Spanish Broadcasting System (SBSAA) 10-Q 2007 Q2 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2007
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission filenumber 33-82114

Spanish Broadcasting System, Inc.

(Exact name of registrant as specified in its charter)

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

2601 South Bayshore Drive, PH II

Coconut Grove, Florida 33133

(Address of principal executive offices) (Zip Code)

(305) 441-6901

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year,

if changed since last report)

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.
Yesþ Noo

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” inRule 12b-2 of the Exchange Act.

Large accelerated filer: o      Accelerated filer: þ     Non-accelerated filer: o

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yeso Noþ

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of August 7, 2007, 40,277,805 shares of Class A common stock, par value $0.0001 per share, 24,503,500 shares of Class B common stock, par value $0.0001 per share and 380,000 shares of Series C convertible preferred stock, $0.01 par value per share, which are convertible into 7,600,000 shares of Class A common stock, were outstanding.

SPANISH BROADCASTING SYSTEM, INC.

INDEX

			Page
		PART I. FINANCIAL INFORMATION
	ITEM 1.	Financial Statements — Unaudited		2
		Unaudited Condensed Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006		3
		Unaudited Condensed Consolidated Statements of Operations for the Three- and Six-Months Ended June 30, 2007 and 2006		4
		Unaudited Condensed Consolidated Statement of Changes in Stockholders��� Equity and Comprehensive Income for the Six-Months Ended June 30, 2007		5
		Unaudited Condensed Consolidated Statements of Cash Flows for the Six-Months Ended June 30, 2007 and 2006		6
		Notes to Unaudited Condensed Consolidated Financial Statements		7
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		24
	ITEM 4.	Controls and Procedures		24
		PART II. OTHER INFORMATION
	ITEM 1.	Legal Proceedings		25
	ITEM 1A.	Risk Factors		25
	ITEM 4.	Submission of Matters to a Vote of Security Holders		25
	ITEM 6.	Exhibits		26
EX-31.1 Section 302 Certification of CEO
EX-31.2 Section 302 Certification of CFO
EX-32.1 Section 906 Certification of CEO
EX-32.2 Section 906 Certification of CFO

1

Special Note Regarding Forward-Looking Statements

This Quarterly Report onForm 10-Q contains both historical and forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are not based on historical facts, but rather reflect our current expectations concerning future results and events. These forward-looking statements generally can be identified by the use of statements that include phrases such as “believe,” “expect,” “anticipate”, “intend”, “estimate”, “plan”, “project”, “foresee”, “likely”, “will” or other words or phrases with similar meanings. Similarly, statements that describe our objectives, plans or goals are, or may be, forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be different from any future results, performance and anticipated achievements expressed or implied by these statements. We do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company’s historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in this report, in Part II, “Item 1A. Risk Factors” and elsewhere in our Annual Report onForm 10-K for the year ended December 31, 2006, and those described from time to time in our future reports filed with the Securities and Exchange Commission.

2

PART I. FINANCIAL INFORMATION

Item 1.   Financial Statements — Unaudited

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Balance Sheets

	June 30,			December 31,
	2007			2006
	(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	62,922			66,815
Receivables, net of allowance for doubtful accounts of $3,921 in 2007 and $4,383 in 2006		37,951			32,142
Prepaid expenses and other current assets		3,253			3,460
Total current assets		104,126			102,417
Property and equipment, net of accumulated depreciation of $35,964 in 2007 and $33,751 in 2006		39,141			28,022
FCC licenses		749,864			749,864
Goodwill		32,806			32,806
Other intangible assets, net of accumulated amortization of $124 in 2007 and $106 in 2006		1,310			1,328
Deferred financing costs, net of accumulated amortization of $2,306 in 2007 and $1,749 in 2006		5,357			5,914
Other assets		1,116			1,634
Derivative instruments		9,424			7,755
Total assets	$	943,144			929,740
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	20,065			18,622
Accrued interest		300			394
Deferred commitment fee		337			375
Unearned revenue		2,986			3,882
Other current liabilities		22			22
Current portion of the senior credit facilities term loan due 2012		3,250			3,250
Current portion of other long-term debt		426			79
Series B cumulative exchangeable redeemable preferred stock dividends payable		2,014			2,014
Total current liabilities		29,400			28,638
Unearned revenue, less current portion		1,190			2,064
Other long-term liabilities, less current portion		154			166
Senior credit facilities term loan due 2012, less current portion		314,437			316,063
Other long-term debt, less current portion		7,706			413
Non-interest bearing promissory note payable due 2009, net of unamortized discount of $2,074 in 2007 and $2,713 in 2006		16,426			15,787
Deferred income taxes		159,805			153,683
Total liabilities		529,118			516,814
Cumulative exchangeable redeemable preferred stock:
103/4% Series B cumulative exchangeable redeemable preferred stock, $0.01 par value, liquidation value $1,000 per share. Authorized 280,000 shares; 89,932 shares issued and outstanding at June 30, 2007 and December 31, 2006, respectively		89,932			89,932
Stockholders’ equity:
Series C convertible preferred stock, $0.002 par value and liquidation value. Authorized 600,000 shares; 380,000 shares issued and outstanding at June 30, 2007 and December 31, 2006, respectively		1			1
Class A common stock, $0.0001 par value. Authorized 100,000,000 shares; 40,277,805 shares issued and outstanding at June 30, 2007 and December 31, 2006, respectively		4			4
Class B common stock, $0.0001 par value. Authorized 50,000,000 shares; 24,503,500 shares issued and outstanding at June 30, 2007 and December 31, 2006, respectively		2			2
Additional paid-in capital		523,261			522,400
Accumulated other comprehensive income		9,424			7,755
Accumulated deficit		(208,598	)		(207,168	)
Total stockholders’ equity		324,094			322,994
Total liabilities and stockholder’s equity	$	943,144			929,740

See accompanying notes to the unaudited condensed consolidated financial statements.

3

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Operations

	Three-Months Ended						Six-Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
	(In thousands, except per share data)
Net revenue	$	47,871			48,841		$	86,808			86,616
Operating expenses:
Engineering and programming		12,377			12,986			24,671			24,805
Selling, general and administrative		20,197			19,727			36,104			36,426
Corporate expenses		3,112			3,661			6,715			7,189
Depreciation and amortization		1,105			905			2,242			1,832
Total operating expenses		36,791			37,279			69,732			70,252
(Gain) loss on the sale of assets, net of disposal costs		(1	)		8			(1	)		(50,793	)
Operating income		11,081			11,554			17,077			67,157
Other (expense) income:
Interest expense, net		(4,735	)		(4,936	)		(9,424	)		(10,355	)
Loss on early extinguishment of debt		—			—			—			(2,997	)
Other, net		—			3			1,960			(23	)
Income before income taxes		6,346			6,621			9,613			53,782
Income tax expense (benefit)		3,956			4,190			6,209			(2,190	)
Net income		2,390			2,431			3,404			55,972
Dividends on Series B preferred stock		(2,417	)		(2,417	)		(4,834	)		(4,834	)
Net (loss) income applicable to common stockholders	$	(27	)		14		$	(1,430	)		51,138
Basic and diluted net (loss) income per common share	$	—			—		$	(0.02	)		0.71
Weighted average common shares outstanding:
Basic		72,381			72,381			72,381			72,381
Diluted		72,381			72,390			72,381			72,392

See accompanying notes to the unaudited condensed consolidated financial statements.

