Edgar Filing: UNIVISION COMMUNICATIONS INC

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended June 30, 2008

Commission File Number: 001-12223

UNIVISION COMMUNICATIONS INC.

(Exact name of registrant as specified in its charter)


Delaware		No. 95-4398884
(State of Incorporation)		(I.R.S. Employer Identification)

605 Third Avenue, 12^th Floor

New York, NY 10158

(Address of principal executive offices)

(212) 455-5200

(Registrant’s telephone number, including area code)

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

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer ¨

Non-accelerated filer x (Do not check if a smaller reporting company) Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x.

There were 1,000 shares, $0.01 par value, common stock issued and outstanding as of August 11, 2008.

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

INDEX


		Page
Part I—Financial Information:
Item 1.	Consolidated Financial Statements
	Condensed Consolidated Balance Sheets at June 30, 2008 (Unaudited) and December 31, 2007	3
	Condensed Consolidated Statements of Operations for the three months ended June 30, 2008 and 2007 (Unaudited)	4
	Condensed Consolidated Statements of Operations for the six months ended June 30, 2008, the three months ended June 30, 2007 and the three months ended March 31, 2007 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008, the three months ended June 30, 2007 and the three months ended March 31, 2007 (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	49

Part II—Other Information:
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	52
Item 6.	Exhibits	54

Part I, Item 1

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per-share data)


	June 30, 2008			December 31, 2007
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	1,042,700		$	226,200
Accounts receivable, net		438,500			471,500
Program rights and prepayments		28,700			24,000
Deferred tax assets		22,000			22,000
Prepaid expenses and other		37,600			28,300
Current assets held for sale		24,800			110,800

Total current assets		1,594,300			882,800
Property and equipment, net		618,400			664,100
Intangible assets, net		6,920,700			6,925,900
Goodwill		7,290,300			7,277,200
Deferred financing costs, net		233,400			257,200
Program rights and prepayments		59,900			36,700
Investments		112,900			225,800
Other assets		50,900			34,300
Non-current assets held for sale		82,300			153,900

Total assets	$	16,963,100		$	16,457,900

LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	183,900		$	180,900
Income taxes payable		200			4,000
Accrued interest		148,900			150,200
Accrued license fees		20,500			23,700
Program rights obligations		14,400			13,900
Current portion of long-term debt and capital lease obligations		639,200			250,800
Current liabilities held for sale		—			64,300

Total current liabilities		1,007,100			687,800
Long-term debt		10,155,700			9,721,400
Capital lease obligations		41,100			43,100
Program rights obligations		11,800			12,100
Deferred tax liabilities		2,064,400			2,138,800
Other long-term liabilities		319,600			226,800

Total liabilities		13,599,700			12,830,000

Stockholder’s equity:
Common stock, $0.01 par value; 100,000 shares authorized in 2008 and 2007; 1,000 shares issued and outstanding at June 30, 2008 and December 31, 2007		—			—
Additional paid-in-capital		3,978,400			3,975,500
Accumulated deficit		(514,800	)		(247,900	)
Accumulated other comprehensive loss		(100,200	)		(99,700	)

Total stockholder’s equity		3,363,400			3,627,900

Total liabilities and stockholder’s equity	$	16,963,100		$	16,457,900

See Notes to Condensed Consolidated Financial Statements

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands)


	Three Months Ended June 30, 2008			Three Months Ended June 30, 2007
Net revenue	$	533,100		$	557,300
Direct operating expenses		171,000			170,000
Selling, general and administrative expenses		162,900			155,600
Merger-related expenses		1,000			4,200
Depreciation and amortization		30,700			40,500

Operating income		167,500			187,000
Other expense (income):
Interest expense		193,900			199,500
Interest income		(5,500	)		(1,400	)
Loss on investments		78,600			—
Amortization of deferred financing costs		11,700			13,200
Equity income in unconsolidated subsidiaries and other		(700	)		(1,000	)

Loss from continuing operations before income taxes		(110,500	)		(23,300	)
Benefit for income taxes		(11,200	)		(8,000	)

Loss from continuing operations		(99,300	)		(15,300	)
Loss from discontinued operations, net of income taxes		(1,400	)		(4,300	)

Net loss	$	(100,700	)	$	(19,600	)

See Notes to Condensed Consolidated Financial Statements

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands)


	Successor						Predecessor
	Six Months Ended June 30, 2008			Three Months Ended June 30, 2007			Three Months Ended March 31, 2007
Net revenue	$	991,900		$	557,300		$	433,600
Direct operating expenses		342,800			170,000			159,400
Selling, general and administrative expenses		321,100			155,600			141,400
Merger-related expenses		1,500			4,200			144,200
Impairment losses		23,100			—			—
Voluntary contribution per FCC consent decree		—			—			24,000
Depreciation and amortization		58,800			40,500			19,700

Operating income (loss)		244,600			187,000			(55,100	)
Other expense (income):
Interest expense		377,300			199,500			19,100
Interest income		(7,100	)		(1,400	)		(1,300	)
Loss on investments		95,700			—			—
Loss on extinguishment of debt		—			—			1,600
Amortization of deferred financing costs		23,800			13,200			500
Equity income in unconsolidated subsidiaries and other		(1,700	)		(1,000	)		(1,100	)

Loss from continuing operations before income taxes		(243,400	)		(23,300	)		(73,900	)
Benefit for income taxes		(45,000	)		(8,000	)		(5,700	)

Loss from continuing operations		(198,400	)		(15,300	)		(68,200	)
(Loss) income from discontinued operations, net of income taxes		(68,500	)		(4,300	)		1,200

Net loss	$	(266,900	)	$	(19,600	)	$	(67,000	)

See Notes to Condensed Consolidated Financial Statements

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)


	Successor						Predecessor
	Six Months Ended June 30, 2008			Three Months Ended June 30, 2007			Three Months Ended March 31, 2007
Cash flows from operating activities:
Net loss	$	(266,900	)	$	(19,600	)	$	(67,000	)
(Loss) income from discontinued operations		(68,500	)		(4,300	)		1,200

Loss from continuing operations		(198,400	)		(15,300	)		(68,200	)
Adjustments to reconcile loss from continuing operations to net cash (used in) provided by operating activities:
Depreciation		33,500			19,500			19,100
Amortization of intangible assets		25,300			21,000			600
Amortization of deferred financing costs		23,800			13,200			600
Deferred income taxes		(45,200	)		6,500			20,500
Loss on investments		95,700			—			—
Share-based compensation		2,900			1,400			36,500
Impairment losses		23,100			—			—
Other non-cash items		5,100			(3,000	)		9,400
Changes in assets and liabilities:
Accounts receivable, net		33,000			(107,800	)		62,600
Deferred advertising revenue		80,000			—			—
Program rights and prepayments		(27,900	)		(3,200	)		4,700
Prepaid expenses and other		—			(14,000	)		(23,400	)
Accounts payable and accrued liabilities		(18,200	)		(14,000	)		91,500
Income taxes payable		(5,300	)		(15,600	)		(30,000	)
Accrued interest		(1,700	)		136,200			(6,200	)
Accrued license fees		(3,500	)		300			1,500
Program rights obligations		100			3,000			(1,200	)

Net cash provided by operating activities from continuing operations		22,300			28,200			118,000
Net cash (used in) provided by operating activities from discontinued operations		(5,400	)		(5,200	)		3,000

Net cash provided by operating activities		16,900			23,000			121,000

Cash flows from investing activities:
Acquisitions		(19,100	)		—			—
Proceeds from sale of music business		12,500			—			—
Proceeds from sale of investments		10,400			19,600			—
Capital expenditures		(23,500	)		(15,600	)		(15,400	)
Other, net		—			—			(300	)

Net cash (used in) provided by investing activities from continuing operations		(19,700	)		4,000			(15,700	)
Net cash used in investing activities from discontinued operations		(200	)		(200	)		(600	)

Net cash (used in) provided by investing activities		(19,900	)		3,800			(16,300	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		950,000			—			80,000
Payment for share-based awards		—			(180,100	)		—
Capital contribution from management		—			14,600			—
Repayment of current portion of long-term debt		(130,500	)		(1,200	)		(221,200	)
Purchases of treasury shares		—			—			(2,600	)
Proceeds from stock options exercised		—			—			16,800
Income tax benefit from share-based awards		—			—			3,800
Deferred financing costs		—			(800	)		(100	)
Merger-related (payments) and receipts		—			(36,700	)		235,400

Net cash provided by (used in) financing activities from continuing operations		819,500			(204,200	)		112,100
Net cash provided by (used in) financing activities from discontinued operations		—			—			—

Net cash provided by (used in) financing activities		819,500			(204,200	)		112,100

Net increase (decrease) in cash and cash equivalents		816,500			(177,400	)		216,800
Cash and cash equivalents, beginning of period		226,200			320,300			103,500

Cash and cash equivalents, end of period	$	1,042,700		$	142,900		$	320,300

Supplemental disclosure of cash flow information:
Interest paid	$	384,200		$	72,200		$	22,300
Income taxes paid	$	3,800		$	4,500		$	700

See Notes to Condensed Consolidated Financial Statements

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

1.	Summary of Significant Accounting Policies

Nature of operations—Univision Communications Inc., together with its subsidiaries (the “Company” or “Univision”), is the leading Spanish-language media company in the United States and has continuing operations in three business segments: television, radio and Internet. The Company’s television operations include the Univision and TeleFutura networks, Galavisión, the Company’s cable television network and the Company’s owned and operated television stations. Univision Radio, Inc. (“Univision Radio”) operates the Company’s radio business, which includes its owned and operated radio stations and radio network. Univision Online, Inc. (“Univision Online”) operates the Company’s Internet portal, Univision.com.

The Company’s music division was sold on May 5, 2008. In addition, certain radio and television stations are treated as discontinued operations for all periods presented. See Note 3. Discontinued Operations and Other Disposals.

Basis of presentation—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial statements. The interim financial statements are unaudited, but include all adjustments, which are of a normal recurring nature, that management considers necessary to fairly present the financial position and the results of operations for such periods. Results of operations of interim periods are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the nine months ended December 31, 2007 and the three months ended March 31, 2007.

The condensed consolidated financial statements and notes present the financial position and results of operations using the new basis of accounting due to the merger transaction, more fully described in Note 2. The Merger, with a black line separating the results of operations and cash flows prior to the merger transaction.

Use of estimates—The preparation of financial statements in conformity with generally accepted accounting principles 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

Revenue recognition—Net revenue comprises gross revenues from the Company’s television and radio broadcast, cable and Internet businesses, including subscriber fees, sales commissions on national advertising aired on Univision affiliated television stations, less agency commissions, music license fees paid by television and compensation costs paid to an affiliated television station. The amounts deducted from gross revenues, principally represent agency commissions, which aggregate to $91.2, $168.8, $96.0 and $170.0 million for the three and six months ended June 30, 2008 and 2007, respectively. The Company’s television and radio revenue is recognized when advertising spots are aired and performance guaranties, if any, are achieved. The Internet business recognizes primarily banner and sponsorship advertisement revenue. Banner revenue is recognized as “impressions” are delivered and sponsorship revenue is recognized ratably over the contract period. “Impressions” are defined as the number of times that an advertisement appears in pages viewed by users of the Company’s online properties. All revenue is recognized only when collection of the resulting receivable is reasonably assured.

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

Derivative instruments—The Company accounts for derivative instruments in accordance with Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended (“SFAS No. 133”). The Company utilizes interest rate swaps in order to manage the earnings and cash flow volatility of changes in interest rates. The Company does not use derivative instruments for trading or speculative purposes. The Company has formally documented the relationships between hedging instruments and hedged items, as well as its risk management objectives. All derivative instruments are recognized on the balance sheet at fair market value. Hedge accounting is followed for derivatives that have been designated and qualify as cash flow hedges. For derivatives that have been designated and qualify as cash flow hedges, changes in the fair market value of the effective portion of the derivative’s gains or losses are reported in other comprehensive income (loss) and reclassified into earnings in the same period or periods that the hedged item affects earnings. Any deferred gains or losses associated with derivative instruments, which on infrequent occasions may be terminated prior to maturity, are recognized in earnings in the period in which the underlying hedged item is recognized. In the event a designated hedged item is sold, extinguished or matures prior to the termination of the related derivative instrument, the derivative instrument would be closed and the resulting gain or loss would be recognized in earnings. At June 30, 2008, all cash flow hedges utilized were highly effective.

Interest allocated to discontinued operations—In accordance with Financial Accounting Standards Board Emerging Issue Task Force Abstract No. 87-24, Allocation of Interest to Discontinued Operations (“EITF No. 87-24”), the Company has allocated interest to discontinued operations based on the amount and the terms of the bank second-lien asset sale bridge loan that will be required to be repaid using management’s estimate of the proceeds to be realized from the sale of assets associated with the discontinued operations. No allocation was made to discontinued operations for interest related to other borrowings.

Deferred financing costs—Deferred financing costs consist of all payments made by the Company in connection with obtaining its merger-related debt, primarily ratings fees, legal fees, audit fees and all costs related to the offering circular and the road show. Deferred financing costs are amortized over the life of the related debt using the effective interest method.

Program rights for television broadcast—Costs incurred in connection with the production of or purchase of rights to programs to be broadcast within one year are classified as current assets, while costs of those programs to be broadcast beyond a one year period are considered non-current. Program costs are charged to operating expense as the programs are broadcast. The rights fees related to the 2010/2014 World Cups and other interim FIFA events are amortized using the flow of income method.

Legal costs—Legal costs are expensed as incurred.

Advertising and promotional expenses—The Company expenses advertising and promotional costs in the period in which they are incurred.

Share-based compensation—The Company accounts for share-based compensation in accordance with Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123R”). Under the fair value provisions of this statement, share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the vesting period. In order to determine the fair value of stock options on the date of grant, the Company utilizes the Black-Scholes Merton model.

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

Inherent in this model are assumptions related to expected stock-price volatility, option life, risk-free interest rate and dividend yield. The risk-free interest rate is based on data derived from public sources. The expected stock-price volatility, option life and dividend yield assumptions require significant judgment which makes them critical accounting estimates. Based on the recipients and the nature of the awards, the Company believes no forfeiture estimates are required.

Concentration of credit risk—Financial instruments that potentially subject the Company to concentrations of risk include primarily cash and cash equivalents, trade receivables and financial instruments used in hedging activities. The Company invests cash with high-quality-credit institutions, which limits the amount of credit exposure with any one financial institution. The Company sells its services and products to a large number of diverse customers in a number of different industries, thus spreading the trade credit risk. No one customer represented more than 10% of net revenue of the Company for the three and six months ended June 30, 2008 and 2007. The Company extends credit based on an evaluation of the customers’ financial condition. The Company monitors its exposure for credit losses and maintains allowances for anticipated losses. The counterparties to the agreements relating to the Company’s financial instruments consist of major, international institutions. The Company does not believe that there is significant risk of nonperformance by these counterparties as the Company monitors the credit ratings of such counterparties and limits the financial exposure with any one institution.

