2010.

Dividend Payment on the Series B Preferred Stock

Under the terms of our Series B preferred stock, the holders of the outstanding shares of the Series B preferred stock are entitled to receive, when, as and if declared by the Board of Directors, dividends on the Series B preferred stock at a rate of 10¾% per year, of the $1,000 liquidation preference per share, payable quarterly.

During fiscal year 2009, our Board of Directors, under management’s recommendation, determined that based on, among other things, the then current economic environment and future cash requirements, it would not be prudent to declare or pay the January 15, 2010, October 15, 2009 and July 15, 2009 cash dividends in the aggregate amount of approximately $7.5 million.

Our Board of Directors has not yet determined whether to pay the scheduled April 15, 2010 dividend. In determining whether to declare and pay any future cash dividends our Board of Directors will consider management’s recommendation, our financial condition, as well as whether, under Delaware law, sufficient surplus or net profits exist to pay such dividends.

NASDAQ Notification Letters

NASDAQ Delisting Letters and Temporary Extension

As we initially announced on August 25, 2008, we received a notice from The NASDAQ Stock Market (NASDAQ) on August 20, 2008 indicating that we failed to comply with the minimum bid price requirement set forth in NASDAQ Listing Rule 5450(a)(1) (formerly Marketplace Rule 4450(a)(5)) for continued listing of our common stock on The NASDAQ Global Market because the bid price of our common stock closed under $1.00 per share for 30 consecutive business days. The notice also stated that, in accordance with NASDAQ Listing Rule 5810(c)(3)(A) (formerly Marketplace Rule 4450(e)(2)), we would be provided 180 calendar days, or until February 17, 2009, to regain compliance with the minimum bid price requirement. Due to NASDAQ’s subsequent suspensions of enforcement of the minimum bid price requirement in 2008 and 2009, and as disclosed by our filings of various Forms 8-K, 10-Q and 10-K, our time period for regaining compliance was extended until December 4, 2009. To regain compliance, the closing bid price of our common stock had to remain at or above $1.00 per share for a minimum of 10 consecutive business days prior to the market close on December 4, 2009.

We did not regain compliance with the $1.00 minimum bid price requirement by December 4, 2009. Accordingly, on December 7, 2009, we received written notification from NASDAQ (the Staff Determination) that unless we requested a hearing before the NASDAQ Listing Qualifications Panel (the Panel) on or before 4:00 p.m. Eastern Time on December 14, 2009, our common stock would be delisted from The NASDAQ Global Market at the opening of business on December 16, 2009.

On December 11, 2009, we requested a hearing before the Panel to appeal the Staff Determination in order to present our plan to address the minimum bid price deficiency (the Appeal). A hearing was held on January 7, 2010. At the hearing, we provided NASDAQ with a specific plan of how we intended to regain compliance with the minimum bid price deficiency, including a time frame for completion of such plan.

On February 9, 2010, we received notice from NASDAQ indicating that NASDAQ had granted our request for an extension of time to regain compliance with the Rule (the NASDAQ Extension Notice). Pursuant to the terms of the NASDAQ Extension Notice, we will be required to, on or before June 7, 2010, evidence a closing bid price of $1.00 or more for a minimum of ten consecutive trading days. In the event that we do not evidence compliance with the Rule and all other requirements for continued listing, our securities may be delisted from The NASDAQ Global Market.

NASDAQ Audit Committee Compliance Letter

On August 14, 2009, we notified NASDAQ that due to the vacancy in our Audit Committee created by Antonio Fernandez’ voluntary resignation as a member of the Board, we were no longer in compliance with NASDAQ Marketplace Rule 5605 (Rule 5605), which requires that the Audit Committee be comprised of at least three members, each of whom are independent.