4

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity

and Comprehensive Income (Loss) for the Six-Months Ended June 30, 2007

	Class C				Class A				Class B							Accumulated
	preferred stock				common stock				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		income		deficit			equity
							(In thousands, except share data)
Balance at December 31, 2006		380,000	$	1		40,277,805	$	4		24,503,500		$	2	$	522,400	$	7,755	$	(207,168	)	$	322,994
Stock-based compensation		—		—		—		—		—			—		861		—		—			861
Series B preferred stock dividends		—		—		—		—		—			—		—		—		(4,834	)		(4,834	)
Comprehensive income:
Net income		—		—		—		—		—			—		—		—		3,404			3,404
Unrealized gain on derivative instruments		—		—		—		—		—			—		—		1,669		—			1,669
Comprehensive income																						5,073
											��
Balance at June 30, 2007		380,000	$	1		40,277,805	$	4		24,503,500		$	2	$	523,261	$	9,424	$	(208,598	)	$	324,094

See accompanying notes to the unaudited condensed consolidated financial statements.

5

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statements of Cash Flows

	Six-Months Ended
	June 30,
	2007			2006
	(In thousands)
Cash flows from operating activities:
Net income	$	3,404			55,972
Adjustments to reconcile net income to net cash provided by operating activities:
Loss (gain) on the sale of assets		(1	)		(50,804	)
Loss on early extinguishment of debt		—			2,997
Stock-based compensation		861			1,080
Depreciation and amortization		2,242			1,832
Net barter (income) expense		(174	)		(3	)
Provision for doubtful trade accounts receivables		553			657
Amortization of deferred financing costs		557			626
Amortization of discount on the non-interest bearing promissory note payable		639			396
Deferred income taxes		6,122			(2,069	)
Decrease (increase) in unearned revenue		(1,899	)		15
Accretion of the time-value of money component related to unearned revenue		125			97
Amortization of deferred commitment fee		(38	)		(37	)
Amortization of other liabilities		(12	)		—
Changes in operating assets and liabilities:
Increase in trade receivables		(6,184	)		(2,429	)
Decrease (increase) in other current assets		165			(697	)
Increase in other assets		(517	)		(130	)
Increase (decrease) in accounts payable and accrued expenses		1,435			(5,261	)
Decrease in accrued interest		(128	)		(1,373	)
Net cash provided by operating activities		7,150			869
Cash flows from investing activities:
Proceeds from sale of radio stations, net of disposal costs		—			64,751
Purchases of property and equipment		(2,428	)		(4,305	)
Acquisition of a building and its related building improvements		(1,982	)		—
Proceeds from an insurance recovery		15			—
Acquisition of television stations and related equipment		—			(18,534	)
Net cash (used in) provided by investing activities		(4,395	)		41,912
Cash flows from financing activities:
Payment of senior credit facility term loan 2012		(1,626	)		(1,625	)
Payment of senior credit facility term loan due 2013 (including prepayment premium of $1.0 million)		—			(101,000	)
Payment of Series B preferred stock cash dividends		(4,834	)		(4,834	)
Payments of other long-term debt		(188	)		(318	)
Payments of defered financing costs		—			(352	)
Net cash used in financing activities		(6,648	)		(108,129	)
Net decrease in cash and cash equivalents		(3,893	)		(65,348	)
Cash and cash equivalents at beginning of year		66,815			125,156
Cash and cash equivalents at end of year	$	62,922			59,808
Supplemental cash flows information:
Interest paid	$	9,934			12,403
Income taxes paid, net		—			389
Noncash investing and financing activities:
Ten-year promissory note issued for the acquisition of a building	$	7,650			—
Unrealized gain on derivative instruments		1,669			7,707
Unearned revenue (advertising given as consideration for acquisition of television stations)		—			5,338
Non-interest bearing promissory note payable issued for the acquisition of television stations and related equipment		—			14,778

See accompanying notes to the unaudited condensed consolidated financial statements.

6

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of Spanish Broadcasting System, Inc. and its subsidiaries (the “Company”, “we”, “us”, “our” or “SBS”). All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements as of June 30, 2007 and December 31, 2006 and for the three- and six-month periods ended June 30, 2007 and 2006 have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions toForm 10-Q andRule 10-01 ofRegulation S-X. They do not include all information and notes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with our consolidated financial statements as of, and for, the fiscal year ended December 31, 2006, included in our fiscal year end 2006 Annual Report onForm 10-K.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, which are all of a normal and recurring nature, necessary for a fair presentation of the results of the interim periods. The results of operations for the three- and six-month periods ended June 30, 2007 are not necessarily indicative of the results for a full year.

2.   Acquisition of a Facility and Related Financing

On January 4, 2007, SBS, through its wholly owned subsidiary, SBS Miami Broadcast Center, Inc. (“SBS Miami Broadcast Center”), completed the acquisition of certain real property located in Miami-Dade County, Florida pursuant to the purchase and sale agreement, dated August 24, 2006, as amended on September 25, 2006, as further amended on October 25, 2006 (the “Purchase Agreement”). The real property consists of 5.47 acres (234,208 square feet) and approximately 62,000 square feet of office space (the “Property”). The Property was acquired from 7007 Palmetto Investments, LLC (“Seller”), an unrelated third party, for a total purchase price of approximately $8.9 million, excluding closing costs and broker’s fees. During 2006, pursuant to the terms of the Purchase Agreement, we made deposits totaling approximately $1.0 million in escrow that were released at the closing and were applied to the purchase price. At December 31, 2006, these deposits were included in other assets in the accompanying condensed consolidated balance sheet. We funded the purchase price using cash on hand and borrowings and we expect to incur significant construction costs for the new broadcasting facility. Upon the completion of construction at the building, we will consolidate our Miami radio and television operations at the new broadcasting facility.

In connection with the acquisition of the Property, on January 4, 2007, SBS Miami Broadcast Center entered into a loan agreement (the “Loan Agreement”), a ten-year promissory note in the original principal amount of $7.7 million (the “Promissory Note”), and a Mortgage, Assignment of Rents and Security Agreement (the “Mortgage”) in favor of Wachovia Bank, National Association (“Wachovia”). The Promissory Note bears an interest rate equal to one-month LIBOR plus 125 basis points and requires monthly principal payments of $0.03 million with any unpaid balance due on its maturity date of January 4, 2017. The Promissory Note is secured by the Property and any related collateral.

The terms of the loan include certain restrictions and covenants for SBS Miami Broadcast Center, which limit, among other things, the incurrence of additional indebtedness and liens. The Loan Agreement specifies a number of events of default (some of which are subject to applicable cure periods), including, among others, the failure to make payments when due, non-compliance with covenants and defaults under other agreements or instruments of indebtedness. Upon the occurrence of an event of default and expiration of any applicable cure periods, Wachovia may accelerate the loan and declare all amounts outstanding to be immediately due and payable.

Additionally, on January 4, 2007, SBS Miami Broadcast Center entered into an interest rate swap arrangement (the “Swap Agreement”) for the original notional principal amount of $7.7 million whereby it will pay a fixed interest rate of 6.31% as compared to interest at a floating rate equal to one-month LIBOR plus 125 basis points on the Promissory Note. The interest rate swap amortization schedule is identical to the

7

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Promissory Note amortization schedule, which has an effective date of January 4, 2007, monthly notional reductions and an expiration date of January 4, 2017.

In connection with the acquisition of the Property, we agreed to unconditionally guaranty all obligations of SBS Miami Broadcast Center pursuant to the Promissory Note, the Loan Agreement, the Mortgage, the loan documents thereto, and the Swap Agreement, for the benefit of Wachovia and its affiliates (the “Guaranty”). In addition, the terms of the Guaranty contain certain financial covenants, which require us to maintain available liquidity of not less than 1.2 times the then outstanding principal balance of the loan made to SBS Miami Broadcast Center by Wachovia.