Reclassifications—Certain reclassifications, primarily related to discontinued operations, have been made to the prior year financial statements to conform to the current year presentation.

New accounting pronouncements—In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations (“SFAS No. 141R”) and Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements, (“SFAS No. 160”). SFAS No. 141R requires that upon initially obtaining control, an acquirer will recognize 100% of the fair values of acquired assets, including goodwill, and assumed liabilities, with only limited exceptions, even if the acquirer has not acquired 100% of its target. Additionally, contingent consideration arrangements will be fair valued at the acquisition date and included on that basis in the purchase price consideration and transaction costs will be expensed as incurred. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. SFAS No. 141R and SFAS No. 160 are effective as of the beginning of the 2009 fiscal year. The Company is currently evaluating the impact of the adoption of SFAS No. 141R and SFAS No. 160.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 (“SFAS No. 161”), Disclosures about Derivative Instruments and Hedging Activities. SFAS No. 161 requires companies with derivative instruments to disclose information that should enable financial-statement users to understand how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133 and how derivative instruments and related hedged items affect a company’s financial position, financial performance and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact, if any, that SFAS No. 161 will have on the consolidated financial statements.

FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157 (“FSP 157-2”) defers the effective date of FASB Statement No. 157 for one year for all nonfinancial assets and nonfinancial liabilities,

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

except for those items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Company is currently evaluating the potential impact on its consolidated financial statements that the application of SFAS No. 157 will have on its nonfinancial assets and liabilities.

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted Accounting Principles, (“SFAS No. 162”). The statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (“GAAP”) in the United States (the GAAP hierarchy). SFAS No. 162 will be effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board (“PCAOB”) amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company does not expect SFAS No. 162 to have a material impact on its financial statements.

2.	The Merger

On March 29, 2007, Broadcasting Media Partners, Inc. (“Broadcasting Media”), completed its acquisition of the Company pursuant to the terms of the agreement and plan of merger dated as of June 26, 2006 (the “Merger Agreement”), by and among the Company, Broadcasting Media and Umbrella Acquisition, Inc. (“Umbrella Acquisition”), a subsidiary of Broadcasting Media. Umbrella Acquisition and Broadcasting Media were formed by an investor group that includes affiliates of Madison Dearborn Partners LLC, Providence Equity Partners Inc., Saban Capital Group Inc., TPG Capital, and Thomas H. Lee Partners L.P. (collectively the “Sponsors”). To consummate the acquisition, Umbrella Acquisition was merged (the “Merger”) with and into the Company and the Company was the surviving corporation. Pursuant to the Merger Agreement, each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the Merger was canceled and automatically converted into the right to receive $36.25 in cash, without interest.

As a result of the Merger, a new basis of accounting was established at March 29, 2007. In effect, Broadcasting Media’s basis in the Company’s assets and liabilities has been pushed down to the Company’s financial statements as of March 31, 2007. The consolidated financial statements and notes identify the results of operations and cash flows using the new basis of accounting as “successor” in such statements with a black line separating that information from the results of operations and cash flows using the basis of accounting prior to the merger transaction and identified as “predecessor” in such statements.

The acquisition was accounted for using the purchase method of accounting as though the Merger closed on March 31, 2007 for convenience purposes to align the Merger transaction date to the accounting close date, considering the insignificant impact to the statement of operations. The statement of operations for the three months ended March 31, 2007 excludes depreciation and amortization of the purchase accounting adjustments and interest in the new debt related to the Merger for the period March 29, 2007 through March 31, 2007.

As a result of the Merger, the common stock, par value $0.01 per share, of Umbrella Acquisition that was issued and outstanding immediately prior to the Merger converted into and became one thousand fully paid shares of common stock, par value $0.01 per share, of the Company and constitutes the only outstanding shares of capital stock of the Company. These issued and outstanding shares of the Company are held by Broadcast Media Partners Holdings, Inc. (“Broadcast Holdings”). The issued and outstanding capital stock of Broadcast Holdings is owned by Broadcasting Media. The issued and outstanding preferred stock of Broadcast Holdings is owned by the Sponsors, co-investors and certain members of management.

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

In accordance with EITF 95-3, Recognition of Liabilities in Connection with a Purchase Business Combination, the Company booked an estimated liability of $13.2 million, with an offset to goodwill, as part of the application of purchase accounting for involuntary termination of certain key employees in connection with the Merger. At June 30, 2008, the accrued liability remaining was $1.6 million.

The Company has completed its purchase price allocation to broadcast licenses, trade names, multiple subscriber operator contracts and relationships, broadcast affiliate agreements and relationships, advertiser relationships, land and buildings, and liabilities based upon an evaluation of the fair value of assets and liabilities prepared by an independent appraisal firm. The Company uses the direct value method to value intangible assets other than goodwill acquired in business combinations.

Merger-Related Expenses—As a result of the Merger, the Company incurred the following merger-related expenses:


	Three Months Ended June 30, 2008		Three Months Ended June 30, 2007
Change in control payments to employees	$	—		1,500
Legal fees		200		600
Other non-compensation expenses		—		1,500
Other compensation expenses		800		600

Total Merger-related expenses	$	1,000	$	4,200


	Successor				Predecessor
	Six Months Ended June 30, 2008		Three Months Ended June 30, 2007		Three Months Ended March 31, 2007
Share-based compensation expense	$	—	$	—	$	46,400	(a)
Change in control payments to employees		—		1,500		41,900
Advisory success fee		—		—		32,800
Legal fees		500		600		16,100
Other non-compensation expenses		—		1,500		4,300
Other compensation expenses		1,000		600		2,700

Total Merger-related expenses	$	1,500	$	4,200	$	144,200

(a)	As a result of the Merger, the Company accelerated approximately $31.9 million of share-based compensation and expensed change in control share-based compensation of $14.5 million.

Voluntary Contribution Per FCC Consent Decree

On March 27, 2007, the Federal Communications Commission (“FCC”) and Univision entered into a Consent Decree to resolve pending license renewal proceedings where petitioners alleged that certain Univision stations failed to comply with the children’s programming requirements set forth in the Children’s Television Act of 1990 and Section 73.671 of the Commission’s rules. The FCC agreed to terminate the proceedings and grant the stations’ renewal applications, and the Company agreed to make a $24 million voluntary contribution to the United States Treasury. The contribution was accrued as of March 31, 2007 and was paid in April 2007.

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

3.	Discontinued Operations and Other Disposals

Prior to the completion of the Merger, the Sponsors decided to dispose of the Company’s music recording and publishing business. As a result, the music division’s results of operations, assets and liabilities are reported as discontinued operations for all periods presented in the accompanying consolidated financial statements. During the first quarter of 2008, the Company identified additional non-core assets of its radio and television reporting units for disposal. Some of these dispositions qualify as discontinued operations, while other dispositions will be associated with the Company’s continuing operations. Dispositions where the Company is exiting a geographic market and where there will be no remaining direct cash flows have been classified as discontinued operations. Dispositions where the Company remains in a geographic market and where significant direct cash flows remain have been classified as continuing operations. The non-core assets and liabilities of the radio and television reporting units have been reclassified to held for sale.

For the six months ended June 30, 2008, the Company recorded an impairment charge of approximately $23.1 million related to continuing operations asset dispositions whose book value exceeded estimated net realizable value. The results of operations of discontinued operations have been reclassified to discontinued operations for all periods presented. The six months ended June 30, 2008 includes an impairment charge of approximately $91.9 million, $63.3 million net of income taxes, related to discontinued operations asset dispositions whose book value exceeded estimated net realizable value. The Company repaid approximately $114.7 million of its $500.0 million bank second-lien asset sale bridge loan in May of 2008 with the proceeds from the sale of its music recording and publishing businesses and certain non-core assets. The Company intends to pay the balance remaining under its $500.0 million bank second-lien asset sale bridge loan due March 29, 2009 with the proceeds from the sale of certain non-core television and radio stations, investments, real estate, cash on hand, and a potential borrowing under its bank senior secured revolving credit facility (which cannot exceed $250.0 million).

Results of all discontinued operations are as follows:


	Three Months Ended June 30, 2008			Three Months Ended June 30, 2007
Net revenue	$	12,100		$	30,300

Loss from discontinued operations	$	(1,800	)	$	(6,900	)
Benefit for income taxes		(600	)		(2,600	)
Loss on sale of discontinued operations		(400	)		—
Benefit for income taxes		(200	)		—

Loss from discontinued operations, net of income taxes	$	(1,400	)	$	(4,300	)

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)


	Successor						Predecessor
	Six Months Ended June 30, 2008			Three Months Ended June 30, 2007			Three Months Ended March 31, 2007
Net revenue	$	40,400		$	30,300		$	45,000

(Loss) income from discontinued operations	$	(99,600	)	$	(6,900	)	$	2,000
(Benefit) provision for income taxes		(31,300	)		(2,600	)		800
Loss on sale of discontinued operations		(400	)		—			—
Benefit for income taxes		(200	)		—			—

(Loss) income from discontinued operations, net of income taxes	$	(68,500	)	$	(4,300	)	$	1,200

The financial position of the discontinued operations is as follows:


	June 30, 2008		December 31, 2007
Cash and cash equivalents	$	—	$	13,100
Current assets held for sale:
Accounts receivable, net	$	—	$	23,500
Deferred taxes		—		9,300
Prepaid and other current assets		—		19,800
Property and equipment		3,600		6,200
Intangible assets		21,200		41,300
Other long-term assets		—		10,700

	$	24,800	$	110,800

Non-current assets held for sale:
Property and equipment	$	7,000	$	6,200
Intangible assets		75,300		147,700

	$	82,300	$	153,900

Current liabilities held for sale:
Accounts payable and accrued liabilities	$	—	$	63,300
Other long-term liabilities		—		1,000

	$	—	$	64,300

Sale of the Music Division—On May 5, 2008, the Company completed the sale of its music recording and publishing businesses to UMG Recordings, Inc., an entity controlled by Universal Music Group pursuant to a purchase agreement dated as of February 27, 2008. The total consideration was $153.0 million (including approximately $13.0 million for working capital), paid to the Company in cash as follows: (i) approximately $113.0 million at the closing, (ii) $11.5 million payable upon the first anniversary of the closing, (iii) $12.5 million payable upon the second anniversary of the closing, (iv) $6.0 million payable upon the third anniversary of the closing, and (v) $10.0 million payable upon the fourth anniversary of the closing, subject to purchase price adjustments, as agreed to by the parties.

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

Under the purchase agreement, the Company has committed to provide both preemptible and non-preemptible advertising support through broadcast commercials that will be aired on its Univision and Telefutura Networks, and its owned and operated television stations, for the Universal Music Group and its Latin artists until May 2013. The total consideration includes amounts payable to the Company for such advertising support. The Company is required to indemnify Universal from and against losses it may incur arising out of breaches by the Company of representations, warranties and covenants set forth in the purchase agreement, subject to certain limitations as set forth in the purchase agreement.

Upon the completion of the sale, the Company allocated $12.5 million of the total purchase price to the assets of the music recording and publishing business and $118.7 million to the advertising support the Company has committed to provide, based on the relative fair values of the assets of the music business sold and the advertising support commitments, to the aggregate fair value, as determined by an independent appraisal firm. The $118.7 million of deferred advertising revenues associated with the television segment will be recognized into revenue over the next five years.

The sale of the music business generated a deferred tax asset of approximately $110.0 million related to the excess tax basis the Company had in the music entities. As of June 30, 2008, the Company has offset this asset with a valuation allowance of the same amount since, based on the weight of available evidence, it is more likely than not that the deferred tax asset recorded will not be realized.

4.	Supplemental Balance Sheet Information


	June 30, 2008			December 31, 2007
Accounts receivable
Accounts receivable	$	455,200		$	486,400
Less allowance for doubtful accounts		(16,700	)		(14,900	)

	$	438,500		$	471,500

Property and equipment
Land and improvements	$	168,000		$	165,200
Buildings and improvements		248,900			238,000
Broadcast equipment		165,100			188,700
Furniture, computers and other equipment		109,400			103,300
Capital leases—transponder equipment		18,600			27,100

		710,000			722,300
Accumulated depreciation		(91,600	)		(58,200	)

	$	618,400		$	664,100

Accounts Payable and Accrued Liabilities
Accounts payable and accruals	$	100,200		$	109,200
Deferred advertising revenue		34,700			7,700
Accrued compensation		49,000			64,000

	$	183,900		$	180,900

Other Long-Term Liabilities
Swap liability	$	168,000		$	165,800
Deferred advertising revenue		92,200			—
Other		59,400			61,000

	$	319,600		$	226,800

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

5.	Intangible Assets and Goodwill

Goodwill and other intangible assets with indefinite lives, such as broadcast licenses, are not amortized and are tested for impairment annually or more frequently if circumstances indicate a possible impairment exists. The television and radio broadcast licenses have indefinite lives because the Company expects to renew them and renewals are routinely granted with little cost, provided that the licensee has complied with the applicable rules and regulations of the FCC. Over the last five years, all the television and radio licenses that have been up for renewal have been renewed. The technology used in broadcasting is not expected to be replaced by another technology in the foreseeable future. The television and radio broadcast licenses and the related cash flows are expected to continue indefinitely, and as a result the broadcast licenses have an indefinite useful life. In addition, the Company’s trademarks, including Univision^®, are well known in the industry and given the Company’s longevity and wide name brand recognition, the Company has determined that its trademarks have indefinite economic lives. These broadcast licenses, trademarks and other intangible assets will not be amortized unless circumstances change indicating their useful lives are deemed to no longer be indefinite.

The following is an analysis of the Company’s intangible assets currently being amortized, intangible assets not being amortized, estimated amortization expense for the years 2008 through 2013, and goodwill by segment:


	As of June 30, 2008
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible Assets Being Amortized
Multiple system operator contracts and relationships and broadcast affiliate agreements	$	981,700	$	54,200	$	927,500
Advertiser related intangibles, primarily advertiser contracts		105,300		31,000		74,300
Other amortizable intangibles		1,000		700		300

Total	$	1,088,000	$	85,900		1,002,100

Intangible Assets Not Being Amortized
Broadcast licenses						5,307,400
Trademarks						610,100
Other intangible assets						1,100

Total						5,918,600

Total intangible assets, net					$	6,920,700


	As of December 31, 2007
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible Assets Being Amortized
Multiple system operator contracts and relationships and broadcast affiliate agreements	$	981,700	$	32,600	$	949,100
Advertiser related intangibles, primarily advertiser contracts		105,300		27,600		77,700
Other amortizable intangibles		1,000		400		600

Total	$	1,088,000	$	60,600		1,027,400

Intangible Assets Not Being Amortized
Broadcast licenses						5,287,300
Trademarks						610,100
Other intangible assets						1,100

Total						5,898,500

Total intangible assets, net					$	6,925,900

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

Estimated amortization expense is as follows:


Year	Amount
2008	$	50,640
2009	$	50,080
2010	$	50,076
2011	$	50,062
2012	$	50,062
2013	$	50,062

The Company has various intangible assets that are being amortized on a straight line basis. Advertiser related intangibles are being amortized through 2026, the multiple system operator contracts and relationships and broadcast affiliate agreements and relationships are being amortized through 2027 and 2031, respectively, and other amortizable intangible assets are being amortized through 2010. The Company incurred amortization expense of $12.5 million and $25.3 million, and $20.9 million and $21.6 million for the three and six months ended June 30, 2008 and 2007, respectively. The remaining weighted average amortization period for the amortizable intangibles is approximately 21 years.