As a result, on August 27, 2009, we received a letter from NASDAQ notifying us that we were not in compliance with the audit committee requirements as set forth in Rule 5605 and advising us that, consistent with NASDAQ Marketplace Rule 5605(c)(4)(A), NASDAQ will provide us the following cure period to regain compliance:

•

until the earlier of our next annual shareholders’ meeting or August 11, 2010; or

•

if the next annual shareholders’ meeting is held before February 8, 2010, no later than February 8, 2010.

Since we intend to hold our next annual shareholders’ meeting after February 8, 2010 and before August 11, 2010, we will have until our next annual shareholders’ meeting to regain compliance. An active search for Mr. Fernandez’ replacement is currently underway and we fully intend to regain compliance with Rule 5605 within the cure period allowed by NASDAQ.

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, capital expenditures or capital resources.

Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles 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 differ from those estimates. The following accounting policies require significant management judgments, assumptions and estimates.

Accounting for Indefinite-Lived Intangible Assets and Goodwill

Our indefinite-lived intangible assets consist of FCC broadcasting 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 FASB ASC Topic 350, Intangibles- Goodwill and Other (ASC 350), 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. We test our FCC broadcasting licenses for impairment at the market cluster level. We apply the guidance of FASB ASC Topic 350-30-35, Unit of Accounting for Purposes of Testing for Impairment of Intangible Assets Not Subject to Amortization (ASC 350-30-35), to certain of our FCC broadcasting licenses, if their market operations are consolidated.

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. The valuation method used is based on the premise that the only asset that the unbuilt start-up station would possess is the FCC broadcasting license. The valuation method isolates the income attributable to a FCC broadcasting license by modeling a hypothetical greenfield build-up to a normalized enterprise that, by design, lacks inherent goodwill and whose only other assets have essentially been paid for as part of the build-up process. Consequently, the resulting accretion in value is solely attributed to the FCC broadcasting license.

In the discounted cash flow projections, a period of ten years was determined to be an appropriate time horizon for the analysis. The yearly streams of cash flows are adjusted to present value using an after-tax discount rate calculated for the broadcast industry as of December 31 of each year. A risk premium is added to this base rate, in order to reflect the uncertainty associated with a start-up operation. Additionally, it is necessary to project the terminal value at the end of the ten-year projection period. The terminal value represents the hypothetical value of the licenses at the end of a ten-year period. An estimated amount of taxes are deducted from the assumed terminal value, which accordingly is discounted to net present value.

The key assumptions incorporated in the discounted cash flow model are market advertising revenue projections, market revenue share projections, anticipated operating profit margins and risk adjusted discount rates. These assumptions vary based on the market size, type of broadcast of signal, media competition and audience share. These assumptions primarily reflect industry norms for similar stations/broadcast signals, as well as historical performance and trends of the markets. In the preparation of the FCC broadcasting license appraisals, estimates and assumptions are made that affect the valuation of the intangible asset. These estimates and assumptions could differ from actual results and could have a material impact on our financial statements in the future.

The key assumptions for the respective markets are further described as follows:

Market Advertising Revenue Projections. Revenues are based on estimates of market revenues gathered from various third-party sources. Fiscal year 2010 total market revenues were determined based on this data and market revenues were forecast over the 10-year projection period to reflect the expected long-term growth rates for the broadcast industry and each market. Over the 10-year projection period, revenue growth rates have been projected to return to growth rates equal to the expected long-term growth rate in each market. The long-term growth rates have been estimated based on historical and expected performance in each market. In determining revenue growth rates in each market, revenue growth forecasts from various industry analysts are reviewed and analyzed.

Market Revenue Share Projections. Market revenue share projections are based upon the most recent average adjusted audience share for comparable stations operating in each market. This assumption is not specific to the performance of our stations and is predicated on the expectation that a new entrant into the market could reasonably be expected to perform at a level similar to the average competitor, assuming that competitor had similar technical facilities.