3.   Stockholders’ Equity

(a)  Series C Convertible Preferred Stock

On December 23, 2004, in connection with the closing of the merger agreement, dated October 5, 2004, with Infinity Media Corporation (“Infinity”), Infinity Broadcasting Corporation of San Francisco (“Infinity SF”) and SBS Bay Area, LLC, a wholly-owned subsidiary of SBS (“SBS Bay Area”), we issued to Infinity (i) an aggregate of 380,000 shares of Series C convertible preferred stock, $0.002 par value per share (the “Series C preferred stock”), each of which is convertible at the option of the holder into twenty fully paid and non-assessable shares of our Class A common stock; and (ii) a warrant to purchase an additional 190,000 shares of Series C preferred stock, exercisable at any time from December 23, 2004 until December 23, 2008, at an exercise price of $300.00 per share (the “Warrant”).

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

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

We are required to pay holders of Series C preferred stock dividends on parity with our Class A common stock and Class B common stock, and each other class or series of our capital stock, if created, after December 23, 2004.

(b)  Class A and B Common Stock

The rights of the holders of shares of Class A common stock and Class B common stock are identical, except for voting rights and conversion provisions. The Class A common stock is entitled to one vote per share and the Class B common stock is entitled to ten votes per share. The Class B common stock is convertible to Class A common stock on a share-for-share basis at the option of the holder at any time, or automatically upon the transfer to a person or entity which is not a permitted transferee. Holders of each class of common stock are entitled to receive dividends and, upon liquidation or dissolution, are entitled to receive all assets available for distribution to stockholders. The holders of each class have no preemptive or other subscription rights and there are no redemption or sinking fund provisions with respect to such shares. Each class of common stock is subordinate to our 103/4% Series B cumulative exchangeable redeemable preferred stock, par value $0.01 per share and liquidation preference of $1,000 per share (the “Series B preferred stock”) and on parity with the Series C preferred stock with respect to dividend rights and rights upon liquidation, winding up and dissolution of SBS.

8

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(c)  Warrant

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

(d)  Share-based Compensation Plans

2006 Omnibus Equity Compensation Plan

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

1999 Stock Option Plans

In September 1999, we adopted an employee incentive stock option plan (the “1999 ISO Plan”) and a non-employee director stock option plan (the “1999 NQ Plan”). Options granted under the 1999 ISO Plan will vest according to terms to be determined by the compensation committee of our board of directors, and will have a contractual life of up to 10 years from the date of grant. Options granted under the 1999 NQ Plan will vest 20% upon grant and 20% each year for the first four years from the date of grant. All options granted under the 1999 ISO Plan and the 1999 NQ Plan vest immediately upon a change in control of SBS, as defined therein. A total of 3,000,000 shares and 300,000 shares of Class A common stock were reserved for issuance under the 1999 ISO Plan and the 1999 NQ Plan, respectively. Additionally, on November 2, 1999, we granted a stock option to purchase 250,000 shares of Class A common stock to a former director. This option vested immediately, and expires 10 years from the date of grant.

(e)  Stock-Based Compensation Expense

The impact on our results of operations of recognizing stock-based compensation for the three- and six-month periods ended June 30, 2007 and 2006 were as follows (in thousands):

	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
Engineering and programming expenses	$	189		176	$	377		356
Selling, general and administrative expenses		33		87		69		174
Corporate expenses		197		250		415		550
Total stock-based compensation expense	$	419		513	$	861		1,080

During the six-month periods ended June 30, 2007 and 2006, no stock options were exercised; therefore, no cash payments were received. In addition, we did not recognize a tax benefit on our stock-based compensation expense due to our valuation allowance on substantially all of our deferred tax assets.

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SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Stock Options

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

A summary of the status of our stock options, as of December 31, 2006 and June 30, 2007, and changes during the six-months ended June 30, 2007, is presented below (in thousands, except per share data):

								Weighted
				Weighted				Average
				Average		Aggregate		Remaining
				Exercise		Intrinsic		Contractual
	Shares			Price		Value		Life (Years)
Outstanding at December 31, 2006		3,029		$	11.33
Granted		—			—
Exercised		—			—
Forfeited		(141	)		10.55
Outstanding at June 30, 2007		2,888		$	11.36	$	—		5.4
Exercisable at June 30, 2007		2,494		$	11.72	$	—		5.1

The following table summarizes information about stock options outstanding and exercisable at June 30, 2007 (in thousands, except per share data):

							Weighted
							Average
					Weighted		Remaining				Weighted
					Average		Contractual				Average
			Unvested		Exercise		Life		Number		Exercise
Range of Exercise Prices	Vested Options		Options		Price		(Years)		Exercisable		Price
$ 0 – 4.99		200		—	$	4.80		6.4		200	$	4.80
5 – 9.99		1,436		340		8.72		6.2		1,436		8.69
10 – 14.99		148		54		10.77		7.2		148		10.81
15 – 19.99		—		—		—		—		—		—
20 – 24.99		710		—		20.00		2.3		710		20.00
		2,494		394	$	11.36		5.4		2,494	$	11.72

Nonvested Shares

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

10

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

A summary of the status of our nonvested shares, as of December 31, 2006 and June 30, 2007, and changes during the six-months ended June 30, 2007, is presented below (in thousands, except per share data):

			Weighted
			Average Grant-
			Date Fair Value
	Shares		(per Share)
Nonvested at December 31, 2006		—		—
Awarded		72	$	4.30
Vested		—		—
Forfeited		—		—
Nonvested at June 30, 2007		72	$	4.30

4.   Basic and Diluted Net (Loss) Income Per Common Share

Basic net (loss) income per common share was computed by dividing net (loss) income applicable to common stockholders by the weighted average number of shares of common stock and convertible preferred stock outstanding for each period presented, using the if converted method. Diluted net (loss) income per common share is computed by giving effect to common stock equivalents as if they were outstanding for the entire period.

Common stock equivalents were not considered in the calculation for the three- and six- month periods ended June 30, 2007, since its effect would be anti-dilutive. If included, the common stock equivalents for the three- and six-month periods ended June 30, 2007 would have amounted to 3 and 0, respectively. During the three- and six- month periods ended June 30, 2006, common stock equivalents included in the calculation amounted to 9 and 11, respectively.

5.   Operating Segments

Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information,” establishes standards for the way public business enterprises report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports. We have two reportable segments: radio and television. The following summary table presents separate financial data for each of our operating segments (in thousands):

	Three-Months Ended										Six-Months Ended
	June 30,				Change						June 30,				Change
	2007		2006		$			%			2007		2006		$			%
Net revenue:
Radio	$	45,256		47,443		(2,187	)		(5	)%	$	82,088		84,787		(2,699	)		(3	)%
Television		2,615		1,398		1,217			87	%		4,720		1,829		2,891			158	%
Consolidated	$	47,871		48,841		(970	)		(2	)%	$	86,808		86,616		192			0	%
Engineering and programming expenses:
Radio	$	9,068		8,320		748			9	%	$	17,910		16,756		1,154			7	%
Television		3,309		4,666		(1,357	)		(29	)%		6,761		8,049		(1,288	)		(16	)%
Consolidated	$	12,377		12,986		(609	)		(5	)%	$	24,671		24,805		(134	)		(1	)%