The changes in goodwill are as follows:


	Segments
	Television		Radio			Internet		Total
Balance as of December 31, 2007	$	6,040,000	$	1,129,300		$	107,900	$	7,277,200
Goodwill impairment		—		(19,500	)		—		(19,500	)
Purchase accounting adjustments		34,600		(2,000	)		—		32,600

Balance as of June 30, 2008	$	6,074,600	$	1,107,800		$	107,900	$	7,290,300

6.	Financial Instruments and Fair Value Measures

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosure requirements for fair value measurements. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value. SFAS No. 157 does not expand the use of fair value measurements in any new circumstances. The Company was required to apply the recognition and disclosure provisions of SFAS No. 157 for financial assets and financial liabilities that are remeasured at least annually on January 1, 2008. The Company will apply the recognition and disclosure provisions of SFAS No. 157 for the nonfinancial assets and nonfinancial liabilities on January 1, 2009.

SFAS No. 157 established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly through corroboration with observable market data (market-corroborated inputs). If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

liability. Level 3 inputs are unobservable inputs for the asset or liability, that is, inputs that reflect the reporting entity’s own determination about the assumptions market participants would use in pricing the asset or liability (including assumptions about risk) developed based on the best information available in the circumstances. Assumptions about risk include the risk inherent in a particular valuation technique used to measure fair value (such as a pricing model) and/or the risk inherent in the inputs to the valuation technique.

Derivative Instruments—At June 30, 2008, the Company’s interest rate swaps on its $7 billion variable bank debt and on its $250 million senior note due 2008 were impacted by SFAS No. 157. The Company measures these assets and liabilities on a recurring basis at fair value. The LIBOR swap curve, which is a significant observable input under the guidelines of SFAS No. 157, will continue to be the main input in the determination of the fair value of the Company’s interest rate swaps. However, under SFAS No. 157, the Company is also required to consider the effect of each party’s credit risk (credit standing) on the fair value of its hedges in all periods in which the swap asset or liability is measured because those who might hold the Company’s swap liabilities as assets, or swap assets as liabilities, would consider the effect of credit standing in determining the prices they would be willing to pay for similar assets or liabilities.

Below are the assets and liabilities that are measured by the Company in accordance with SFAS No. 157 on a recurring basis as of June 30, 2008:


	Fair Value Measurements at Reporting Date Using
Description	As of June 30, 2008		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Interest rate swaps	$	426	$	—	$	426	$	—

Liabilities:
Interest rate swaps	$	168,000	$	—	$	168,000	$	—

Equity Instruments—The Company monitors Entravision’s Class A common stock, which is publicly traded, as well as Entravision’s financial results, operating performance and the outlook for the media industry in general. The Company follows the guidance in SFAS 115, Accounting for Certain Investments in Debt and Equity Securities and FSP FAS 115-1 and FAS 124-1—The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments in determining whether a decline in fair value below basis is other than temporary. Based upon the continuing low Entravision stock price, the Company recorded a charge of $78.6 million for the three months ended June 30, 2008, related to an other-than-temporary decline in the value of its Entravision stock. At June 30, 2008, after giving effect to this write-down, the Company had an investment in Entravision of $62.9 million and a book basis of $4.02 per share.

As part of the consent decree pursuant to which the United States Department of Justice approved the Company’s acquisition of the Hispanic Broadcasting Corporation, the Company is currently required to own not more than 15% of Entravision stock on a fully converted basis, which includes full exercise of employee options and conversion of all convertible securities, and to sell enough of the Company’s Entravision stock so that its ownership of Entravision, on a fully converted basis, does not exceed 10% by March 26, 2009. The future sale of the stock will have no impact on the Company’s existing television station affiliation agreements with Entravision.

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

Separately, during the first quarter, the Company recorded an impairment charge of $15.1 million on an equity investment in a media company.

7.	Related Party Transactions

On March 29, 2007, the Company entered into a management agreement with Broadcasting Media and the Sponsors under which certain affiliates of the Sponsors provide the Company with management, consulting and advisory services for a quarterly aggregate service fee of 2% of operating income before depreciation and amortization, subject to certain adjustments, as well as reimbursement of out-of-pocket expenses. The management fee for the three and six months ended June 30, 2008 was $4.5 million and $7.4 million, respectively, and $5.0 million for both the three and six months ended June 30, 2007. The out-of-pocket expenses were $0.5 million and $1.7 million for the three and six months ended June 30, 2008, respectively. The management service fees and out-of-pocket expenses are included in selling, general and administrative expenses on the statement of operations.

On January 29, 2008, Broadcasting Media entered into a consulting agreement with an entity controlled by the Chairman of the Board of Directors. See Note 11. Share-Based Compensation.

The Sponsors are private investment firms that have investments in companies that do business with Univision. No individual Sponsor has a controlling ownership interest in Univision. The Sponsors have controlling ownership interests or ownership interests with significant influence with companies that do business with Univision. In the opinion of management, all business conducted by Univision with companies that the Sponsors have an ownership in are arms length transactions entered into in the ordinary course of business.

Debt

Long-term debt consists of the following as of:


	June 30, 2008			December 31, 2007
Bank senior secured revolving credit facility	$	687,000		$	—
Bank senior secured term loan facility		7,000,000			7,000,000
Bank second-lien asset sale bridge loan		385,300			500,000
Bank senior secured draw term loan		450,000			200,000
Senior notes—9.75%/10.50% due 2015		1,500,000			1,500,000
Senior notes—7.85% due 2011		518,700			521,400
Senior notes—3.875% due 2008		248,300			245,600

		10,789,300			9,967,000
Less current portion		(633,600	)		(245,600	)

Long-term debt	$	10,155,700		$	9,721,400

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

Interest is paid on a monthly basis. Although the Company has no immediate needs for additional liquidity, in light of current financial market conditions, the Company drew on the facility to provide it with greater financial flexibility. The cash proceeds of the borrowing are currently maintained in highly liquid short-term investments. The Company may potentially use up to $250.0 million of revolver borrowings, to pay down the remaining balance of $385.3 million under its $500.0 million bank second-lien asset sale bridge loan due March 29, 2009. There was $687.0 million outstanding on this facility as of June 30, 2008. After giving effect to outstanding letters of credit as of June 30, 2008 of $9.0 million, the Company had approximately $54.0 million remaining under this facility available for letters of credit and other general corporate purposes.

The bank senior secured term loan facility is a 7.5 year facility totaling $7 billion and accrues interest at a floating rate, which can be either a Eurodollar rate plus an applicable margin or, at the borrower’s option, an alternative base rate (defined as the higher of (x) the Deutsche Bank AG New York Branch prime rate and (y) the federal funds effective rate, plus one half percent (0.50%) per annum) plus an applicable margin. The Eurodollar rate is the three month LIBOR rate. The applicable interest rate as of June 30, 2008 was 7.13%. Interest is paid on January 31, April 30, July 31 and October 31. Commencing June 30, 2010, the Company is required to repay 0.625% of the aggregate principal amount of this facility and the repayment percentage will be reduced to 0.25% beginning June 30, 2012.

In April and August 2007, the Company entered into $5 and $2 billion three- and two-year, respectively, interest rate swaps on its variable rate bank debt. Under the interest rate swap contracts, the Company agreed to receive a floating rate payment for a fixed rate payment. These interest rate swaps are accounted for as cash flow hedges that are highly effective. As of June 30, 2008, the Company had a swap liability totaling $168.0 million, which is included in other long-term liabilities on the balance sheet. As of December 31, 2007, the swap liability in other long-term liabilities was $165.8 million. For the six months ended June 30, 2008, the charge for the cash flow hedge, net of income taxes, in other comprehensive loss was $1.3 million.

The bank second-lien asset sale bridge loan is a 2 year loan totaling $500 million and accrues interest at a floating rate, which can be either a Eurodollar rate plus an applicable margin or, at the Company’s option, an alternative base rate (defined as the higher of (x) the Deutsche Bank AG New York Branch prime rate and (y) the federal funds effective rate, plus one half percent (0.50%) per annum) plus an applicable margin. The Eurodollar rate is the one-month LIBOR rate. The applicable interest rate as of June 30, 2008 was 4.98%. Interest is paid on a monthly basis. The Company repaid approximately $114.7 million of its $500.0 million bank second-lien asset sale bridge loan in May of 2008 with the proceeds from the sale of its music recording and publishing businesses and certain non-core assets. There was $385.3 million outstanding on this loan at June 30, 2008. The Company intends to pay the balance remaining under its $500.0 million bank second-lien asset sale bridge loan due March 29, 2009 with the proceeds from the sale of certain non-core television and radio stations, investments, real estate, cash on hand, and a potential borrowing under its bank senior secured revolving credit facility (which cannot exceed $250.0 million). See Note 3. Discontinued Operations and Other Disposals concerning the sale of the Company’s music recording and publishing business and other non-core assets.

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

applicable margin. The applicable interest rate as of June 30, 2008 was 4.73%. Interest is paid on a monthly basis. Commencing June 30, 2010, the Company is required to repay 0.625% of the aggregate principal amount of this facility and the repayment percentage will be reduced to 0.25% beginning June 30, 2012. The cash proceeds of the borrowings are currently maintained in highly liquid short-term investments.

The 9.75% senior notes are 8 year notes due 2015, totaling $1.5 billion and accrue interest at a fixed rate. The initial interest payment on these notes was paid in cash on September 15, 2007. For any interest period thereafter through March 15, 2012, the Company may elect to pay interest on the notes entirely by cash, by increasing the principal amount of the notes or by issuing new notes (“PIK interest”) for the entire amount of the interest payment or by paying interest on half of the principal amount of the notes in cash and half in PIK interest. After March 15, 2012, all interest on the notes will be payable entirely in cash. PIK interest will be paid at the maturity of the senior notes. The notes bear interest at 9.75% and PIK interest will accrue at 10.50%. These senior notes pay interest on March 15th and September 15th each year. As of June 30, 2008, the Company has not elected the PIK option on these notes.

The Company’s 7.85% senior notes due 2011 bear interest at 7.85% per annum. These senior notes pay interest on January 15th and July 15th of each year.

The Company has $250 million of senior notes due in October 2008, which bear interest at the rate of 3.875% per annum. The interest is payable on the senior notes in cash on April 15th and October 15th of each year. The Company intends to use the $250.0 million of borrowings from the bank senior secured draw term loan facility, made on April 9, 2008, to repay these senior notes on their maturity date.

When the Company issued the senior notes due 2008, it entered into two fixed-to-floating interest rate swaps. Following the Merger, these two swaps no longer qualified for hedge accounting. During the six months ended June 30, 2008, the Company recognized a $0.1 million benefit related to the changes in the fair value of these swaps. This $0.1 million benefit is reported in interest expense in the Company’s statement of operations. At June 30, 2008, the Company had a swap asset of $0.4 million reported in prepaid expenses and other assets on the balance sheet, related to the interest rate swaps on the 2008 senior notes.

Voluntary prepayments of principal amounts outstanding under the bank senior secured revolving credit facility, bank senior secured term loan facility, bank second-lien asset sale bridge loan and bank senior secured draw term loan (collectively the “Senior Secured Credit Facilities”) will be permitted, except for the bank second-lien asset sale bridge loan, at any time; however, if a prepayment of principal is made with respect to a Eurodollar loan on a date other than the last day of the applicable interest period, the lenders will require compensation for any funding losses and expenses incurred as a result of the prepayment. Voluntary prepayments of principal amounts outstanding under the second-lien asset sale bridge loan will not be permitted at any time, except to the extent the payment is made with the proceeds of any sale of equity interests by, or any equity contribution to, us or any issuance by us of permitted senior subordinated notes and/or senior unsecured notes on terms to be agreed upon.

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

of debt under the Senior Secured Credit Facilities or the failure to pay that debt when due would cause a default under the indentures governing the senior notes (assuming certain amounts of that debt were outstanding at the time). The lenders under the Company’s Senior Secured Credit Facilities also have the right upon an event of default thereunder to terminate any commitments they have to provide further borrowings. Further, following an event of default under the Company’s Senior Secured Credit Facilities, the lenders will have the right to proceed against the collateral. The Company is in compliance with all covenants including financial covenants under its bank credit agreement governing the Senior Secured Credit Facilities as of June 30, 2008.

Additionally, the Senior Secured Credit Facilities contain certain restrictive covenants which, among other things, limit the incurrence of investments, payment of dividends, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, prepayments of other indebtedness, liens and encumbrances and other matters customarily restricted in such agreements.

The subsidiary guarantors under the Company’s bank senior secured term loan facility and senior notes are all of the Company’s domestic subsidiaries other than certain immaterial subsidiaries. The guarantees are full and unconditional and joint and several and any subsidiaries of the Company other than the subsidiary guarantors are minor. Univision Communications Inc. is not a guarantor and has no independent assets or operations. The bank senior secured term loan facility and senior notes are secured by, among other things (a) a first priority security interest in substantially all of the assets of the Company, Broadcast Holdings and the Company’s material domestic subsidiaries, as defined, including without limitation, all receivables, contracts, contract rights, equipment, intellectual property, inventory, and other tangible and intangible assets, subject to certain customary exceptions; (b) a pledge of (i) all of the Company’s present and future capital stock and the present and future capital stock of each of the Company’s and each subsidiary guarantor’s direct domestic subsidiaries and (ii) 65% of the voting stock of each of the Company’s and each guarantor’s material direct foreign subsidiaries, subject to certain exceptions and (c) all proceeds and products of the property and assets described above. The bank second-lien asset sale bridge loan is secured by a second priority security interest in all of the assets of the Company, Broadcast Holdings and the Company’s material domestic subsidiaries, as defined, securing the other secured credit facilities.

The Company’s senior notes due 2008 and 2011 that were outstanding prior to the Merger and remain outstanding, as a result of the Merger are secured on an equal and ratable basis with the Senior Secured Credit Facilities.