Anticipated Operating Profit Margins. Operating profits are defined as profit before interest, depreciation and amortization, income tax, and corporate allocation charges. Operating profits are then divided by broadcast revenues, net of agency and representative commissions, to compute the operating profit margin. Operating profit margins for each station are projected based upon industry operating margin norms, which reflect market size and station type. In determining operating profit margins in each market, third-party information is utilized. This assumption is not specific to the performance of our stations and is predicated on the expectation that a new entrant into the market could reasonably be expected to perform at a level similar to a typical competitor.

Risk Adjusted Discount Rates. Discount rates of 10.5% for radio licenses and 10.0% for television licenses were used to calculate the present value of the net after-tax cash flows. The discount rates are based on an after-tax rate determined using the weighted average cost of capital model as of December 31, 2009. The discount rates are not specific to us or to the stations, but are based upon the expected rates that would be used by a typical market participant, which include a risk premium.

These key assumptions are subject to such factors as: overall advertising demand, station listenership and viewership, audience tastes, technology, fluctuation in preferred advertising media and the estimated cost of capital. Since a number of factors may influence the determination of the fair value of our FCC broadcasting licenses, we are unable to predict whether impairments will occur in the future. Any significant change in these factors will result in a modification of the key assumptions, which may result in an additional impairment.

For example, changes in the discount rates will significantly impact our impairment testing. We note that a 100 basis point increase in the discount rates would result in an additional impairment of $15.7 million.

As of December 31, 2009, the percentage by which the fair value of our FCC broadcasting licenses exceeded (or equaled) their carrying values were as follows:

Market 1			0	%
Market 2			31	%
Market 3			9	%
Market 4			35	%
Market 5			7	%
Market 6			9	%
Market 7			0	%

Goodwill consists of the excess of the purchase price over the fair value of tangible and identifiable intangible net assets acquired in business combinations. ASC 350 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 ASC 350; Radio and Television. We currently only have goodwill in our radio reporting unit. We have aggregated our operating components (radio stations) into a single radio reporting unit based upon the similarity of their economic characteristics, including consideration of the requirements in FASB ASC 280, Segment Reporting, as required by ASC 350. Our evaluation included consideration of factors such as regulatory environment, business model, gross margins, nature of services and the process for delivering these services.

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 and the enterprise must perform step two of the impairment test (measurement). If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed. Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed.

During the years ended December 31, 2009 and 2008, we performed interim and annual impairment reviews of our goodwill and determined that there was no impairment of goodwill. The estimated enterprise value of our radio reporting unit exceeded its carrying value during our impairment testing. In addition, there is currently a net accumulated deficit in our radio reporting unit and we have a net overall accumulated deficit; therefore we have not performed a step-two impairment test. When evaluating our estimated enterprise value, we utilized an income approach which uses assumptions and estimates which among others include the aggregated expected revenues and operating margins generated by our FCC broadcasting licenses (i.e. our stations) and use of a risk adjusted discount rate. We did not find reconciliation to our current market capitalization meaningful in the determination of our enterprise value given current factors that impact our market capitalization, including but not limited to: (1) our recent NASDAQ delisting notices; (2) limited trading volume; (3) the impact of our television segment operating losses; and (4) the significant voting control of our Chairman and CEO.

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 financial statement and tax reporting purposes. These temporary differences result in the recognition of deferred tax assets and liabilities, which are included in our consolidated balance sheet. FASB ASC 740, Income Taxes (ASC 740), 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 FASB ASC Topic 350, Intangibles- Goodwill and Other, 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 established a valuation allowance for substantially all 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 financial statement and tax reporting purposes. 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.

We account for uncertain tax positions which require that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not (a likelihood of more than 50 percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Interest and penalties on tax liabilities, if any, would be recorded in interest expense and other non-interest expense, respectively.

Valuation of Accounts Receivable

We review accounts receivable to determine which accounts 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, age of the invoices and the overall creditworthiness of our customers. Changes in the credit worthiness of customers, general economic conditions and other factors may impact the level of future write-offs.