11

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Three-Months Ended												Six-Months Ended
	June 30,						Change						June 30,						Change
	2007			2006			$			%			2007			2006			$			%
Selling, general and administrative expenses:
Radio	$	18,494			17,790			704			4	%	$	32,717			32,342			375			1	%
Television		1,703			1,937			(234	)		(12	)%		3,387			4,084			(697	)		(17	)%
Consolidated	$	20,197			19,727			470			2	%	$	36,104			36,426			(322	)		(1	)%
Operating income (loss) before depreciation and amortization and (gain) loss on sales of assets, net:
Radio	$	17,694			21,333			(3,639	)		(17	)%	$	31,461			35,689			(4,228	)		(12	)%
Television		(2,397	)		(5,205	)		2,808			(54	)%		(5,428	)		(10,304	)		4,876			(47	)%
Corporate		(3,112	)		(3,661	)		549			(15	)%		(6,715	)		(7,189	)		474			(7	)%
Consolidated	$	12,185		$	12,467			(282	)		(2	)%	$	19,318		$	18,196			1,122			6	%
Depreciation and amortization:
Radio	$	711			605			106			18	%	$	1,437			1,223			214			17	%
Television		128			73			55			75	%		270			130			140			108	%
Corporate		266			227			39			17	%		535			479			56			12	%
Consolidated	$	1,105			905			200			22	%	$	2,242			1,832			410			22	%
(Gain) loss on sale of assets, net:
Radio	$	(1	)		8			(9	)		(113	)%	$	(1	)		(50,793	)		50,792			(100	)%
Television		—			—			—			0	%		—			—			—			0	%
Corporate		—			—			—			0	%		—			—			—			0	%
Consolidated	$	(1	)		8			(9	)		(113	)%	$	(1	)		(50,793	)		50,792			(100	)%
Operating income (loss):
Radio	$	16,984			20,720			(3,736	)		(18	)%	$	30,025			85,259			(55,234	)		(65	)%
Television		(2,525	)		(5,278	)		2,753			(52	)%		(5,698	)		(10,434	)		4,736			(45	)%
Corporate		(3,378	)		(3,888	)		510			(13	)%		(7,250	)		(7,668	)		418			(5	)%
Consolidated	$	11,081		$	11,554			(473	)		(4	)%	$	17,077		$	67,157			(50,080	)		(75	)%
Capital expenditures:
Radio	$	507			994			(487	)		(49	)%	$	1,016			1,523			(507	)		(33	)%
Television		392			923			(531	)		(58	)%		2,025			2,441			(416	)		(17	)%
Corporate		1,122			220			902			410	%		1,369			341			1,028			301	%
Consolidated	$	2,021			2,137			(116	)		(5	)%	$	4,410			4,305			105			2	%

	June 30,		December 31,
	2007		2006
Total Assets:
Radio	$	864,590		863,236
Television		59,289		49,376
Corporate		19,265		17,128
Consolidated	$	943,144		929,740

12

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6.   Comprehensive Income

Our total comprehensive income, comprised of net income and unrealized gain on derivative instruments, for the three-and six-months ended June 30, 2007 and 2006, respectively, was as follows (in thousands):

	Three-Months Ended				Six-Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
Net income	$	2,390		2,431	$	3,404		55,972
Other comprehensive income:
Unrealized gain on derivative instruments		3,555		3,174		1,669		7,707
Total comprehensive income	$	5,945		5,605	$	5,073		63,679

7.   New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157,“Fair Value Measurements”(“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value in GAAP, and enhances disclosures about fair value measurements. SFAS No. 157 applies when other accounting pronouncements require fair value measurements; it does not require new fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007 or fiscal year 2008 for us. We are currently evaluating the impact that SFAS No. 157 may have on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159,“The Fair Value Option for Financial Assets and Liabilities — Including an Amendment of FASB Statement No. 115”(“SFAS No. 159”). SFAS No. 159 permits entities to choose to measure certain financial assets and liabilities at fair value. Unrealized gains and losses, arising subsequent to adoption, are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007 or fiscal year 2008 for us. We are currently evaluating the impact that SFAS No. 159, if elected, may have on our consolidated financial statements.

8.   Income Taxes

Our income tax expense differs from the statutory federal tax rate of 35% and related statutory state tax rates, primarily as a result of the application of SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”). Under SFAS No. 142, the reversal of our deferred tax liabilities related to our intangible assets could no longer be assured over our net operating loss carry forward period. Therefore, our effective book tax rate is impacted by establishing a valuation allowance on substantially all of our deferred tax assets.

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

We file federal, state and local income tax returns in the United States and Puerto Rico. The tax years that remain subject to assessment of additional liabilities by the United States federal, state, and local tax authorities are 2003 through 2006. The tax years that remain subject to assessment of additional liabilities by the Puerto Rico tax authority are 2002 through 2006. The Puerto Rico Treasury Department has recently commenced an examination of the Puerto Rico income tax returns for 2002.

Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our consolidated financial statements. Our evaluation was performed for the tax years ended

13

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

December 31, 2002, 2003, 2004, 2005 and 2006, the tax years which remain subject to examination by tax jurisdictions as of June 30, 2007.

9.   Litigation

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

Amigo Broadcasting Litigation

On December 5, 2003, Amigo Broadcasting, L.P. (“Amigo”) brought suit against Spanish Broadcasting System, Inc. (“SBS”), Raul Bernal, Joaquin Garza and Latin Entertainment Network, Inc. (“LEN”). Messrs. Bernal and Garza had been on-air radio personalities for Amigo’s Spanish language radio station in Austin, Texas. They left the Amigo station and were employed by SBS’s Los Angeles radio station. Amigo contended that Messrs. Garza and Bernal breached their contract by quitting Amigo and joining SBS. Amigo further contended that SBS and LEN committed various wrongful acts in luring Messrs. Garza and Bernal away from the Amigo station. Amigo sought both injunctive relief to prevent Garza and Bernal from working for SBS, as well as damages in excess of $3.0 million.

The case was tried in the United States District Court for the Western District of Texas from May 2 through May 5, 2006, before the Honorable James Nowlin. At the conclusion of Plaintiff’s case in chief, Judge Nowlin granted all Defendants’ Motions for Judgment as a matter of law. Judge Nowlin ruled that Plaintiffs had failed to introduce sufficient evidence on one or more elements of each of their causes of action against each of the Defendants.

Amigo has appealed the trial court ruling, arguing that the Court should have allowed the jury to decide the case. The appeal is currently pending before the United States Court of Appeals for the Fifth Circuit in New Orleans. We do not believe the outcome of the litigation will result in any material liability for the Company.

Wolf, et al., Litigation

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

This case is one of more than 300 similar cases brought by similar counsel against more than 300 issuers, 40 underwriters and 1000 individual defendants alleging, in general, violations of federal securities laws in connection with initial public offerings, in particular, failing to disclose that the underwriter defendants allegedly solicited and received additional, excessive and undisclosed commissions from certain investors in exchange for which they allocated to those investors material portions of the restricted shares issued in connection with each offering. All of these cases, including the one involving SBS, have been assigned for consolidated pretrial purposes to one judge of the United States District Court for the Southern District of New York. The issuer defendants in the consolidated cases (the “Issuer Defendants”) filed motions to dismiss the consolidated cases. These motions to dismiss covered issues common among all Issuer Defendants and

14

SPANISH BROADCASTING SYSTEM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

issues common among all underwriter defendants in the consolidated cases. As a result of these motions, the Individuals were dismissed from one of the claims against them, specifically theSection 10b-5 claim.

On October 13, 2004, the District Court granted plaintiffs motion for class certification in six “focus cases” out of the more than 300 consolidated class actions. On August 31, 2005, the District Court issued an order of preliminary approval of a settlement between plaintiffs and the Issuer Defendants (the “Issuers Settlement”). On December 5, 2006, the United States Court of Appeals for the Second Circuit reversed the District Court’s October 13, 2004 class certification order, holding that plaintiffs could not satisfy the predominance requirement for a Federal Rule of Civil Procedure 23(b)(3) class action.

On May 30, 2007, the District Court held a status conference to discuss the impact of the Second Circuit’s December 5, 2006 decision and Plaintiffs made an oral motion for class certification, based on newly proposed class definitions. Plaintiffs also indicated that they intend to file amended complaints and amended master allegations in the consolidated actions. On June 25, 2007, the District Court entered a stipulation between plaintiffs and the Issuer Defendants, terminating the proposed Issuers Settlement in light of the Second Circuit’s reversal of the District Court’s class certification order and subsequent denial of plaintiffs petition for a rehearing or rehearing en banc. Also on June 25, 2007, plaintiffs served document requests on the Issuer Defendants. The Issuer Defendants are in negotiations with plaintiffs to limit the document requests to the six “focus cases.” We do not believe the outcome of the litigation will result in any material liability for the Company.