9.	Income Taxes

The Company’s effective tax rate from continuing operations of approximately 18.49% differs from the statutory rate primarily due to nondeductible tax differences that reduce the tax benefit from current period losses and valuation allowance relating to the write down of certain investments.

The Company’s gross unrecognized tax benefits can be summarized as follows:


*(dollars in millions)*
Balance as of January 1, 2008	$	28.2
Additions for tax positions taken during the current period		2.9
Additions for tax positions of prior years		1.7

Balance as of June 30, 2008	$	32.8

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

If the unrecognized tax benefits were recognized in a future period, the Company does not believe its effective income tax rate would materially change. The Company recognizes interest and penalties, if any, related to uncertain income tax positions in income tax expense. For the three and six months ended June 30, 2008, the Company recognized approximately $0.3 million and $0.5 million in interest expense, net of taxes, respectively. As of June 30, 2008, the Company had accrued interest of $1.1 million related to uncertain tax positions.

The Company is subject to U.S. federal income tax as well as multiple state jurisdictions. The Company has substantially concluded all U.S. federal matters through 2004. All material state matters have been concluded through 2001.

10.

Stockholder’s Equity

Comprehensive Loss

Comprehensive loss includes net loss, foreign currency translation adjustments and unrealized gains (losses) on certain derivative financial instruments.


	Three Months Ended June 30, 2008			Three Months Ended June 30, 2007
Net loss	$	(100,700	)	$	(19,600	)
Other comprehensive (loss) income:
Cash flow hedges, net of income taxes		83,400			27,800
Foreign currency		700			—

Comprehensive (loss) income	$	(16,600	)	$	8,200


	Successor						Predecessor
	Six Months Ended June 30, 2008			Three Months Ended June 30, 2007			Three Months Ended March 31, 2007
Net loss	$	(266,900	)	$	(19,600	)	$	(67,000	)
Other comprehensive income (loss):
Cash flow hedges, net of income taxes		(1,300	)		27,800			—
Foreign currency		800			—			1,600

Comprehensive (loss) income	$	(267,400	)	$	8,200		$	(65,400	)

11.

Share-Based Compensation

Total compensation cost related to restricted stock awards was approximately $1.1 and $2.3 million for the three and six months ended June 30, 2008, respectively. Unamortized compensation cost related to restricted stock awards was $5.8 million and the weighted average period over which it is expected to be recognized is approximately 1.25 years.

Total compensation cost related to stock option awards was approximately $0.1 million for the six months ended June 30, 2008. Unamortized compensation cost related to stock option awards was $1.4 million and the weighted average period over which it is expected to be recognized is approximately 3.7 years.

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

On January 29, 2008, Broadcasting Media entered into a consulting agreement with an entity controlled by Univision’s Chairman of the Board of Directors. The agreement will pay up to 3% of defined appreciation realized by the Sponsors and co-investors on their investments in Broadcasting Media and Broadcast Holdings in excess of certain preferred returns and performance thresholds, which increase over time. This agreement has been accounted for in accordance with the provisions of SFAS No. 123(R). Changes, either increases or decreases, in the defined appreciation in excess of the preferred returns and performance thresholds between the date of the consulting agreement and a liquidation event results in a change in the measure of consulting expense. The term of the consulting agreement is indefinite, subject to the right of either party to terminate the agreement. The Company recognized consulting expense of $0.2 million and $0.5 million for the three and six months ended June 30, 2008, respectively.

12.

Commitments and Contingencies

Televisa Program License Agreement (“PLA”) Litigation—Televisa and the Company are parties to the PLA, which provides the Company’s three television networks with a majority of prime time programming and a substantial portion of their overall programming. The Company currently pays a license fee to Televisa for programming, subject to certain upward adjustments. On June 16, 2005, Televisa filed an amended complaint in the United States District Court for the Central District of California alleging breach by the Company of the PLA, including breach for its alleged failure to pay Televisa royalties attributable to revenues from certain programs and from the use of unsold time to promote assets, the Company’s alleged unauthorized editing of certain Televisa programs and related copyright infringement claims, a claimed breach of the Soccer Agreement (a soccer rights side-letter to the PLA), a claim that the Company did not cooperate with various Televisa audit rights and efforts and a claim that the Company has not been properly carrying out a provision of the PLA that gives Televisa the secondary right to use the Company’s unsold advertising inventory. Televisa sought monetary relief in an amount not less than $1.5 million for breach, declaratory relief against the Company’s ability to recover amounts of approximately $5.0 million previously paid in royalties to Televisa, and an injunction against the Company’s alteration of Televisa programming without Televisa’s consent. In June 2005, the Company made a payment under protest to Televisa of $1.5 million. On August 15, 2005, the Company filed an answer to the amended complaint denying Televisa’s claims and also filed counterclaims alleging various breaches of contract and covenants by Televisa. The Company seeks monetary damages and injunctive relief.

On September 20, 2005, Televisa filed a motion to dismiss certain of the Company’s counterclaims. On November 17, 2005, the District Court denied that motion in its entirety. Thereafter, Televisa changed counsel and on January 31, 2006, after several extensions of time granted by the Company, Televisa filed its answer to the Company’s counterclaims. Televisa in its answer alleged that its claims rose to the level of a material breach of the PLA and delivered a purported notice of material breach on February 16, 2006. On March 2, 2006, the Company responded to Televisa’s purported notice of material breaches. In the Company’s response, the Company asserted that the notice was procedurally defective and that Televisa’s breach claims were not, in any event, well-founded. The Company does not believe that it is in breach of its agreements with Televisa and certainly not in material breach.

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

same allegations of material breach contained in Televisa’s January 31, 2006 answer to the Company’s counterclaims and in its February 16, 2006 notice of purported material breaches. Among other claims, the new complaint seeks a declaration that the Company is in material breach of the PLA and that Televisa has the right to suspend or terminate its performance under the PLA.

On May 5, 2006, the Company filed its Answer to the Second Amended Complaint, denying Televisa’s principal substantive allegations, denying liability, and asserting various affirmative defenses. On May 12, 2006, the Court reset the discovery cut-off date in the case for December 29, 2006, and the trial date for June 19, 2007. On May 22, 2006, the Company filed its First Amended Counterclaims, which added a claim for declaratory relief that the Company was not in material breach of the PLA or the Soccer Agreement and that it had received inadequate notice of any alleged breaches. Televisa sent a letter on June 2, 2006, notifying the Company that the 90-day cure period had expired for certain breaches alleged in Televisa’s February 16, 2006, notice of purported material breaches under the PLA and the Soccer Agreement. In that June 2, 2006 letter, Televisa contended that because the Company had purportedly failed to cure these and other breaches, some of which Televisa asserted were not susceptible of being cured, Televisa therefore had the right to terminate the PLA, the Soccer Agreement, and a related Guaranty given by Grupo Televisa to the Company. Televisa indicated, however, that it was not at that time exercising its purported termination rights and that it was seeking a declaration of its right to terminate in the litigation between the companies.

On July 19, 2006, Televisa filed a complaint in Los Angeles Superior Court seeking a judicial declaration that on and after December 19, 2006, it may, without liability to Univision, transmit or permit others to transmit any programming that is licensed to the Company under the PLA into the United States from Mexico over or by means of the Internet. The Company was served with the new complaint on July 21, 2006. The Company filed a motion to dismiss or stay this action on August 21, 2006. In response to the motion, Televisa stipulated to stay the Superior Court action, and the Court entered the stay on January 11, 2007.

On August 18, 2006, the Company filed a motion for leave to file its Second Amended Counterclaims, which include a newly-added claim for a judicial declaration that on and after December 19, 2006, Televisa may not transmit or permit others to transmit any programming that is licensed to the Company under the PLA into the United States over or by means of the Internet. Televisa opposed the motion. On October 5, 2006, the Court granted Univision’s motion for leave to file its Second Amended Counterclaims.

On September 21, 2006, Televisa sent the Company an additional notice of purported breaches under the PLA. The new notice alleged breaches relating to the Company’s sale of advertising time in connection with certain types of programs. The notice also purported to supplement Televisa’s previous breach claims with respect to the Company’s editing of Televisa programming.

On November 15, 2006, Televisa filed a motion seeking a separate trial of the Company’s Internet counterclaim. The Company opposed Televisa’s motion, and, on December 6, 2006, the Court denied the motion.

Pursuant to a stipulation and order dated November 3, 2006, the Court appointed a Special Master to oversee discovery matters in the federal case and to make recommendations on certain procedural issues. On December 15, 2006, the Special Master recommended that the Court extend the discovery completion date to June 29, 2007, and continue the trial date to October 2007. The Court accepted the Special Master’s recommended dates for discovery completion and trial by order dated January 18, 2007.

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

Pursuant to a motion brought by the Company, the Special Master on June 8, 2007, recommended a further extension of the discovery cutoff to August 27, 2007, and of the trial date to January 15, 2008. The federal court accepted the Special Master’s recommended dates for discovery completion and trial by order dated June 19, 2007. Pursuant to a stipulation of the parties and a recommendation by the Special Master, the Court on August 29, 2007, further continued the trial date to February 12, 2008, and adjusted other pretrial deadlines. On October 16, 2007, acting upon another stipulation of the parties and recommendation by the Special Master, the Court once again continued the trial date and related deadlines. On April 28, 2008, at the request of the parties, the trial was again continued and was scheduled to begin on July 1, 2008. On June 12, 2008, the U.S. District Court in Los Angeles—Central District of California continued the trial date from July 1, 2008 to October 14, 2008.

On October 1, 2007, the Company filed a motion for partial summary judgment on one of Televisa’s claims and one of the Company’s counterclaims seeking a ruling that the breaches of the PLA alleged by Televisa, even if found to be true, do not constitute “material breaches” that would allow Televisa to terminate the PLA. After briefing by both sides and argument before the Court, on December 17, 2007, the Court issued an order denying the Company’s summary judgment motion, finding that disputed issues as to certain facts would need to be resolved by a jury.

The Company is in wide-ranging settlement negotiations with Televisa, however, there are significant unresolved elements to the negotiations and there can be no assurances that settlement will be reached, or if reached, what its terms will be. A settlement could involve, among other positive and adverse impacts on the Company’s financial statements for the period in which a settlement is reached and future periods, a material charge. The range of any of these impacts from a potential settlement, including the range of a charge, if any, cannot be determined at this time. In addition, it cannot be determined whether any charge would have a material impact on adjusted operating income before depreciation and amortization, the measurement of operating income reported to the banks. The Company continues to defend the litigation and pursue its counterclaims vigorously and it plans to take all actions necessary to ensure Televisa’s continued performance under the PLA.

13.

Business Segments

The Company’s principal business segment is television, which includes the operations of the Company’s Univision Network, TeleFutura Network, Galavisión and owned-and-operated stations. The operating segments reported below are the segments of the Company for which separate financial information is available and for which segment results are evaluated regularly by management in deciding how to allocate resources and in assessing performance. The Company’s corporate expenses are included in its television segment.

The Company uses the key indicator of adjusted operating income before depreciation and amortization (“OIBDA”) to evaluate the Company’s operating performance, for planning and forecasting future business operations, and reporting to the banks. This indicator is presented on an adjusted basis consistent with the definition in the Company’s bank credit agreement governing its Senior Secured Credit Facilities to exclude certain expenses.

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

Presented below is segment information pertaining to the Company’s television, radio and Internet businesses:


	Three Months Ended June 30, 2008		Three Months Ended June 30, 2007
Net revenue:
Television	$	411,000	$	433,500
Radio		111,900		112,300
Internet		10,200		11,500

Consolidated		533,100		557,300

Direct operating expenses:
Television		145,600		147,000
Radio		21,700		19,400
Internet		3,700		3,600

Consolidated		171,000		170,000

Selling, general and administrative expenses:
Television		115,200		109,000
Radio		43,400		42,700
Internet		4,300		3,900

Consolidated		162,900		155,600

Merger-related expenses:
Television		1,000		3,600
Radio		—		600
Internet		—		—

Consolidated		1,000		4,200

Depreciation and amortization:
Television		25,800		36,100
Radio		2,800		2,400
Internet		2,100		2,000

Consolidated		30,700		40,500

Operating income:
Television		123,400		137,800
Radio		44,100		47,200
Internet		—		2,000

Consolidated	$	167,500	$	187,000

OIBDA:
Television	$	169,500	$	192,700
Radio		48,200		50,100
Internet		2,200		4,000

Consolidated	$	219,900	$	246,800

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)


	Three Months Ended June 30, 2008		Three Months Ended June 30, 2007
Capital expenditures:
Television	$	11,200	$	13,000
Radio		1,300		2,300
Internet		500		300

Consolidated	$	13,000	$	15,600


	Successor				Predecessor
	Six Months Ended June 30, 2008		Three Months Ended June 30, 2007		Three Months Ended March 31, 2007
Net revenue:
Television	$	776,200	$	433,500	$	340,900
Radio		197,700		112,300		83,300
Internet		18,000		11,500		9,400

Consolidated		991,900		557,300		433,600

Direct operating expenses:
Television		290,400		147,000		135,900
Radio		44,700		19,400		19,800
Internet		7,700		3,600		3,700

Consolidated		342,800		170,000		159,400

Selling, general and administrative expenses:
Television		227,800		109,000		98,400
Radio		84,400		42,700		38,200
Internet		8,900		3,900		4,800

Consolidated		321,100		155,600		141,400

Impairment losses:
Television		1,600		—		—
Radio		21,500		—		—
Internet		—		—		—

Consolidated		23,100		—		—

Merger-related expenses:
Television		1,500		3,600		138,500
Radio		—		600		5,700
Internet		—		—		—

Consolidated		1,500		4,200		144,200

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)


	Successor					Predecessor
	Six Months Ended June 30, 2008			Three Months Ended June 30, 2007		Three Months Ended March 31, 2007
Voluntary contribution per FCC consent decree:
Television		—			—		24,000
Radio		—			—		—
Internet		—			—		—

Consolidated		—			—		24,000

Depreciation and amortization:
Television		49,800			36,100		16,500
Radio		4,900			2,400		2,600
Internet		4,100			2,000		600

Consolidated		58,800			40,500		19,700

Operating income (loss):
Television		205,100			137,800		(72,500	)
Radio		42,100			47,200		17,000
Internet		(2,600	)		2,000		400

Consolidated	$	244,600		$	187,000	$	(55,100	)

OIBDA:
Television	$	299,100		$	192,700	$	119,400
Radio		70,200			50,100		26,200
Internet		1,500			4,000		1,100

Consolidated	$	370,800		$	246,800	$	146,700

Capital expenditures:
Television	$	17,900		$	13,000	$	12,300
Radio		5,000			2,300		2,900
Internet		600			300		200