Revenue Recognition

We recognize broadcasting revenue as advertisements are aired on our stations, subject to meeting certain conditions such as persuasive evidence that an agreement 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 customer advances.

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.

New Accounting Standards

In December 2009, the FASB issued ASU 2009-16, Transfers and Servicing (Topic 860). ASU 2009-16 removes the concept of a qualifying special-purpose entity (QSPE) and eliminates the exception from applying FASB ASC 810-10, Consolidation of Variable Interest Entities, to qualifying special-purpose entities. Furthermore, ASU 2009-16 establishes specific conditions to account for a transfer of financial assets as a sale, changes the requirements for derecognizing financial assets and requires additional disclosure. ASU 2009-16 is effective as of the beginning of the first annual reporting period that begins after November 15, 2009, which for us is our fiscal year beginning on January 1, 2010. We are currently evaluating the impact of adopting ASU 2009-16 on our results of operations and financial position.

In December 2009, the FASB issued ASU 2009-17, Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. ASU 2009-17 is a revision to pre-existing guidance that requires an enterprise to perform an analysis to identify the primary beneficiary of a Variable Interest Entity (VIE), a qualitatively on-going re-assessment on whether the enterprise is the primary beneficiary of the VIE and additional disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a VIE. In addition, this statement revises the methods utilized for determining whether an entity is a VIE and the events that trigger a reassessment of whether an entity is a VIE. ASU 2009-17 is effective as of the beginning of the first annual reporting period that begins after November 15, 2009, which for us is our fiscal year beginning on January 1, 2010. We are currently evaluating the impact of adopting ASU 2009-17 on our results of operations and financial position.

Impact on Inflation

We believe that inflation has not had a material impact on our results of operations for each of our fiscal years ended December 31, 2009 and 2008, respectively. However, there can be no assurance that inflation will not have an adverse impact on our future operating results and financial condition.

Item 7A.		Quantitative and Qualitative Disclosures About Market Risk

Not required for smaller reporting companies.

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

None.

Item 9A(T).		Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in our periodic reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time periods. As of December 31, 2009, the end of the period covered by this report, we carried out an evaluation under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective. We review our disclosure controls and procedures, on an ongoing basis, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that they evolve with our business.

In addition, no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) occurred during the fourth quarter of our fiscal year ended December 31, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

As members of management of the Company, we are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under our supervision, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail, (i) accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting, no matter how well designed, may not prevent or detect misstatements and can only provide reasonable assurance with respect to the financial statement preparation and presentation even when those systems are determined to be effective. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate. These inherent limitations are an intrinsic part of the financial reporting process. Therefore, although we are unable to eliminate this risk, it is possible to develop safeguards to reduce it. We are responsible for establishing and maintaining adequate internal control over financial reporting for the Company.

Under the supervision of and with the participation of our management, we assessed the Company’s internal control over financial reporting, based on criteria for effective internal control over financial reporting described in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation, we concluded that we maintained effective internal control over financial reporting as of December 31, 2009 in accordance with the COSO criteria.

This annual report does not include an attestation report of the company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s independent registered public accounting firm pursuant to the temporary rules of the Securities and Exchange Commission that permit the company to provide only management’s report in this annual report.

Item 9B.		Other Information

None.

PART III

Item 10.		Directors, Executive Officers and Corporate Governance

Information called for by Item 10 is set forth in our proxy statement relating to the 2010 Annual Meeting of Stockholders (the Proxy Statement), which information is incorporated herein by this reference.

Code of Ethics

We have adopted a Code of Business Conduct and Ethics (the 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.

Item 11.		Executive Compensation

Information called for by Item 11 is set forth in our Proxy Statement, which information is incorporated herein by this reference.

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

Information called for by Item 12 is set forth in our Proxy Statement, which information is incorporated herein by this reference.