15

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

Overview

We are the largest publicly traded Hispanic-controlled media and entertainment company in the United States. We own and operate 20 radio stations in markets that reach approximately 51% of the U.S. Hispanic population, and two television stations, which reach approximately 1.5 million households in the South Florida market. 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. Our two television stations operate as one television operation, branded “MEGA TV”. As part of our operating business, we also operateLaMusica.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 occasionally produce live concerts and events throughout the United States and Puerto Rico.

On March 1, 2006, we acquired television stationsWSBS-TV (Channel 22, formerly known asWDLP-TV) and its derivative digital television station WSBS-DT (Channel 3, formerly known as WDLP-DT) in Key West, Florida and WSBS-CA (Channel 50, formerly known as WDLP-CA) in Miami, Florida, serving the South Florida market. On March 1, 2006, we also launched MEGA TV, our general interestSpanish-language television operation. MEGA TV’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 capableSpanish-language production partners. Our television revenue is generated primarily from the sale of local advertising and paid programming.

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 bothSpanish-language andEnglish-language stations in its market, as well as with other advertising media, such as newspapers, cable television, the Internet, magazines, outdoor advertising, satellite radio, 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 theSpanish-language market targeted by a particular station.

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

16

Comparison Analysis of the Operating Results for the Three-Months Ended June 30, 2007 and 2006

The following summary table presents separate financial data for each of our operating segments.

	Three-Months Ended
	June 30,						Change
	2007			2006			$			%
Net revenue:
Radio	$	45,256			47,443			(2,187	)		(5	)%
Television		2,615			1,398			1,217			87	%
Consolidated	$	47,871			48,841			(970	)		(2	)%
Engineering and programming expenses:
Radio	$	9,068			8,320			748			9	%
Television		3,309			4,666			(1,357	)		(29	)%
Consolidated	$	12,377			12,986			(609	)		(5	)%
Selling, general and administrative expenses:
Radio	$	18,494			17,790			704			4	%
Television		1,703			1,937			(234	)		(12	)%
Consolidated	$	20,197			19,727			470			2	%
Operating income (loss) before depreciation and amortization and (gain) loss on sales of assets, net:
Radio	$	17,694			21,333			(3,639	)		(17	)%
Television		(2,397	)		(5,205	)		2,808			(54	)%
Corporate		(3,112	)		(3,661	)		549			(15	)%
Consolidated	$	12,185			12,467			(282	)		(2	)%
Depreciation and amortization:
Radio	$	711			605			106			18	%
Television		128			73			55			75	%
Corporate		266			227			39			17	%
Consolidated	$	1,105			905			200			22	%
(Gain) loss on sale of assets, net:
Radio	$	(1	)		8			(9	)		(113	)%
Television		—			—			—			0	%
Corporate		—			—			—			0	%
Consolidated	$	(1	)		8			(9	)		(113	)%
Operating income (loss):
Radio	$	16,984			20,720			(3,736	)		(18	)%
Television		(2,525	)		(5,278	)		2,753			(52	)%
Corporate		(3,378	)		(3,888	)		510			(13	)%
Consolidated	$	11,081			11,554			(473	)		(4	)%

17

The following summary table presents a comparison of our results of operations for the three-month periods ended June 30, 2007 and 2006. Various fluctuations illustrated in the table are discussed below. This section should be read in conjunction with our unaudited condensed consolidated financial statements and notes.

	Three Months Ended
	June 30,						Change
	2007			2006			$			%
	(In thousands)
Net revenue	$	47,871			48,841			(970	)		(2	)%
Engineering and programming expenses		12,377			12,986			(609	)		(5	)%
Selling, general and administrative expenses		20,197			19,727			470			2	%
Corporate expenses		3,112			3,661			(549	)		(15	)%
Depreciation and amortization		1,105			905			200			22	%
(Gain) loss on sale of assets, net of disposal costs		(1	)		8			(9	)		(113	)%
Operating income	$	11,081			11,554			(473	)		(4	)%
Interest expense, net		(4,735	)		(4,936	)		201			(4	)%
Other income, net		—			3			(3	)		(100	)%
Income tax expense		3,956			4,190			(234	)		(6	)%
Net income	$	2,390			2,431			(41	)		(2	)%

Net Revenue.  The decrease in our consolidated net revenue of $1.0 million or 2% was due to the decrease in net revenue from our radio segment of $2.2 million or 5%, offset by our television segment net revenue growth of $1.2 million or 87%. Our radio segment had a decrease in net revenue primarily due to lower national, local and barter sales. The decrease in national sales occurred primarily in our Miami, Chicago, and Los Angeles markets, offset by an increase in our New York market. The decrease in local sales occurred primarily in our Los Angeles, Puerto Rico, and Miami markets, offset by an increase in our San Francisco and Chicago markets. Also, throughout most of our radio markets, barter sales declined. Our television segment net revenue growth was primarily due to MEGA TV establishing itself within the South Florida advertising community during the past 16 months, which resulted in an ability to increase advertising rates and sell more inventory.

Engineering and Programming Expenses.  The decrease in our consolidated engineering and programming expenses of $0.6 million or 5% was mainly due to our television segment. Our television segment expenses decreased $1.4 million or 29%, primarily due to a decrease in programming costs, original produced programming, and compensation and benefits for our television technical and production personnel. Our radio segment expenses increased $0.7 million or 9%, primarily related to an increase in music license fees and compensation and benefits for our radio programming personnel.

Selling, General and Administrative Expenses.  The increase in our consolidated selling, general and administrative expenses of $0.5 million or 2% was mainly due to our radio segment. Our radio segment expenses increased $0.7 million or 4%, primarily due to an increase in (a) cash advertising, promotional and marketing costs, and (b) legal fees related to a radio station lawsuit. These increases in our radio segment’s expenses were offset by a decrease in local and national sales commissions related to lower sales. Our television segment expenses decreased $0.2 million or 12%, primarily due to the decrease in cash advertising, promotional and marketing costs related to the prior year launch of MEGA TV.

Corporate Expenses.  The decrease in corporate expenses was mainly a result of decreases in employee compensation and benefits, and legal and professional fees, offset by an increase in travel and entertainment expenses.

Operating Income.  The decrease in operating income of $0.5 million or 4% was primarily related to our radio segment’s operating income decrease of $3.7 million or 18% mainly related to the decrease in net revenues. The radio segment’s operating income decrease was offset by a decrease in our corporate expenses

18

of $0.5 million or 13% and a decrease in our television segment’s operating loss of $2.8 million, or 52%, mainly related to the decrease in engineering and programming expenses and an increase in net revenues.

Interest Expense, net.  The decrease in interest expense, net, was primarily due a decrease in interest expense related to lower outstanding principal balances and an increase in interest income.

Income Taxes.  The decrease in income taxes was primarily due to the decrease in pre-tax income.

Net Income.  The decrease in net income was primarily due to the decrease in operating income, offset by a decrease in interest expense, net and income tax expense.

19

Comparison Analysis of the Operating Results for the Six-Months Ended June 30, 2007 and 2006

The following summary table presents separate financial data for each of our operating segments.