Consolidated	$	23,500		$	15,600	$	15,400


	June 30, 2008		December 31, 2007
Total Assets:
Television	$	12,517,600	$	11,825,000
Radio		4,161,900		4,171,700
Internet		176,500		183,500
Assets held for sale		107,100		277,700

Consolidated	$	16,963,100	$	16,457,900

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements—(Continued)

June 30, 2008

(Unaudited)

(Dollars in thousands, except share and per-share data, unless otherwise indicated)

OIBDA is not, and should not be used as, an indicator of or alternative to operating income (loss) or net loss as reflected in the consolidated financial statements. It is not a measure of financial performance under U.S. generally accepted accounting principles (“GAAP”) and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Since the definition of OIBDA may vary among companies and industries it should not be used as a measure of performance among companies. The Company is providing on a consolidated basis a reconciliation of adjusted operating income before depreciation and amortization to operating income (loss), which is the most directly comparable GAAP financial measure, for the periods presented in the segmental disclosure:


	Three Months Ended June 30, 2008		Three Months Ended June 30, 2007
Adjusted operating income before depreciation and amortization	$	219,900	$	246,800
Depreciation and amortization		30,700		40,500
Share-based compensation expense		1,300		1,400
Televisa litigation costs, payments under protest and other license fee overcharges		5,200		6,600
Merger-related expenses		1,000		4,200
Restructuring costs		6,100		—
Business optimization expenses		3,100		2,100
Sponsor expense		500		—
Management fee		4,500		5,000

Operating income	$	167,500	$	187,000


	Successor				Predecessor
	Six Months Ended June 30, 2008		Three Months Ended June 30, 2007		Three Months Ended March 31, 2007
Adjusted operating income before depreciation and amortization	$	370,800	$	246,800	$	146,700
Depreciation and amortization		58,800		40,500		19,700
Share-based compensation expense		2,900		1,400		4,700
Televisa litigation costs, payments under protest and other license fee overcharges		13,500		6,600		6,600
Merger-related expenses		1,500		4,200		144,200
Voluntary contribution per FCC consent decree		—		—		24,000
Impairment losses		23,100		—		—
Restructuring costs		11,700		—		—
Business optimization expenses		5,200		2,100		2,600
Sponsor expense		1,700		—		—
Management fee		7,400		5,000		—
Purchase accounting adjustments related to leases		400		—		—

Operating income (loss)	$	244,600	$	187,000	$	(55,100	)

Part I,

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

Univision Communications Inc., together with its wholly-owned subsidiaries (the “Company,” “we,” “us” and “our”), has continuing operations in three business segments:

•

Television: The Company’s principal business segment is television, which consists primarily of the Univision and TeleFutura national broadcast networks, the owned and/or operated television stations and the Galavisión cable television network. For the six months ended June 30, 2008, the television segment accounted for approximately 78% of the Company’s net revenue.

•

Radio: Univision Radio is the largest Spanish-language radio broadcasting company in the United States. For the six months ended June 30, 2008, the radio segment accounted for approximately 20% of the Company’s net revenue.

•

Internet: Univision Online, Inc. operates the Company’s Internet portal, Univision.com, which provides Spanish-language content directed at Hispanics in the U.S., Mexico and Latin America. For the six months ended June 30, 2008, the Internet segment accounted for approximately 2% of the Company’s net revenue.

On March 29, 2007, Broadcasting Media Partners, Inc. (“Broadcasting Media”), completed its acquisition of the Company pursuant to the terms of the agreement and plan of merger dated as of June 26, 2006 (the “Merger Agreement”), by and among the Company, Broadcasting Media and Umbrella Acquisition, Inc. (“Umbrella Acquisition”), a subsidiary of Broadcasting Media. Umbrella Acquisition and Broadcasting Media were formed by an investor group that includes affiliates of Madison Dearborn Partners, LLC, Providence Equity Partners Inc., Saban Capital Group Inc., TPG, and Thomas H. Lee Partners, L.P. (collectively the “Sponsors”). To consummate the acquisition, Umbrella Acquisition was merged (the “Merger”) with and into the Company and the Company was the surviving corporation. Pursuant to the Merger Agreement, each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the Merger was canceled and automatically converted into the right to receive $36.25 in cash, without interest.

As a result of the Merger, a new basis of accounting was established at March 29, 2007. In effect, Broadcasting Media’s basis in the Company’s assets and liabilities has been pushed down to the Company’s financial statements as of March 31, 2007. The acquisition was accounted for using the purchase method of accounting as though the Merger closed on March 31, 2007 for convenience purposes to align the Merger transaction date to the accounting close date considering the insignificant impact to the statement of operations.

The Company is divesting of certain non-core television and radio stations, investments and excess real estate and completed the sale of its music business on May 5, 2008. See “Notes to Condensed Consolidated Financial Statements—3. Discontinued Operations and Other Disposals.”

Description of Net Revenue

Television net revenue is generated from the sale of network, national and local spot advertising time, subscriber fees and sales commissions on national advertising aired on Univision affiliate television stations less agency commissions, music license fees and station compensation paid to affiliates. Radio net revenue is derived from the sale of local, national, and network spot advertising time less agency commissions. The Internet business derives its net revenue primarily from online advertising.

Description of Direct Operating Expenses

Direct operating expenses consist primarily of programming, license fees, news and technical costs. License fees related to our program license agreements (the “PLA”) with Grupo Televisa S.A. and its affiliates

(“Televisa”) and affiliates of Corporación Venezolana del Television, C.A. (VENEVISION) (“Venevision”) accounted for approximately 17% of our total direct operating and selling, general and administrative expenses, excluding merger-related expenses for both the six months ended June 30, 2008 and 2007.

Description of Selling, General and Administrative Expenses

Selling, general and administrative expenses include selling, research, promotions, Televisa litigations costs, management fee and other general and administrative expenses.

Factors Affecting Our Results

Televisa Program License Agreement Litigation

Televisa and the Company are parties to the PLA, which provides our three television networks with a majority of its prime time programming and a substantial portion of its overall programming. The Company currently pays a license fee to Televisa for programming, subject to certain upward adjustments. In June 2005, Televisa filed an amended complaint in the United States District Court for the Central District of California alleging breach by us of our PLA with Televisa. Televisa’s current claims include breach for our alleged failure to pay Televisa royalties attributable to revenues from certain programs and from our use of unsold time to promote assets, the Company’s alleged unauthorized editing of certain Televisa programs and related copyright infringement claims, a claimed breach of a soccer rights side-letter to the PLA (the “Soccer Agreement”), a claim that we did not cooperate with various Televisa audit rights and efforts and a claim that we have not been properly carrying out a provision of the PLA that gives Televisa the secondary right to use our unsold advertising inventory. Televisa sought monetary relief in an amount not less than $1.5 million for breach, declaratory relief against the Company’s ability to recover amounts of approximately $5.0 million previously paid in royalties to Televisa, and an injunction against our alteration of Televisa programming without Televisa’s consent. For the three and six months ended June 30, 2008 and 2007, the Company recognized charges in the statement of operations related to the Televisa payments under protest and other license fee overcharges of approximately $0.7 million and $3.4 million and $0.3 million and $2.5 million, respectively. Televisa is also seeking a declaration that the Company is in material breach of the PLA and the Soccer Agreement and that Televisa has the right to suspend or terminate its performance under such agreements. We do not believe we are in breach of our agreements with Televisa and certainly not in material breach. The Company has filed an answer and also filed counterclaims alleging various breaches of contract and covenants by Televisa. The Company seeks monetary damages and injunctive relief.

Televisa also seeks a declaration that it may transmit or permit others to transmit any television programming into the United States from Mexico over or by means of the Internet.

Pursuant to a stipulation and order dated November 3, 2006, the federal court appointed a Special Master to oversee discovery matters in the federal case and to make recommendations on certain procedural issues. On December 15, 2006, the Special Master recommended that the federal court extend the discovery completion date to June 29, 2007, and continue the trial date to October 2007. The federal court accepted the Special Master’s recommended dates for discovery completion and trial by order dated January 18, 2007.

On October 1, 2007, the Company filed a motion for partial summary judgment on one of Televisa’s claims and one of the Company’s counterclaims. The motion seeks a ruling that the breaches of the PLA alleged by Televisa, even if found to be true, do not constitute “material breaches” that would allow Televisa to terminate the PLA. After briefing by both sides and argument before the Court, on December 17, 2007, the Court issued an order denying the Company’s summary judgment motion, finding that disputed issues as to certain facts would need to be resolved by a jury.

Merger-Related Expenses

The Company accounted for its merger-related payments, incurred in connection with the Merger, primarily as either deferred financing costs recorded as an asset in the balance sheet or merger-related expenses, which were expensed in the statement of operations. Deferred financing costs consist of all payments made by the Company in connection with obtaining its merger-related debt, primarily ratings fees, legal fees, audit fees and all costs related to the offering circular and the road show. All other costs were expensed in the statement of operations by the Company as merger-related expenses such as the success and opinion fees, change in control severance payments, the solvency opinion fee, legal fees, audit fees, appraisal fees and tax fees.

Certain post-Merger payments relate to involuntary termination benefits and relocation costs, which were capitalized under EITF 95-3, Recognition of Liabilities in Connection with a Purchase Business Combination. Other costs such as indirect expenses related to the Merger were expensed in the statement of operations.

Broadcasting Media’s Merger-related direct expenditures were capitalized and accounted for under the guideline of SFAS No. 141, Business Combinations, and were allocated to tangible or intangible assets, deferred financing costs or goodwill.

Voluntary Contribution per FCC Consent Decree

On March 27, 2007, the FCC and Univision entered into a Consent Decree to resolve pending license renewal proceedings where petitioners alleged that certain Univision stations failed to comply with the children’s programming requirements set forth in the Children’s Television Act of 1990 and Section 73.671 of the Commission’s rules. The FCC agreed to terminate the proceedings and grant the stations’ renewal applications and the Company agreed to make a $24 million voluntary contribution to the United States Treasury. The contribution was accrued as of March 31, 2007 and was paid in April 2007.

Management Fee Agreement

management fee for the three and six months ended June 30, 2008 was $4.5 million and $7.4 million, respectively, and $5.0 million for both the three and six months ended June 30, 2007. The out-of-pocket expenses were $0.5 million and $1.7 million for the three and six months ended June 30, 2008, respectively, which are included in selling, general and administrative expenses on the statement of operations.

Loss on Investments

The Company monitors its investments for their individual operating results, outlook and market performance. The Company follows the guidance in SFAS 115, Accounting for Certain Investments in Debt and Equity Securities and FSP FAS 115-1 and FAS 124-1—The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments in determining whether a decline in fair value below basis is other than temporary.

In addition to realized losses of $1.6 million on the sale of securities during the three and six month periods ended June 30, 2008, the company recorded impairment losses for the three and six month periods ended June 30, 2008 of $78.6 million and $94.1 million, respectively.

Critical Accounting Policies

Certain of the Company’s accounting policies require management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are based on the Company’s historical experience, terms of existing contracts, the Company’s evaluation of trends in the industry, information provided by the Company’s customers and suppliers and information available from other outside sources, as appropriate. However, they are subject to an inherent degree of uncertainty. As a result, actual results in these areas may differ significantly from the Company’s estimates.

The Company believes the following critical accounting policies affect the more significant judgments and estimates used in the preparation of its financial statements and changes in these judgments and estimates may impact future results of operations and financial condition.

Program Costs for Television Broadcast

Program costs pursuant to the PLAs are expensed monthly by the Company as a license fee, which is based principally on a percentage of the Company’s television combined net time sales, as defined in the PLA. The Company has expensed its payments made under protest to Televisa, discussed previously in “Notes to Condensed Consolidated Financial Statements—12. Commitments and Contingencies.” Depending on the outcome of the litigation, the Company may recover some or all of these payments. Also, the Company may be required to pay additional license fees on certain programming that is currently being excluded from the license fee calculation.

All other costs incurred in connection with the production of or purchase of rights to programs that are ready and available to be broadcast within one year are classified as current assets, while costs of those programs to be broadcast subsequent to one year are considered non-current. Program costs are charged to operating expense as the programs are broadcast. In the case of multi-year sports contracts, program costs are charged to operating expense based on the flow-of-income method over the term of the contract. Management estimates the amount of revenue expected to be realized when programs are aired, as well as the revenue associated with multi-year sports contracts in applying the flow-of-income method. If the revenue realized associated with the programming is less than estimated, the Company’s future operating margins will be lower and previously capitalized program costs may be written off.

Revenue Recognition

Net revenue is comprised of gross revenues from the Company’s television and radio broadcast, cable and Internet businesses, including subscriber fees, sales commissions on national advertising aired on Univision affiliated television stations, less agency commissions, music license fees paid by television and compensation costs paid to affiliated television stations. The Company’s television and radio gross revenues are recognized when advertising spots are aired and performance guaranties, if any, are achieved. The Internet business recognizes primarily banner and sponsorship advertisement revenues. Banner and sponsorship revenues are recognized ratably over their contract period or as impressions are delivered. “Impressions” are defined as the number of times that an advertisement appears in pages viewed by users of the Company’s online properties.

The music business, which is accounted for as a discontinued operation, recognizes revenues from the sale of recorded music upon delivery of products to third parties based on terms F.O.B. destination, less an allowance for returns, cooperative advertising and discounts.

Accounting for Intangibles and Long-Lived Assets

For purposes of performing the impairment test of goodwill, we established the following reporting units: television, radio and Internet. The Company compares the fair value of the reporting unit to its carrying amount on an annual basis to determine if there is potential goodwill impairment. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the fair value of the goodwill within the reporting unit is less than its carrying value. The Company also compares the fair value of indefinite lived intangible assets to their carrying amount. If the carrying amount of an indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized.

In accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets, long-lived assets, such as property and equipment and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to its estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Program License Agreement

Televisa and Venevision have PLAs with us that provide our three television networks with a substantial amount of programming. The Company currently pays an aggregate license fee of approximately 15% of television net revenue to Televisa and Venevision collectively for their programming, subject to certain upward adjustments. The Company believes that the PLAs and all other agreements with Televisa and Venevision, which were related party transactions prior to the Merger, have been negotiated as arms-length transactions. If the license fee ultimately paid is more than the amount estimated by management, additional license fee expense will be recognized.

Share-Based Compensation

On January 1, 2006, the Company adopted SFAS No. 123R, Share-Based Payment, which requires compensation expense relating to share-based payments to be recognized in earnings using a fair-value measurement method. The Company has elected to use the straight-line attribution method of recognizing compensation expense over the vesting period. The fair value of each new stock option award will be estimated on the date of grant using the Black-Scholes-Merton option-pricing model, which is the same model that was used by the Company prior to the adoption of SFAS No. 123R.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations (“SFAS No. 141R”) and Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements, (“SFAS No. 160”). SFAS No. 141R requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair value on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. SFAS No. 141R and SFAS No. 160 are effective as of the beginning of the 2009 fiscal year. The Company is currently evaluating the impact of the adoption of SFAS No. 141R and SFAS No. 160.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities, (“SFAS No. 161”). SFAS No. 161 requires companies with derivative instruments to disclose information that should enable financial-statement users to understand how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities and how derivative instruments and related hedged items affect a company’s financial position, financial performance and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the impact, if any, that SFAS No. 161 will have on the consolidated financial statements.

FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157 defers the effective date of FASB Statement No. 157 for one year for all nonfinancial assets and nonfinancial liabilities, except for those items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Company is currently evaluating the potential impact on its consolidated financial statements that the application of SFAS No. 157 will have on its nonfinancial assets and liabilities.

In May 2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted Accounting Principles, (“SFAS No. 162”). The statement identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (GAAP) in the United States (the GAAP hierarchy). SFAS No. 162 will be effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company does not expect SFAS No. 162 to have a material impact on its financial statements.

Results of Operations

Overview

In the following table, the Company’s combined results for the six months ended June 30, 2007 represent the sum of the amounts for the three months ended March 31, 2007 and the three months ended June 30, 2007. This combination does not comply with GAAP or with the rules for pro forma presentation, but is presented because we believe it enables a meaningful comparison of our results.


	Successor						Predecessor			Combined Results of Successor and Predecessor
Unaudited in thousands	Six Months Ended June 30, 2008			Three Months Ended June 30, 2007			Three Months Ended March 31, 2007			Six Months Ended June 30, 2007
Net revenue	$	991,900		$	557,300		$	433,600		$	990,900

Direct operating expenses		342,800			170,000			159,400			329,400
Selling, general and administrative expenses		321,100			155,600			141,400			297,000
Merger-related expenses		1,500			4,200			144,200			148,400
Impairment losses		23,100			—			—			—
Voluntary contribution per FCC consent decree		—			—			24,000			24,000
Depreciation and amortization		58,800			40,500			19,700			60,200

Operating income (loss)		244,600			187,000			(55,100	)		131,900
Other expenses (income):
Interest expense		377,300			199,500			19,100			218,600
Interest income		(7,100	)		(1,400	)		(1,300	)		(2,700	)
Loss on investments		95,700			—			—			—
Loss on extinguishment of debt		—			—			1,600			1,600
Amortization of deferred financing costs		23,800			13,200			500			13,700
Equity income in unconsolidated subsidiaries and other		(1,700	)		(1,000	)		(1,100	)		(2,100	)

Loss from continuing operations before income taxes		(243,400	)		(23,300	)		(73,900	)		(97,200	)
Benefit for income taxes		(45,000	)		(8,000	)		(5,700	)		(13,700	)

Loss from continuing operations		(198,400	)		(15,300	)		(68,200	)		(83,500	)
(Loss) income from discontinued operations, net of tax		(68,500	)		(4,300	)		1,200			(3,100	)

Net loss	$	(266,900	)	$	(19,600	)	$	(67,000	)	$	(86,600	)

In comparing our results of operations for the three and six months ended June 30, 2008 (“2008”) with those ended June 30, 2007 (“2007”), the following should be noted:

•

For the three months ended June 30, 2008 and 2007, the Company incurred merger-related expenses of $1.0 and $4.2 million, respectively. For the six months ended June 30, 2008 and 2007, the Company incurred merger-related expenses of $1.5 million and $148.4 million, respectively. The costs are primarily related to legal, banking, change in control severance payments and consulting fees incurred in connection with the Merger.

•

In the first quarter of 2007, the Company expensed a voluntary contribution per an FCC consent decree of approximately $24.0 million to resolve pending license renewal applications.

•

For the three months ended June 30, 2008 and 2007, the Company recorded selling, general and administrative expense of $4.5 and $6.4 million, respectively for Televisa litigation costs regarding its PLA and direct operating expenses of $0.7 and $0.2 million, respectively, for payments under protest and other license fee overcharges to Televisa. For the six months ended June 30, 2008 and 2007, the Company recorded selling, general and administrative expense of $10.0 and $10.7 million, respectively for Televisa litigation costs regarding its PLA and direct operating expenses of $3.5 and $2.5 million, respectively, for payments under protest and other license fee overcharges to Televisa.

•

In the first quarter of 2008, the Company recorded an impairment loss of $23.1 million related to assets held for sale from continuing operations. See “Notes to Condensed Consolidated Financial Statements—3. Discontinued Operations and Other Disposals.”

•

For the three and six months ended June 30, 2008, the Company recorded losses on investments of $78.6 and $95.7 million, respectively. See “Notes to Condensed Consolidated Financial Statements—6. Financial Instruments and Fair Value Measures.”

•

For the three months ended June 30, 2008 and 2007, the Company recorded management fee expense of $4.5 and $5.0 million, respectively, payable to affiliates of the Sponsors and $0.5 million of out-of-pocket expenses for the three months ended June 30, 2008, which are included in selling, general and administrative expenses. The management fee for the six months ended June 30, 2008 and 2007 was $7.4 and $5.0 million and the out-of-pocket expenses for the six months ended June 30, 2008 were $1.7 million.

•

For the three and six months ended June 30, 2008, the Company’s selling general and administrative expenses include share-based compensation costs of $1.3 million and $2.9 million, respectively. For the three and six months ended June 30, 2007, the Company’s selling general and administrative expenses include share-based compensation costs of $1.4 million and $5.6 million, respectively. The Company’s direct operating expenses include share-based compensation costs of $0.6 million for the six months ended June 30, 2007.

•

For the three and six months ended June 30, 2008, the Company recorded $3.1 and $5.2 million, respectively, of business optimization expense, primarily related to the implementation of the Oracle system. For the three and six months ended June 30, 2007, the Company recorded $2.1 and $4.7 million, respectively, of business optimization expense.

Three Months Ended June 30, 2008 Compared to Three Months Ended June 30, 2007

Net revenue. Net revenue was $533.1 million in 2008 compared to $557.3 million, a decrease of $24.2 million or 4.3%. The Company’s television segment revenues were $411.0 million in 2008 compared to $433.5 million in 2007, a decrease of $22.5 million or 5.2%. The decrease in the revenues of the Company’s television networks and owned-and-operated stations are due to certain soccer championships which were aired in the second quarter of 2007 and reduced spending on advertising due to the economic downturn. The Company’s radio segment revenues were essentially flat at $111.9 million in 2008 compared to $112.3 million in 2007, a decrease of $0.4 million or 0.3%. The Company’s Internet segment had revenues of $10.2 million in 2008 compared to $11.5 million in 2007, a decrease of $1.3 million or 10.9%, primarily related to a decrease in nonsearch Internet advertising.

Expenses. Direct operating expenses increased to $171.0 million in 2008 from $170.0 million in 2007, an increase of $1.0 million or 0.6%. The Company’s television segment direct operating expenses were $145.6 million in 2008 compared to $147.0 million in 2007, a decrease of $1.4 million or 1.0%. The decrease is due to a decrease in programming costs of $2.9 million offset by an increase in license fee expense of $1.1 million paid under our PLA, and an increase in payments made under protest and other license fee overcharges to Televisa of $0.4 million. The Company’s radio segment had direct operating expenses of $21.7 million in 2008 compared to $19.4 million in 2007, an increase of $2.3 million or 12.2%. The increase is due to increased programming costs of $2.1 million and technical costs of $0.2 million. The Company’s Internet segment had direct operating

expenses of $3.7 million in 2008 compared to $3.6 million in 2007, an increase of $0.1 million or 2.5%. The increase is due primarily to increased technical costs. As a percentage of net revenue, the Company’s direct operating expenses increased to 32.1% in 2008 from 30.5% in 2007.

Selling, general and administrative expenses increased to $162.9 million in 2008 from $155.6 million in 2007, an increase of $7.3 million or 4.7%. The Company’s television segment selling, general and administrative expenses were $115.2 million in 2008 compared to $109.0 million in 2007, an increase of $6.2 million or 5.8%. The increase is due primarily to increased restructuring costs of $4.7 million, increased research costs of $2.3 million and increased selling costs of $2.2 million offset in part by a decrease in Televisa litigation costs of $1.8 million and a decrease in general and administrative compensation costs of $1.2 million. The Company’s radio segment had selling, general and administrative expenses of $43.4 million in 2008 compared to $42.7 million in 2007, an increase of $0.7 million or 1.4%. The increase is due primarily to increased selling costs of $1.2 million offset by other savings of $0.6 million. The Company’s Internet segment had selling, general and administrative expenses of $4.3 million in 2008 compared to $3.9 million in 2007, an increase of $0.4 million or 11.4%. The increase is due primarily to increased selling costs. As a percentage of net revenue, the Company’s selling, general and administrative expenses increased to 30.6% in 2008 from 27.9% in 2007.

Merger-related expenses. In 2008 and 2007, the Company incurred merger-related expenses of $1.0 million and $4.2 million. The costs are primarily related to legal, banking, change in control severance payments and consulting fees incurred in connection with the Merger. See “Notes to Condensed Consolidated Financial Statements—2. The Merger.”

Depreciation and amortization. Depreciation and amortization decreased to $30.7 million in 2008 from $40.5 million in 2007, a decrease of $9.8 million or 24.2%. The Company’s depreciation expense decreased to $18.1 million in 2008 from $19.5 million in 2007, a decrease of $1.4 million primarily related to decreased capital expenditures and an increase in the depreciable lives of certain tangible assets as a result of the Merger. The Company had amortization of intangible assets of $12.5 million and $21.0 million in 2008 and 2007, respectively, a decrease of $8.5 million. The decrease is due primarily to certain advertiser related intangible assets that were fully amortized in 2007 following the Merger. See “Notes to Condensed Consolidated Financial Statements—5. Intangible Assets and Goodwill.” Depreciation and amortization expense for the television segment decreased by $10.3 million to $25.8 million in 2008 from $36.1 million in 2007 due primarily to advertiser related intangible assets that were fully amortized in 2007 following the Merger. Depreciation and amortization expense for the radio segment increased by $0.4 million to $2.8 million in 2008 from $2.4 million in 2007 primarily due to an increase in depreciation expense resulting from increased capital expenditures. Depreciation and amortization expense for the Internet segment was $2.1 million in 2008 and $2.0 million in 2007, an increase of $0.1 million.

Operating income. As a result of the factors discussed above, operating income decreased to $167.5 million in 2008 from operating income of $187.0 million in 2007, a decrease of $19.5 million. The Company’s television segment had operating income of $123.4 million in 2008 compared to operating income of $137.8 million in 2007, a decrease of $14.4 million. The Company’s radio segment had operating income of $44.1 million in 2008 compared to operating income of $47.2 million in 2007, a decrease of $3.1 million. The Company’s Internet segment’s operating income was flat in 2008 compared to operating income of $2.0 million in 2007, a decrease of $1.9 million.

Interest expense. Interest expense decreased to $193.9 million in 2008 from $199.5 million in 2007, a decrease of $5.6 million. The decrease is due primarily to a decrease in interest rates offset by changes in amounts borrowed. See “Notes to Condensed Consolidated Financial Statements—8. Debt.”

Interest income. Interest income increased to $5.5 million in 2008 from $1.4 million in 2007, an increase of $4.1 million. The increase is due primarily to an increase in cash investments resulting from the Company’s borrowings of $700 million from its bank senior secured revolving credit facility and $250 million from its bank senior secured draw term loan facility in April 2008. See “Notes to Condensed Consolidated Financial Statements—8. Debt.”

Loss on investments. Loss on investments consists of an impairment charge of $78.6 million on the Company’s investment in Entravision. See “Notes to Condensed Consolidated Financial Statements—6. Financial Instruments and Fair Value Measures.”

Benefit for income taxes. In 2008, the Company reported an income tax benefit of $11.2 million related to deferred taxes. In 2007, the Company reported an income tax benefit of $8.0 million, representing the net of $15.4 million of current tax benefit and $7.4 million of deferred tax provision. The Company’s effective tax benefit rate of 10.2% in 2008 is different from the effective tax benefit rate of 34.5% in 2007 due to the charge for the nontemporary decline in the fair value of the Entravision investment, for which no tax benefit was recorded in 2008. The Company recorded a deferred tax asset related to its loss on its Entravision investment that was offset by a valuation allowance for the same amount since, based on the weight of available evidence, it is more likely than not that the deferred tax asset recorded will not be realized.

Loss from discontinued operations, net of income tax. The Company reported a net loss from discontinued operations in 2008 of $1.4 million compared to a net loss of $4.3 million in 2007 related to its music business and non-core television and radio assets held for sale. See “Notes to Condensed Consolidated Financial Statements—3. Discontinued Operations and Other Disposals.”

Net loss. As a result of the above factors, the Company reported a net loss of $100.7 million in 2008 and $19.6 million in 2007.

Adjusted operating income before depreciation and amortization (“OIBDA”). OIBDA decreased to $219.9 million in 2008 from $246.8 million in 2007, a decrease of $26.9 million or 10.9%. The decrease is based on the net revenue and operating expense explanations above, along with the matters noted in the overview. As a percentage of net revenue, the Company’s OIDBA decreased to 41.3% in 2008 from 44.3% in 2007.

The Company uses the key indicator of OIBDA to evaluate the Company’s operating performance, for planning and forecasting future business operations, and reporting to the banks. This indicator is presented on an adjusted basis consistent with the definition in our bank credit agreement governing our senior secured credit facilities to exclude certain expenses. OIBDA is not, and should not be used as, an indicator of or alternative to operating income or net (loss) income as reflected in the consolidated financial statements. It is not a measure of financial performance under GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Since the definition of OIBDA may vary among companies and industries it should not be used as a measure of performance among companies.

The table below summarizes the reconciliation of OIBDA to operating income.


In thousands	Three Months Ended June 30, 2008		Three Months Ended June 30, 2007
OIBDA	$	219,900	$	246,800
Depreciation and amortization		30,700		40,500
Share-based compensation expense		1,300		1,400
Televisa litigation costs, payments under protest and other license fee overcharges		5,200		6,600
Merger-related expenses		1,000		4,200
Restructuring costs		6,100		—
Business optimization expenses		3,100		2,100
Sponsor expenses		500		—
Management fee		4,500		5,000

Operating income	$	167,500	$	187,000

Six Months Ended June 30, 2008 Compared to Six Months Ended June 30, 2007

Net revenue. Net revenues was $991.9 million in 2008 compared to $990.9 million, an increase of $1.0 million or 0.1%. The Company’s television segment revenues were $776.2 million in 2008 compared to $774.4 million in 2007, an increase of $1.8 million or 0.2%. The Company’s radio segment had revenues of $197.7 million in 2008 compared to $195.6 million in 2007, an increase of $2.1 million or 1.0%. The Company’s Internet segment had revenues of $18.0 million in 2008 compared to $20.9 million in 2007, a decrease of $2.9 million or 13.7%, primarily related to a decrease in nonsearch Internet advertising.