Item 13.		Certain Relationships and Related Transactions, and Director Independence

Information called for by Item 13 is set forth in our Proxy Statement, which information is incorporated herein by this reference.

Item 14.		Principal Accountant Fees and Services

Information called for by Item 14 is set forth in our Proxy Statement, which information is incorporated herein by this reference.

PART IV

Item 15.		Exhibits, Financial Statement Schedules

1. Financial Statements

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

•      Report of Independent Registered Public Accounting Firm;		59
•      Consolidated Balance Sheets as of December 31, 2009 and 2008;		60
•      Consolidated Statements of Operations for the years ended December 31, 2009 and 2008;		61
•      Consolidated Statements of Changes in Stockholders’ Deficit and Comprehensive Loss for the years ended December 31, 2009 and 2008;		62
•      Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008; and		63
•      Notes to Consolidated Financial Statements.		64
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.		101

Report of Independent Registered Public Accounting Firm

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

We have audited the accompanying consolidated financial statements of Spanish Broadcasting System, Inc. as listed in the Index at Item 15. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule listed in the Index. These consolidated financial statements and the financial statement schedules 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 the standards of the Public Company Accounting Oversight Board (United States). 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. as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. 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 2(r) to the consolidated financial statements, the Company changed its method for measuring and disclosing the fair value of assets and liabilities due to the adoption of new accounting requirements issued by the FASB, effective January 1, 2008.

March 24, 2010
Fort Lauderdale, Florida
Certified Public Accountants

SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

Consolidated Balance Sheets

December 31, 2009 and 2008

(In thousands, except share data)

		2009				2008
Assets
Current assets:
Cash and cash equivalents		$	53,580				32,852
Receivables:
Trade			25,649				29,083
Barter			398				172
			26,047				29,255
Less allowance for doubtful accounts			1,247				1,675
Net receivables			24,800				27,580
Prepaid expenses and other current assets			3,439				4,426
Total current assets			81,819				64,858
Property and equipment, net			45,365				52,411
FCC broadcasting licenses			312,623				331,224
Goodwill			32,806				32,806
Other intangible assets, net of accumulated amortization of $214 in 2009 and $178 in 2008			1,220				1,256
Deferred financing costs, net of accumulated amortization of $5,028 in 2009 and $3,956 in 2008			2,574				3,646
Other assets			2,386				3,066
Total assets		$	478,793				489,267
Liabilities and Stockholder’s (Deficit) Equity
Current liabilities:
Accounts payable and accrued expenses			18,211				15,428
Accrued interest			5,608				486
Unearned revenue			602				560
Other liabilities			570				66
Derivative instruments			5,863				—
Senior credit facility revolver due 2010			15,000				—
Current portion of the senior credit facility term loan due 2012			3,250				3,250
Current portion of other long-term debt			447				438
Series B cumulative exchangeable redeemable preferred stock dividends payable			7,032				2,068
Total current liabilities			56,583				22,296
Other liabilities, less current portion			405				139
Derivative instruments			612				12,541
Senior credit facility revolver due 2010			—				15,000
Senior credit facility term loan due 2012, less current portion			306,313				309,563
Other long-term debt, less current portion			6,605				7,052
Deferred income taxes			71,408				68,082
Total liabilities			441,926				434,673
Commitments and contingencies (notes 12, 14, and 16)
Cumulative exchangeable redeemable preferred stock:
10 3/4% Series B cumulative exchangeable redeemable preferred stock, $0.01 par value, liquidation value $1,000 per share. Authorized 280,000 shares; 92,349 shares issued and outstanding at December 31, 2009 and 2008, respectively			92,349				92,349
Stockholder’s deficit:
Series C convertible preferred stock, $0.01 par value and liquidation value. Authorized 600,000 shares; 380,000 shares issued and outstanding at December 31, 2009 and 2008, respectively			4				4
Class A common stock, 0.0001 par value. Authorized 100,000,000 shares; 41,542,513 and 41,445,222 shares issued and outstanding at December 31, 2009 and 2008, respectively			4				4
Class B common stock, 0.0001 par value. Authorized 50,000,000 shares; 23,403,500 shares issued and outstanding at December 31, 2009 and 2008, respectively			2				2
Additional paid-in capital			525,026				524,722
Accumulated other comprehensive loss			(2,513	)			(8,187	)
Accumulated deficit			(578,005	)			(554,300	)
Total stockholder’s deficit			(55,482	)			(37,755	)
Total liabilities and stockholder’s deficit		$	478,793				489,267