	Six-Months Ended
	June 30,						Change
	2007			2006			$			%
Net revenue:
Radio	$	82,088			84,787			(2,699	)		(3	)%
Television		4,720			1,829			2,891			158	%
Consolidated	$	86,808			86,616			192			0	%
Engineering and programming expenses:
Radio	$	17,910			16,756			1,154			7	%
Television		6,761			8,049			(1,288	)		(16	)%
Consolidated	$	24,671			24,805			(134	)		(1	)%
Selling, general and administrative expenses:
Radio	$	32,717			32,342			375			1	%
Television		3,387			4,084			(697	)		(17	)%
Consolidated	$	36,104			36,426			(322	)		(1	)%
Operating income (loss) before depreciation and amortization and gain on sales of assets, net:
Radio	$	31,461			35,689			(4,228	)		(12	)%
Television		(5,428	)		(10,304	)		4,876			(47	)%
Corporate		(6,715	)		(7,189	)		474			(7	)%
Consolidated	$	19,318			18,196			1,122			6	%
Depreciation and amortization:
Radio	$	1,437			1,223			214			17	%
Television		270			130			140			108	%
Corporate		535			479			56			12	%
Consolidated	$	2,242			1,832			410			22	%
Gain on sale of assets, net:
Radio	$	(1	)		(50,793	)		50,792			(100	)%
Television		—			—			—			0	%
Corporate		—			—			—			0	%
Consolidated	$	(1	)		(50,793	)		50,792			(100	)%
Operating income (loss):
Radio	$	30,025			85,259			(55,234	)		(65	)%
Television		(5,698	)		(10,434	)		4,736			(45	)%
Corporate		(7,250	)		(7,668	)		418			(5	%)
Consolidated	$	17,077			67,157			(50,080	)		(75	%)

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The following summary table presents a comparison of our results of operations for the six-month periods ended June 30, 2007 and 2006. Various fluctuations illustrated in the table are discussed below. This section should be read in conjunction with our unaudited condensed consolidated financial statements and notes.

	Six Months Ended
	June 30,						Change
	2007			2006			$			%
	(In thousands)
Net revenue	$	86,808			86,616			192			0	%
Engineering and programming expenses		24,671			24,805			(134	)		(1	)%
Selling, general and administrative expenses		36,104			36,426			(322	)		(1	)%
Corporate expenses		6,715			7,189			(474	)		(7	)%
Depreciation and amortization		2,242			1,832			410			22	%
Gain on sale of assets, net of disposal costs		(1	)		(50,793	)		50,792			(100	)%
Operating income	$	17,077			67,157			(50,080	)		(75	)%
Interest expense, net		(9,424	)		(10,355	)		931			(9	)%
Loss on early extinguishment of debt		—			(2,997	)		2,997			(100	)%
Other income (expense), net		1,960			(23	)		1,983			(8622	)%
Income tax expense (benefit)		6,209			(2,190	)		8,399			(384	)%
Net income	$	3,404			55,972			(52,568	)		(94	)%

Net Revenue.  Our consolidated net revenue was flat. Our television segment had net revenue growth of $2.9 million or 158%. This growth was primarily due to (a) MEGA TV establishing itself within the South Florida advertising community during the past 16 months, which resulted in an ability to increase advertising rates and sell more inventory, and (b) our television results reflecting six-months of revenue compared to the prior period’s results reflecting only four-months of revenue. Our radio segment had a decrease in net revenue of $2.7 million or 3%, primarily due to lower national, local and barter sales. The decrease in national sales occurred primarily in our Miami, Los Angeles, and Chicago markets, offset by an increase in our New York market. The decrease in local sales occurred primarily in our Los Angeles, Miami, and Puerto Rico markets, offset by an increase in our New York and San Francisco markets. Also, throughout most of our radio markets, barter sales declined.

Engineering and Programming Expenses.  The decrease in our consolidated engineering and programming expenses of $0.1 million or 1% was mainly due to our television segment. Our television segment expenses decreased $1.3 million or 16%, primarily due to a decrease in programming pre-launch costs and compensation and benefits for our television technical and production personnel due to a reduction of headcount. Our radio segment expenses increased $1.2 million or 7%, primarily related to an increase in compensation and benefits for our radio programming personnel and music license fees.

Selling, General and Administrative Expenses.  The decrease in our consolidated selling, general and administrative expenses of $0.3 million or 1% was mainly due to our television segment. Our television segment expenses decreased $0.7 million or 17%, primarily due to the decrease in cash advertising, promotional and marketing costs related to the prior year launching of MEGA TV. Our radio segment expenses increased $0.4 million or 1%, primarily due to an increase in (a) cash advertising, promotional and marketing costs, and (b) professional fees and a legal settlement related to a radio station lawsuit. These increases in our radio segment’s expenses were offset by a decrease in local and national sales commissions.

Gain on Sale of Assets, net.  The prior period gain on sale of assets, net, is related to the sale of radio stationsKZAB-FM andKZBA-FM, serving the Los Angeles, California market, which was completed on January 31, 2006, at which time we recognized a pre-tax gain of approximately $50.8 million.

Operating Income.  The decrease in operating income was primarily attributed to the gain on sale of assets, net, of $50.8 million which was recognized in the prior period.

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Interest Expense, net.  The decrease in interest expense, net, was primarily due to the elimination of interest expense incurred on our $100.0 million second lien credit facility, which was repaid on February 17, 2006.

Loss on Early Extinguishment of Debt.  The prior period loss on early extinguishment of debt of $3.0 million was due to the prepayment premium and the write-off of unamortized deferred financing costs related to the repayment of our $100.0 million second lien credit facility.

Other Income (Expense).  The increase in other income relates to the write-off of the unused portion of unearned revenue that expired. This unearned revenue relates to the MEGA TV acquisition advertising agreement that provides the seller with $2.0 million of advertising per year, for three years.

Income Taxes.  The increase in income taxes was primarily due to the income tax benefit recognized in the prior period, which was related to the sale of radio stationsKZAB-FM andKZBA-FM.

Net Income.  The decrease in net income was primarily due to the gain on sale of assets of $50.8 million and its related income tax benefit of $6.4 million, which were recognized in the prior period.

Liquidity and Capital Resources

Our primary sources of liquidity are cash on hand, cash provided by operations and, to the extent necessary, undrawn commitments that are available under our $25.0 million revolving credit facility. Our ability to raise funds by increasing our indebtedness is limited by the terms of the certificates of designations governing our preferred stock and the credit agreement governing our first lien credit facility. Additionally, our certificates of designations 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.

Management believes that cash from operating activities, together with cash on hand, should be sufficient to permit us to meet our operating obligations in the foreseeable future, including, among other things, required quarterly interest and principal payments pursuant to the credit agreements governing our senior secured credit facility due 2012 and capital expenditures, excluding the acquisitions of FCC licenses. Assumptions (none of which can be assured) which underlie management’s beliefs, include the following:

��	the demand for advertising within the broadcasting industry and economic conditions in general will not deteriorate in any material respect;
•	we will continue to successfully implement our business strategy; and
•	we will not incur any material unforeseen liabilities, including environmental liabilities and legal judgments.

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

We continuously evaluate opportunities to make strategic acquisitions, primarily in the largest Hispanic markets in the United States. We engage in discussions regarding potential acquisitions from time to time in the ordinary course of business. We 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.

We had cash and cash equivalents of $62.9 million as of June 30, 2007.

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The following summary table presents a comparison of our capital resources for the six-month periods ended June 30, 2007 and 2006, 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 unaudited condensed consolidated financial statements and notes.

	Six Months Ended
	June 30,						Change
	2007			2006			$
	(In thousands)
Capital expenditures:
Radio	$	1,016			1,523			(507	)
Television		2,025			2,441			(416	)
Corporate		1,369			341			1,028
Consolidated	$	4,410			4,305			105
Net cash flows provided by operating activities	$	7,150			869			6,281
Net cash flows (used in) provided by investing activities		(4,395	)		41,912			(46,307	)
Net cash flows used in financing activities		(6,648	)		(108,129	)		101,481
Net decrease in cash and cash equivalents	$	(3,893	)		(65,348	)

Net Cash Flows Provided by Operating Activities.  Changes in our net cash flows from operating activities were primarily a result of a decrease in cash paid to vendors and for interest.