Expenses. Direct operating expenses increased to $342.8 million in 2008 from $329.4 million in 2007, an increase of $13.4 million or 4.1%. The Company’s television segment direct operating expenses were $290.4 million in 2008 compared to $282.9 million in 2007, an increase of $7.5 million or 2.7%. The increase is due to increased programming costs of $2.2 million, increased license fee expense of $4.3 million paid under our PLA and an increase in payments made under protest and other license fee overcharges to Televisa of $1.0 million. The Company’s radio segment had direct operating expenses of $44.7 million in 2008 compared to $39.2 million in 2007, an increase of $5.5 million or 14.3%. The increase is due to increased programming costs of $5.1 million and technical costs of $0.5 million. The Company’s Internet segment had direct operating expenses of $7.7 million in 2008 compared to $7.3 million in 2007, an increase of $0.4 million or 4.6%. The increase is due primarily to increased technical costs. As a percentage of net revenue, the Company’s direct operating expenses increased to 34.6% in 2008 from 33.2% in 2007.

Selling, general and administrative expenses increased to $321.1 million in 2008 from $297.0 million in 2007, an increase of $24.1 million or 8.1%. The Company’s television segment selling, general and administrative expenses were $227.8 million in 2008 compared to $207.4 million in 2007, an increase of $20.4 million or 9.9%. The increase is due primarily to increased restructuring costs of $10.3 million, increased research costs of $3.0 million, increased selling costs of $1.9 million, increase in the management fee payable to affiliates of the Sponsors of $2.4 million, increased promotion costs of $1.1 million offset by a decrease in general and administrative compensation costs of $1.9 million. The Company’s radio segment had selling, general and administrative expenses of $84.4 million in 2008 compared to $80.9 million in 2007, an increase of $3.5 million or 4.2%. The increase is due to increased selling costs of $2.3 million, increased promotions costs of $1.6 million offset by savings of $0.5 million. The Company’s Internet segment had selling, general and administrative expenses of $8.9 million in 2008 compared to $8.7 million in 2007, an increase of $0.2 million or 1.5%. The increase is due primarily to increased selling costs of $0.8 million offset by bad debt expense of $0.4 million and other savings of $0.2 million. As a percentage of net revenue, the Company’s selling, general and administrative expenses increased to 32.4% in 2008 from 30.0% in 2007.

Merger-related expenses. In 2008 and 2007, the Company incurred merger-related expenses of $1.5 million and $148.4 million. The costs are primarily related to legal, banking, change in control severance payments and consulting fees incurred in connection with the Merger. See “Notes to Condensed Consolidated Financial Statements—2. The Merger.”

Impairment losses. In the first quarter of 2008, the Company recorded an impairment loss of $23.1 million related to continuing operations asset dispositions whose book value exceeded net realizable value. There were no impairment losses recorded in the second quarter of 2008. See “Notes to Condensed Consolidated Financial Statements—3. Discontinued Operations and Other Disposals.”

Voluntary contribution per FCC consent decree. In 2007, the Company expensed a voluntary contribution per an FCC consent decree of approximately $24.0 million to resolve pending license renewal applications.

Depreciation and amortization. Depreciation and amortization decreased to $58.8 million in 2008 from $60.2 million in 2007, a decrease of $1.4 million or 2.2%. The Company’s depreciation expense decreased to

$33.5 million in 2008 from $38.6 million in 2007, a decrease of $5.1 million primarily related to decreased capital expenditures and an increase in the depreciable lives of certain tangible assets as a result of the Merger. The Company had amortization of intangible additional assets of $25.3 million and $21.6 million in 2008 and 2007, respectively, an increase of $3.7 million. The allocation of the purchase price related to the Merger affected both tangible and amortizable intangible assets. See “Notes to Condensed Consolidated Financial Statements—5. Intangible Assets and Goodwill.” Depreciation and amortization expense for the television segment decreased by $2.8 million to $49.8 million in 2008 from $52.6 million in 2007 primarily related to decreased capital expenditures and an increase in the depreciable lives of certain tangible assets as a result of the Merger. Depreciation and amortization expense for the radio segment decreased by $0.1 million to $4.9 million in 2008 from $5.0 million in 2007. Depreciation and amortization expense for the Internet segment was $4.1 million in 2008 and $2.6 million in 2007 due to an increase in intangible amortization expense.

Operating income. As a result of the factors discussed above, operating income increased to $244.6 million in 2008 from operating income of $131.9 million in 2007, an increase of $112.7 million. The Company’s television segment had operating income of $205.0 million in 2008 compared to operating income of $65.4 million in 2007, an increase of $139.6 million. The Company’s radio segment had operating income of $42.1 million in 2008 compared to operating income of $64.2 million in 2007, a decrease of $22.1 million. The Company’s Internet segment had an operating loss of $2.6 million in 2008 compared to operating income of $2.4 million in 2007, a decrease of $5.0 million.

Interest expense. Interest expense increased to $377.3 million in 2008 from $218.6 million in 2007, an increase of $158.7 million. The increase is due primarily to an increase in borrowings. See “Notes to Condensed Consolidated Financial Statements—8. Debt.”

Interest income. Interest income increased to $7.1 million in 2008 from $2.7 million in 2007, an increase of $4.4 million. The increase is due primarily to an increase in cash investments resulting from the Company’s borrowings of $700 million from its bank senior secured revolving credit facility and $250 million from its bank senior secured draw term loan facility in April 2008. See “Notes to Condensed Consolidated Financial Statements—8. Debt.”

Loss on investments. In addition to realized losses of $1.6 million on the sale of securities, the Company recorded impairment losses for the three and six month periods ending June 30, 2008 of $78.6 million and $94.1 million, respectively related to the Company’s investment in Entravision and an equity investment in a media company.

Benefit for income taxes. In 2008, the Company reported an income tax benefit of $45.0 million related to deferred taxes. In 2007, the Company reported an income tax benefit of $13.7 million, representing the net of $41.6 million of current tax benefit and $27.9 million of deferred tax provision. The Company’s effective tax benefit rate of 18.5% in 2008 is different from the effective tax benefit rate of 14.1% in 2007 due primarily to the pre-tax loss and non-deductibility of certain merger-related expenses recorded in 2007 and due to the charge for the nontemporary decline in the fair value of the Entravision investment and an equity investment in a media company, for which no tax benefit was recorded in 2008. The Company recorded a deferred tax asset related to its capital loss that was offset by a valuation allowance for the same amount since, based on the weight of available evidence, it is more likely than not that the deferred tax asset recorded will not be realized.

Loss from discontinued operations, net of income tax. The Company reported a net loss from discontinued operations in 2008 of $68.5 million compared to a net loss of $3.1 million in 2007 related to its music business and non-core television and radio assets held for sale. In the first quarter of 2008, the Company recorded an impairment charge of approximately $91.9 million, $63.3 million net of income taxes, related to discontinued operations, whose book value exceeded estimated net realizable value. See “Notes to Condensed Consolidated Financial Statements—3. Discontinued Operations and Other Disposals.”

Net loss. As a result of the above factors, the Company reported a net loss of $266.9 million in 2008 and $86.6 million in 2007.

OIBDA. OIBDA decreased to $370.8 million in 2008 from $393.5 million in 2007, a decrease of $22.7 million or 5.8%. The decrease is based on the net revenue and operating expense explanations above, along with the matters noted in the overview. As a percentage of net revenue, the Company’s OIBDA decreased to 37.4% in 2008 from 39.7% in 2007.

The Company uses the key indicator of OIBDA to evaluate the Company’s operating performance, for planning and forecasting future business operations, and reporting to the banks. This indicator is presented on an adjusted basis consistent with the definition in our bank credit agreement to exclude certain expenses. OIBDA is not, and should not be used as, an indicator of or alternative to operating income or net (loss) income as reflected in the consolidated financial statements. It is not a measure of financial performance under GAAP and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Since the definition of OIBDA may vary among companies and industries it should not be used as a measure of performance among companies.

The table below summarizes the reconciliation of adjusted operating income before depreciation and amortization to operating income (loss).


	Successor				Predecessor
In thousands	Six Months Ended June 30, 2008		Three Months Ended June 30, 2007		Three Months Ended March 31, 2007
OIBDA	$	370,800	$	246,800	$	146,700
Depreciation and amortization		58,800		40,500		19,700
Share-based compensation expense		2,900		1,400		4,700
Televisa litigation costs, payments under protest and other license fee overcharges		13,500		6,600		6,600
Merger-related expenses		1,500		4,200		144,200
Voluntary contribution per FCC consent decree		—		—		24,000
Impairment losses		23,100		—		—
Restructuring costs		11,700		—		—
Business optimization expenses		5,200		2,100		2,600
Sponsor expenses		1,700		—		—
Management fee		7,400		5,000		—
Purchase accounting adjustments related to leases		400		—		—

Operating income (loss)	$	244,600	$	187,000	$	(55,100	)

Liquidity and Capital Resources

Cash Flows

The Company’s primary source of cash flow is its television and radio operations. Funds for debt service will be provided by a combination of funds from operations, non-core asset sales and additional borrowings. Capital expenditures historically have been, and we expect will continue to be, provided by funds from operations and by borrowings. Cash and cash equivalents were $1,042.7 million at June 30, 2008 and $226.2 million at December 31, 2007. The increase of $816.5 million was attributable to net cash provided by operating activities of $16.9 million, including $80.0 million related to deferred advertising revenue from an advertising support package, proceeds from borrowings under long-term debt of $950.0 million, proceeds from the sale of the Company’s Entravision stock of $10.4 million and proceeds of $12.5 million from the sale of the Company’s music business, offset by $19.1 million for the purchase of an Austin radio station, capital expenditures of $23.5 million, net bank repayments of $130.5 million and other uses of funds of $0.2 million.

In addition to the sale of our music business which was consummated on May 5, 2008, we intend to sell certain non-core assets, including certain non-core television and radio stations, investments and excess real estate. See “Notes to Condensed Consolidated Financial Statements—3. Discontinued Operations and Other Disposals.”

Capital Expenditures

Capital expenditures totaled $23.5 million for the six months ended June 30, 2008. The Company’s capital expenditures exclude the capitalized lease obligations of the Company. For the fiscal year 2008, the Company plans on spending a total of approximately $100.0 million, which is expected to consist of $18.0 million for television station facilities primarily in Fresno and Puerto Rico; $24.0 million for Univision and TeleFutura Network upgrades and facilities expansion; $17.0 million related to television station transmitter projects; $11.0 million primarily for radio station facility upgrades; and approximately $30.0 million primarily for normal capital improvements.

Debt Instruments

The Company has a 7-year, $750.0 million bank senior secured revolving credit facility. Interest accrues at a floating rate, which can be either a Eurodollar rate plus an applicable margin or, at the Company’s option, an alternative base rate (defined as the higher of (x) the Deutsche Bank AG New York Branch prime rate and (y) the federal funds effective rate, plus one half percent (0.50%) per annum) plus an applicable margin. The Eurodollar rate is the one-month LIBOR rate. On April 7, 2008, the Company borrowed $700.0 million from this facility. The borrowing is at one-month LIBOR plus an applicable margin. The applicable interest rate as of June 30, 2008 was 4.73%. Interest is paid on a monthly basis. Although the Company has no immediate needs for additional liquidity, in light of current financial market conditions, the Company drew on the facility to provide it with greater financial flexibility. The cash proceeds of the borrowing are currently maintained in highly liquid short-term investments. The Company may potentially use up to $250.0 million of revolver borrowings, to pay down the remaining balance of $385.3 million under its $500.0 million bank second-lien asset sale bridge loan due March 29, 2009. There was $687.0 million outstanding on this facility as of June 30, 2008. After giving effect to outstanding letters of credit as of June 30, 2008 of $9.0 million, the Company had approximately $54.0 million remaining under this facility available for letters of credit and other general corporate purposes.

In April and August 2007, the Company entered into $5 and $2 billion three- and two-year, respectively, interest rate swaps on its variable rate bank debt. Under the interest rate swap contracts, the Company agreed to receive a floating rate payment for a fixed rate payment. These interest rate swaps are accounted for as cash flow hedges that are highly effective. As of June 30, 2008, the Company had a swap liability totaling $168.0 million, which is included in other long-term liabilities on the balance sheet. For the six months ended June 30, 2008, the charge for the cash flow hedge, net of income taxes, in other comprehensive loss was $1.3 million.

The bank second-lien asset sale bridge is a 2 year loan totaling $500 million and accrues interest at a floating rate, which can be either a Eurodollar rate plus an applicable margin or, at the Company’s option, an alternative base rate (defined as the higher of (x) the Deutsche Bank AG New York Branch prime rate and (y) the federal funds effective rate, plus one half percent (0.50%) per annum) plus an applicable margin. The Eurodollar rate is the one-month LIBOR rate. The applicable interest rate as of June 30, 2008 was 4.98%. Interest is paid on a monthly basis. As a result of the closing of the Company’s music business sale and other dispositions, the Company repaid approximately $114.7 million of its $500.0 million bank second-lien asset sale bridge loan in May of 2008 with the proceeds from the sale of its music recording and publishing business and certain non-core assets. There was $385.3 million outstanding on this loan as of June 30, 2008. The Company intends to pay the

balance remaining under its $500.0 million bank second-lien asset sale bridge loan due March 29, 2009 with the proceeds from the sale of certain non-core television and radio stations, investments, real estate, cash on hand, and a potential borrowing under its bank senior secured revolving credit facility (which cannot exceed $250.0 million). See “Notes to Condensed Consolidated Financial Statements—3. Discontinued Operations and Other Disposals” concerning the sale of the Company’s music recording and publishing businesses and other non-core assets.

The Company has a 7.5 year, $450 million bank senior secured draw term loan facility, the balance of which is only available to repay the Company’s $250 million pre-Merger senior notes. On April 9, 2008, the Company borrowed the remaining available $250.0 million from this facility. The Company intends to use the borrowing to repay the Company’s senior notes due October 2008 on their maturity date. After the draw down, there is no remaining credit available under this facility. The rate for the borrowing is the one-month LIBOR rate plus an applicable margin. The applicable interest rate as of June 30, 2008 was 4.73%. Interest is paid on a monthly basis. Commencing June 30, 2010, the Company is required to repay 0.625% of the aggregate principal amount of this facility and the repayment percentage will be reduced to 0.25% beginning June 30, 2012. The cash proceeds of the borrowings are currently maintained in highly liquid short-term investments.