See accompanying notes to consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

Consolidated Statements of Operations

December 31, 2009 and 2008

(In thousands, except share data)

		2009				2008
Net revenue		$	139,389				163,717
Operating expenses:
Engineering and programming			41,379				61,012
Selling, general and administrative			50,029				70,720
Corporate expenses			9,686				12,806
Depreciation and amortization			6,262				6,261
Total operating expenses			107,356				150,799
Gain on the sale of assets, net of disposal costs			(14	)			(13	)
Impairment of assets and restructuring costs			21,641				421,116
Operating income (loss)			10,406				(408,185	)
Other (expense) income:
Interest expense			(26,900	)			(22,910	)
Interest income			31				848
Change in fair value of a derivative instrument			5,790				(3,813	)
Other, net			(414	)			3,851
Loss before income taxes			(11,087	)			(430,209	)
Income tax expense (benefit)			2,691				(101,486	)
Net loss			(13,778	)			(328,723	)
Dividends on Series B preferred stock			(9,927	)			(9,722	)
Net loss applicable to common stockholders		$	(23,705	)			(338,445	)
Basic and diluted net loss per common share		$	(0.33	)			(4.67	)
Weighted average common shares outstanding:
Basic and diluted			72,517				72,419

See accompanying notes to consolidated financial statements.

SPANISH BROADCASTING SYSTEM, INC.
AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Deficit and Comprehensive Loss

December 31, 2009 and 2008

(In thousands, except share data)

																														Accumulated
		Class C preferred stock								Class A common stock								Class B common stock								Additional				other								Total
		Number of				Par				Number of				Par				Number of				Par				paid-in				comprehensive				Accumulated				stockholders
		shares				value				shares				value				shares				value				capital				(loss) income				deficit				deficit
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			—				—				67,417				—				—				—				—				—				—				—
Stock-based compensation			—				—				—				—				—				—				692				—				—				692
Series B preferred stock dividends			—				—				—				—				—				—				—				—				(9,722	)			(9,722	)
Comprehensive loss:
Net income			—				—				—				—				—				—				—				—				(328,723	)			(328,723	)
Amounts reclassified to earnings during the period			—				—				—				—				—				—				—				542				—				542
Unrealized loss on derivative instrument			—				—				—				—				—				—				—				(5,147	)			—				(5,147	)
Comprehensive loss																																							(333,328	)
Balance at December 31, 2008			380,000				4				41,445,222				4				23,403,500				2				524,722				(8,187	)			(554,300	)			(37,755	)
Issuance of Class A common stock from vesting of restricted stock			—				—				97,291				—				—				—				—				—				—				—
Stock-based compensation			—				—				—				—				—				—				304				—				—				304
Series B preferred stock dividends			—				—				—				—				—				—				—				—				(9,927	)			(9,927	)
Comprehensive loss:
Net loss			—				—				—				—				—				—				—				—				(13,778	)			(13,778	)
Amounts reclassified to earnings during the period			—				—				—				—				—				—				—				5,398				—				5,398
Unrealized gain on derivative instrument			—				—				—				—				—				—				—				276				—				276
Comprehensive loss																																							(8,104	)
Balance at December 31, 2009			380,000			$	4				41,542,513			$	4				23,403,500			$	2				525,026				(2,513	)			(578,005	)			(55,482	)