Net Cash Flows (Used in) Provided by Investing Activities.  Changes in our net cash flows from investing activities were primarily a result of: (a) in 2007, we acquired a building and its related land and have begun making significant improvements to that building totaling $2.0 million and other capital expenditures of $2.4 million, and (b) in 2006, we received proceeds of $64.8 million for the sale of our Los Angeles stationsKZAB-FM andKZBA-FM, offset by $18.5 million of payments made to acquire our television operation “MEGA TV” and capital expenditures of $4.3 million.

Net Cash Flows Used In Financing Activities.  Changes in our net cash flows from financing activities were primarily a result of the prior period repayment of our $100.0 million second lien credit facility and its related prepayment premium of $1.0 million.

Recent Developments

Acquisition of a Facility and Related Financing

On January 4, 2007, SBS, through its wholly owned subsidiary, SBS Miami Broadcast Center, Inc. (“SBS Miami Broadcast Center”), completed the acquisition of certain real property located in Miami-Dade County, Florida pursuant to the purchase and sale agreement, dated August 24, 2006, as amended on September 25, 2006, as further amended on October 25, 2006 (the “Purchase Agreement”). The real property consists of 5.47 acres (234,208 square feet) and approximately 62,000 square feet of office space (the “Property”). The Property was acquired from 7007 Palmetto Investments, LLC (“Seller”), an unrelated third party, for a total purchase price of approximately $8.9 million, excluding closing costs and broker’s fees. During 2006, pursuant to the terms of the Purchase Agreement, we made deposits totaling approximately $1.0 million in escrow that were released at the closing and were applied to the purchase price. At December 31, 2006, these deposits were included in other assets in the accompanying condensed consolidated balance sheet. We funded the purchase price using cash on hand and borrowings and we expect to incur significant construction costs for the new broadcasting facility. Upon the completion of construction at the building, we will consolidate our Miami radio and television operations at the new broadcasting facility.

In connection with the acquisition of the Property, on January 4, 2007, SBS Miami Broadcast Center entered into a loan agreement (the “Loan Agreement”), a ten-year promissory note in the original principal amount of $7.7 million (the “Promissory Note”), and a Mortgage, Assignment of Rents and Security Agreement (the “Mortgage”) in favor of Wachovia Bank, National Association (“Wachovia”). The Promissory

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Note bears an interest rate equal to one-month LIBOR plus 125 basis points and requires monthly principal payments of $0.03 million with any unpaid balance due on its maturity date of January 4, 2017. The Promissory Note is secured by the Property and any related collateral.

The terms of the loan include certain restrictions and covenants for SBS Miami Broadcast Center, which limit, among other things, the incurrence of additional indebtedness and liens. The Loan Agreement specifies a number of events of default (some of which are subject to applicable cure periods), including, among others, the failure to make payments when due, non-compliance with covenants and defaults under other agreements or instruments of indebtedness. Upon the occurrence of an event of default and expiration of any applicable cure periods, Wachovia may accelerate the loan and declare all amounts outstanding to be immediately due and payable.

Additionally, on January 4, 2007, SBS Miami Broadcast Center entered into an interest rate swap arrangement (the “Swap Agreement”) for the original notional principal amount of $7.7 million whereby it will pay a fixed interest rate of 6.31% as compared to interest at a floating rate equal to one-month LIBOR plus 125 basis points on the Promissory Note. The interest rate swap amortization schedule is identical to the Promissory Note amortization schedule, which has an effective date of January 4, 2007, monthly notional reductions and an expiration date of January 4, 2017.

In connection with the acquisition of the Property, we agreed to unconditionally guaranty all obligations of SBS Miami Broadcast Center pursuant to the Promissory Note, the Loan Agreement, the Mortgage, the loan documents thereto, and the Swap Agreement, for the benefit of Wachovia and its affiliates (the “Guaranty”). In addition, the terms of the Guaranty contain certain financial covenants, which require us to maintain available liquidity of not less than 1.2 times the then outstanding principal balance of the loan made to SBS Miami Broadcast Center by Wachovia.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

We have no material changes to the disclosure on this matter made in our Annual Report onForm 10-K for the year ended December 31, 2006.

Item 4.   Controls and Procedures

Evaluation Of Disclosure Controls And Procedures.  Our principal executive and financial officers have conducted an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures”, as such term is defined underRule 13a-15(e) of the Exchange Act of 1934, as amended (the “Exchange Act”), to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and include controls and procedures designed to ensure that information we are required to disclose in such reports is accumulated and communicated to management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive and financial officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes In Internal Control Over Financial Reporting.  There has been no change in our internal control over financial reporting during the fiscal quarter ended June 30, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1.   Legal Proceedings

The information set forth under Note 9 contained in the “Notes to Unaudited Condensed Consolidated Financial Statements” of this Quarterly Report onForm 10-Q is incorporated by reference in answer to this Item.

Item 1A.  Risk Factors

In addition to the other information set forth in this Quarterly Report onForm 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report onForm 10-K for the year ended December 31, 2006, which could materially affect our business, financial condition or future results. There have been no material changes from the risk factors described in our Annual Report onForm 10-K for the year ended December 31, 2006, but they are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial conditionand/or operating results.

Item 4.   Submission of Matters to a Vote of Security Holders

The election of our board of directors was submitted to a vote of security holders, through the solicitation of proxies pursuant to Section 14A under the Securities Exchange Act of 1934, as amended, at the annual meeting of stockholders held on June 5, 2007 (the “Annual Meeting”).

At the Annual Meeting, our shareholders approved the election of five director nominees to hold office until their successors are duly elected and qualified. The voting results relating to the director elections are set forth in the tables below.

			Votes Against/
Directors	Votes For		Withheld
Raúl Alarcón, Jr.		259,554,854		6,875,090
Pablo Raúl Alarcón, Sr.		255,079,839		11,350,105
Antonio S. Fernandez		264,516,431		1,913,513
Jose A. Villamil		264,974,707		1,455,237
Jason L. Shrinsky		261,190,415		5,239,529

There were no broker non-votes.

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Item 6.   Exhibits

(a)   Exhibits

The following exhibits, which are numbered in accordance with Item 601 ofRegulation S-K, are filed herewith or, as noted, incorporated by reference herein:

Exhibit
Number				Exhibit Description
	3	.1	—	Third Amended and Restated Certificate of Incorporation of Spanish Broadcasting System, Inc. (the “Company”), dated September 29, 1999 (incorporated by reference to the Company’s 1999 Registration Statement onForm S-1 (Commission FileNo. 333-85499) (the “1999 Registration Statement”)) (Exhibit A to this exhibit is incorporated by reference to the Company’s Current Report onForm 8-K, dated March 25, 1996 (the “1996 Current Report”).
	3	.2	—	Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation of the Company, dated September 29, 1999 (incorporated by reference to Exhibit 3.2 of the Company’s 1999 Registration Statement).
	3	.3	—	Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.3 of the Company’s 1999 Registration Statement).
	3	.4	—	Certificate of Elimination of 141/4% Senior Exchangeable Preferred Stock, Series A of the Company, dated October 28, 2003 (incorporated by reference to Exhibit 3.3 of the Company’s Quarterly Report onForm 10-Q, dated November 14, 2003 (the “11/14/03 Quarterly Report”)).
	4	.1	—	Article V of the Third Amended and Restated Certificate of Incorporation of the Company, dated September 29, 1999 (incorporated by reference to Exhibit 3.1 of the Company’s 1999 Registration Statement).
	4	.2	—	Certificate of Designations dated October 29, 2003 Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the 10 3/4% Series A Cumulative Exchangeable Redeemable Preferred Stock of Spanish Broadcasting System, Inc. (incorporated by reference to Exhibit 4.1 of the Company’s 11/14/03 Quarterly Report).
	4	.3	—	Certificate of Designations dated October 29, 2003 Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the 10 3/4% Series B Cumulative Exchangeable Redeemable Preferred Stock of Spanish Broadcasting System, Inc. (incorporated by reference to Exhibit 4.2 of the Company’s 11/14/03 Quarterly Report).
	4	.4	—	Indenture dated June 29, 1994 among the Company, IBJ Schroder Bank & Trust Company, as Trustee, the Guarantors named therein and the Purchasers named therein (incorporated by reference to Exhibit 4.1 of the Company’s 1994 Registration Statement onForm S-4 (the “1994 Registration Statement”).
	4	.5	—	First Supplemental Indenture dated as of March 25, 1996 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the 1996 Current Report).
	4	.6	—	Second Supplemental Indenture dated as of March 1, 1997 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the 1996 Current Report).
	4	.7	—	Supplemental Indenture dated as of October 21, 1999 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the Company’s 1999 Registration Statement).
	4	.8	—	Indenture with respect to 95/8% Senior Subordinated Notes due 2009 with The Bank of New York as Trustee, dated November 2, 1999 (incorporated by reference to the Current Report onForm 8-K dated November 2, 1999 (the “1999 Current Report”)).
	4	.9	—	Indenture with respect to 95/8% Senior Subordinated Notes due 2009 with the Bank of New York as Trustee, dated June 8, 2001 (incorporated by reference to the Company’s Registration Statement onForm S-3, filed on June 25, 2001 (the “2001Form S-3”).
	4	.10	—	Form of stock certificate for the Class A common stock of the Company (incorporated by reference to the Company’s 1999 Registration Statement).

26

Exhibit
Number				Exhibit Description
	4	.11	—	Certificate of Elimination of 141/4% of Senior Exchangeable Preferred Stock, Series A of the Company, dated October 28, 2003 (incorporated by reference to Exhibit 3.3 of the Company’s Quarterly Report onForm 10-Q filed November 14, 2003).
	4	.12	—	Certificate of Designation Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the Series C Convertible Preferred Stock of the Company (“Certificate of Designation of Series C Preferred Stock”) (incorporated by reference to Exhibit 4.1 of the Company’s Current Report onForm 8-K filed on December 27, 2004).
	4	.13	—	Certificate of Correction to Certificate of Designation of Series C Preferred Stock of the Company dated January 7, 2005 (incorporated by reference to Exhibit 4.13 of the Company’s Annual Report filed onForm 10-K for the fiscal year 2004).
	14	.1	—	Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 of the Company’s 2004Form 10-K).
	31	.1	—	Chief Executive Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2	—	Chief Financial Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	—	Chief Executive Officer’s Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32	.2	—	Chief Financial Officer’s Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

27

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SPANISH BROADCASTING SYSTEM, INC.

By:  /s/  JOSEPH A. GARCÍA

JOSEPH A. GARCÍA

Executive Vice President, Chief

Financial Officer and Secretary (principal

financial and accounting officer and duly

authorized officer of the registrant)

Date: August 8, 2007

28

EXHIBIT INDEX

Exhibit
Number				Exhibit Description
	3	.1	—	Third Amended and Restated Certificate of Incorporation of Spanish Broadcasting System, Inc. (the “Company”), dated September 29, 1999 (incorporated by reference to the Company’s 1999 Registration Statement onForm S-1 (Commission FileNo. 333-85499) (the “1999 Registration Statement”)) (Exhibit A to this exhibit is incorporated by reference to the Company’s Current Report onForm 8-K, dated March 25, 1996 (the “1996 Current Report”).
	3	.2	—	Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation of the Company, dated September 29, 1999 (incorporated by reference to Exhibit 3.2 of the Company’s 1999 Registration Statement).
	3	.3	—	Amended and Restated By-Laws of the Company (incorporated by reference to Exhibit 3.3 of the Company’s 1999 Registration Statement).
	3	.4	—	Certificate of Elimination of 141/4% Senior Exchangeable Preferred Stock, Series A of the Company, dated October 28, 2003 (incorporated by reference to Exhibit 3.3 of the Company’s Quarterly Report onForm 10-Q, dated November 14, 2003 (the “11/14/03 Quarterly Report”)).
	4	.1	—	Article V of the Third Amended and Restated Certificate of Incorporation of the Company, dated September 29, 1999 (incorporated by reference to Exhibit 3.1 of the Company’s 1999 Registration Statement).
	4	.2	—	Certificate of Designations dated October 29, 2003 Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the 10 3/4% Series A Cumulative Exchangeable Redeemable Preferred Stock of Spanish Broadcasting System, Inc. (incorporated by reference to Exhibit 4.1 of the Company’s 11/14/03 Quarterly Report).
	4	.3	—	Certificate of Designations dated October 29, 2003 Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the 10 3/4% Series B Cumulative Exchangeable Redeemable Preferred Stock of Spanish Broadcasting System, Inc. (incorporated by reference to Exhibit 4.2 of the Company’s 11/14/03 Quarterly Report).
	4	.4	—	Indenture dated June 29, 1994 among the Company, IBJ Schroder Bank & Trust Company, as Trustee, the Guarantors named therein and the Purchasers named therein (incorporated by reference to Exhibit 4.1 of the Company’s 1994 Registration Statement onForm S-4 (the “1994 Registration Statement”).
	4	.5	—	First Supplemental Indenture dated as of March 25, 1996 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the 1996 Current Report).
	4	.6	—	Second Supplemental Indenture dated as of March 1, 1997 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the 1996 Current Report).
	4	.7	—	Supplemental Indenture dated as of October 21, 1999 to the Indenture dated as of June 29, 1994 among the Company, the Guarantors named therein and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to the Company’s 1999 Registration Statement).
	4	.8	—	Indenture with respect to 95/8% Senior Subordinated Notes due 2009 with The Bank of New York as Trustee, dated November 2, 1999 (incorporated by reference to the Current Report onForm 8-K dated November 2, 1999 (the “1999 Current Report”)).
	4	.9	—	Indenture with respect to 95/8% Senior Subordinated Notes due 2009 with the Bank of New York as Trustee, dated June 8, 2001 (incorporated by reference to the Company’s Registration Statement onForm S-3, filed on June 25, 2001 (the “2001Form S-3”).
	4	.10	—	Form of stock certificate for the Class A common stock of the Company (incorporated by reference to the Company’s 1999 Registration Statement).
	4	.11	—	Certificate of Elimination of 141/4% of Senior Exchangeable Preferred Stock, Series A of the Company, dated October 28, 2003 (incorporated by reference to Exhibit 3.3 of the Company’s Quarterly Report onForm 10-Q filed November 14, 2003).

Exhibit
Number				Exhibit Description
	4	.12	—	Certificate of Designation Setting Forth the Voting Power, Preferences and Relative, Participating, Optional and Other Special Rights and Qualifications, Limitations and Restrictions of the Series C Convertible Preferred Stock of the Company (“Certificate of Designation of Series C Preferred Stock”) (incorporated by reference to Exhibit 4.1 of the Company’s Current Report onForm 8-K filed on December 27, 2004).
	4	.13	—	Certificate of Correction to Certificate of Designation of Series C Preferred Stock of the Company dated January 7, 2005 (incorporated by reference to Exhibit 4.13 of the Company’s Annual Report filed onForm 10-K for the fiscal year 2004).
	14	.1	—	Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 of the Company’s 2004Form 10-K).
	31	.1	—	Chief Executive Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	31	.2	—	Chief Financial Officer’s Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32	.1	—	Chief Executive Officer’s Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	32	.2	—	Chief Financial Officer’s Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.