The 9.75% senior notes are 8 year notes due 2015, totaling $1.5 billion and accrue interest at a fixed rate. The initial interest payment on these notes was paid in cash on September 15, 2007. For any interest period thereafter through March 15, 2012, we may elect to pay interest on the notes entirely by cash, by increasing the principal amount of the notes or by issuing new notes (“PIK interest”) for the entire amount of the interest payment or by paying interest on half of the principal amount of the notes in cash and half in PIK interest. After March 15, 2012, all interest on the notes will be payable entirely in cash. PIK interest will be paid at the maturity of the senior notes. The notes bear interest at 9.75% and PIK interest will accrue at 10.50%. These senior notes pay interest on March 15th and September 15th each year, beginning September 15, 2007. As of June 30, 2008 the Company has not elected the PIK option on these notes.

The Company’s 7.85% senior notes due 2011 bear interest at 7.85% per annum. These senior notes pay interest on January 15th and July 15th of each year.

contribution to, us or any issuance by us of permitted senior subordinated notes and/or senior unsecured notes on terms to be agreed upon.

The Senior Secured Credit Facilities and the senior notes contain various covenants and a breach of any covenant could result in a default under those agreements. If any such default occurs, the lenders of the Senior Secured Credit Facilities or the holders of the senior notes may elect (after the expiration of any applicable notice or grace periods) to declare all outstanding borrowings, together with accrued and unpaid interest and other amounts payable thereunder, to be immediately due and payable. In addition, a default under the indenture governing the senior notes would cause a default under the Senior Secured Credit Facilities, and the acceleration of debt under the Senior Secured Credit Facilities or the failure to pay that debt when due would cause a default under the indentures governing the senior notes (assuming certain amounts of that debt were outstanding at the time). The lenders under our Senior Secured Credit Facilities also have the right upon an event of default thereunder to terminate any commitments they have to provide further borrowings. Further, following an event of default under our Senior Secured Credit Facilities, the lenders will have the right to proceed against the collateral. The Company is in compliance with all covenants, including financial covenants under its bank credit agreement governing the Senior Secured Credit Facilities as of June 30, 2008.

The subsidiary guarantors under the Company’s bank senior secured term loan facility and senior notes are all of the Company’s domestic subsidiaries other than certain immaterial subsidiaries. The guarantees are full and unconditional and joint and several and any subsidiaries of the Company other than the subsidiary guarantors are minor. Univision Communications, Inc. is not a guarantor and has no independent assets or operations. The bank senior secured term loan facility and senior notes are secured by, among other things (a) a first priority security interest in substantially all of the assets of the Company, Broadcast Holdings and the Company’s material domestic subsidiaries, as defined, including without limitation, all receivables, contracts, contract rights, equipment, intellectual property, inventory, and other tangible and intangible assets, subject to certain customary exceptions; (b) a pledge of (i) all of the Company’s present and future capital stock and the present and future capital stock of each of the Company’s and each subsidiary guarantor’s direct domestic subsidiaries and (ii) 65% of the voting stock of each of our and each guarantor’s material direct foreign subsidiaries, subject to certain exceptions; and (c) all proceeds and products of the property and assets described above. The bank second-lien asset sale bridge loan is secured by a second priority security interest in all of the assets of the Company, Broadcast Holdings and the Company’s material domestic subsidiaries, as defined, securing the other secured credit facilities.

The Company and its subsidiaries, affiliates or significant shareholders may from time to time, in their sole discretion, purchase, repay, redeem or retire any of the Company’s outstanding debt or equity securities (including any publicly issued debt securities), in privately negotiated or open market transactions, by tender offer or otherwise.

Acquisitions

The Company continues to explore acquisition opportunities to complement and capitalize on its existing business and management. The purchase price for any future acquisitions may be paid with (a) cash derived from operating cash flow, (b) proceeds available under bank facilities, (c) proceeds from future debt offerings, or (d) any combination thereof.

Contractual Obligations and Other Pending Transactions

Debt Instruments

On April 7, 2008, the Company borrowed $700.0 million from its $750.0 million bank senior secured revolving credit facility. Although the Company has no immediate needs for additional liquidity, in light of current financial market conditions, the Company drew on the facility to provide it with greater financial flexibility. There was $687.0 million outstanding on the 7-year $750.0 million bank senior secured revolving credit facility as of June 30, 2008.

On April 9, 2008, the Company borrowed $250.0 million from its bank senior secured draw term loan facility. The Company intends to use the borrowing to repay the Company’s senior notes due October 2008 on its maturity date. After the draw down, there is no remaining credit available under this facility. There was $450 million outstanding on the bank senior secured draw term loan facility as of June 30, 2008.

Building Lease

The Company is party to a lease for a three-story building with approximately 92,500 square feet for the relocation of its owned and/or operated television and radio stations and studio facilities. The building is to be constructed and owned by the landlord, with occupancy of the premises expected during the first quarter of 2009. The term of the lease is 50 years. The sum of the lease payments will be approximately $74 million over 50 years.

World Cup Rights

On November 2, 2005, the Company acquired the Spanish-language broadcast rights in the U.S. to the 2010 and 2014 FIFA World Cup soccer games and other 2007-2014 FIFA events. A series of payments totaling $325.0 million are due over the term of the agreement. In addition to these payments, and consistent with past coverage of the World Cup games, the Company will be responsible for all costs associated with advertising, promotion and broadcast of the World Cup games, as well as the production of certain television programming related to the World Cup games. Each scheduled payment under the contract is supported by a letter of credit.

The funds for these payments are expected to come from cash from operations and/or borrowings from the Senior Secured Credit Facilities.

Entravision Investment

Equity Instruments—The Company monitors Entravision’s Class A common stock, which is publically traded, as well as Entravision’s financial results, operating performance and the outlook for the media industry in general. The Company follows the guidance in SFAS 115, Accounting for Certain Investments in Debt and Equity Securities and FSP FAS 115-1 and FAS 124-1—The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments in determining whether a decline in fair value below basis is other than temporary. Based upon the continuing low Entravision stock price, the Company recorded a charge of $78.6 million for the three months ended June 30, 2008, related to an other-than-temporary decline in the value of its Entravision stock. At June 30, 2008, after giving effect to this write-down, the Company had an investment in Entravision of $62.9 million and a book basis of $4.02 per share.

Based on our current level of operations, planned capital expenditures, expected future acquisitions and major contractual obligations, the Company believes that its cash flow from operations, together with available cash and available borrowings under the Senior Secured Credit Facilities will provide sufficient liquidity to fund our current obligations, projected working capital requirements and capital expenditures for a period that includes at least the next year.

Below is a summary of the Company’s major contractual payment obligations as of June 30, 2008:

Major Contractual Obligations

As of June 30, 2008


	Payments Due By Period
	2008		2009		2010		2011		2012		Thereafter		TOTAL
	(In thousands)
Bank senior secured revolving credit facility	$	—	$	—	$	—	$	—	$	—	$	687,000	$	687,000
Bank senior secured term loan facility		—		—		131,300		175,000		96,200		6,597,500		7,000,000
Bank second-lien asset sale bridge loan		—		385,300		—		—		—		—		385,300
Bank senior secured draw term loan		—		—		8,400		11,300		6,200		424,100		450,000
Senior notes		250,000		—		—		500,000		—		1,500,000		2,250,000
Programming (a)		27,900		64,200		99,300		27,600		27,700		156,400		403,100
Operating leases		17,300		32,900		30,500		28,800		27,600		115,200		252,300
Capital leases		3,700		8,300		8,300		8,300		8,300		92,500		129,400
Research services		13,400		21,400		21,000		22,400		3,800		—		82,000
Music license fees		7,700		11,700		—		—		—		—		19,400

	$	320,000	$	523,800	$	298,800	$	773,400	$	169,800	$	9,572,700	$	11,658,500

(a)	Amounts exclude the license fees that will be paid in accordance with the PLA, which is based primarily on 15% of Combined Net Time Sales as defined in the PLAs. Amounts include broadcast rights’ costs for the 2010 and 2014 World Cup and other FIFA events.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet transactions, arrangements or obligations (including contingent obligations) that would have a material effect on our financial results.

Forward-Looking Statements

Certain statements contained within this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases you can identify forward-looking statements by terms such as “anticipate,” “plan,” “may,” “intend,” “will,” “expect,” “believe” or the negative of these terms, and similar expressions intended to identify forward-looking statements.

These forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Also, these forward-looking statements present our estimates and assumptions only as of the date of this report. We undertake no obligation to modify or revise any forward-looking statements to reflect events or circumstances occurring after the date that the forward looking statement was made.

Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include: failure to service our debt; cancellation, reductions or postponements of advertising; possible strikes or other union job actions; failure of our new or existing businesses to produce projected revenues or cash flows; our reliance on Televisa for a significant amount of our network programming and our pending litigation with Televisa; failure to obtain the benefits expected from cross-promotion of media; regional downturns in economic conditions in those areas where our stations are located; changes in the rules and regulations of the Federal Communications Commission (“FCC”); a decrease in the supply or quality of programming; an increase in the cost of programming; an increase in the preference among Hispanics for English-language programming; the need for any unanticipated expenses; competitive pressures from other broadcasters and other entertainment and news media; potential impact of new technologies; unanticipated interruption in our broadcasting for any reason, including acts of terrorism; write downs of the carrying value of assets due to impairment; inability to repay or refinance our bank second-lien asset sale bridge loan if we are unable to sell our other non-core assets for as much as we estimated or at all; and a failure to achieve profitability, growth or anticipated cash flows from acquisitions.

Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to, those described in “Risk Factors” contained in the Company’s December 31, 2007 Annual Report on Form 10-K.

Part I

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

The Company’s primary interest rate exposure results from changes in the short-term interest rates applicable to the Company’s LIBOR loans. The Company’s overall interest rate exposure is on its $687 million senior secured revolving credit facility, $250.0 million 2008 senior notes, $450 million bank senior secured draw term loan and $385.3 million of second-lien asset sale bridge loan at June 30, 2008. A change of 10% in interest rates would have an impact of approximately $8 million on pre-tax earnings and pre-tax cash flows over a one-year period related to these borrowings. The Company has an immaterial foreign exchange exposure in Mexico.

On October 15, 2003, the Company issued 3.875% senior notes that have a face value of $250.0 million. These senior notes will mature on October 15, 2008. When the Company issued the senior notes due 2008, it entered into two fixed-to-floating interest rate swaps. Following the Merger, these two swaps no longer qualified for hedge accounting. During the six months ended June 30, 2008, the Company recognized a $0.1 million benefit related to the changes in the fair value of these swaps. The $0.1 million benefit is reported in interest expense in the Company’s statement of operations. At June 30, 2008, the Company had a swap asset of $0.4 million reported in prepaid expenses and other assets on the balance sheet, related to the interest rate swaps on the 2008 senior notes.

In April 2007, the Company entered into a $5 billion three-year interest rate swap on its variable rate bank debt. In August 2007, the Company also entered into a $2 billion two-year interest rate swap on its variable rate bank debt. Under the interest rate swap contracts, the Company agreed to receive a floating rate payment for a fixed rate payment. These interest rate swaps are accounted for as cash flow hedges that are highly effective. As of June 30, 2008, the Company had a swap liability totaling $168.0 million, which is included in other long-term liabilities on the balance sheet, related to these interest rate swaps. For the six months ended June 30, 2008, the charge for the cash flow hedge, net of income taxes, in other comprehensive loss was $1.3 million.

Item 4.

Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Control 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 specified in Securities and Exchange Commission rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. As of June 30, 2008, the end of the period covered by this report, the Company 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. The Company reviews its 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 the Company’s business.

In addition, no change in our internal control over financial reporting (as defined in Rule 15d-15(f) under the Securities Exchange Act of 1934) occurred during the second quarter of 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

On July 1, 2007, the Company implemented an Oracle Enterprise Resource Planning system throughout the entire company, except for music, and also implemented a shared services organization to centralize certain accounting functions, streamline processes, improve consistency in internal controls and enhance analytical capabilities. The Company was required to modify its existing internal controls related to the accounting processes that were affected by the implementation of the Oracle system. The implementation of the Oracle system did not materially affect, and is not reasonably likely to affect, our internal controls over financial reporting.

Part II

Item 1.

Legal Proceedings

Televisa PLA Litigation

Televisa and the Company are parties to the PLA, which provides the Company’s three television networks with a majority of prime time programming and a substantial portion of their overall programming. The Company currently pays a license fee to Televisa for programming, subject to certain upward adjustments. On June 16, 2005, Televisa filed an amended complaint in the United States District Court for the Central District of California alleging breach by the Company of the PLA, including breach for its alleged failure to pay Televisa royalties attributable to revenues from certain programs and from our use of unsold time to promote assets, the Company’s alleged unauthorized editing of certain Televisa programs and related copyright infringement claims, a claimed breach of the Soccer Agreement (a soccer rights side-letter to the PLA), a claim that we did not cooperate with various Televisa audit rights and efforts and a claim that the Company has not been properly carrying out a provision of the PLA that gives Televisa the secondary right to use the Company’s unsold advertising inventory. Televisa sought monetary relief in an amount not less than $1.5 million for breach, declaratory relief against the Company’s ability to recover amounts of approximately $5.0 million previously paid in royalties to Televisa, and an injunction against the Company’s alteration of Televisa programming without Televisa’s consent. In June 2005, the Company made a payment under protest to Televisa of $1.5 million. On August 15, 2005, the Company filed an answer to the amended complaint denying Televisa’s claims and also filed counterclaims alleging various breaches of contract and covenants by Televisa. The Company seeks monetary damages and injunctive relief.

For the three and six months ended June 30, 2008 and 2007, the Company recognized charges in the statement of operations related to the Televisa payments under protest and other license fee overcharges of approximately $0.7 million and $3.4 million and $0.3 million and $2.5 million, respectively. The Company seeks recovery of these amounts via a counterclaim. On March 31, 2006, the Company and Televisa stipulated to the filing of Televisa’s Second Amended and Supplemental Complaint in the lawsuit. The new complaint raises the same allegations of material breach contained in Televisa’s January 31, 2006 answer to the Company’s counterclaims and in its February 16, 2006 notice of purported material breaches. Among other claims, the new complaint seeks a declaration that the Company is in material breach of the PLA and that Televisa has the right to suspend or terminate its performance under the PLA.

the Court reset the discovery cut-off date in the case for December 29, 2006, and the trial date for June 19, 2007. On May 22, 2006, the Company filed its First Amended Counterclaims, which added a claim for declaratory relief that the Company was not in material breach of the PLA or the Soccer Agreement and that it had received inadequate notice of any alleged breaches. Televisa sent a letter on June 2, 2006, notifying the Company that the 90-day cure period had expired for certain breaches alleged in Televisa’s February 16, 2006, notice of purported material breaches under the PLA and the Soccer Agreement. In that June 2, 2006 letter, Televisa contended that because the Company had purportedly failed to cure these and other breaches, some of which Televisa asserted were not susceptible of being cured, Televisa therefore had the right to terminate the PLA, the Soccer Agreement, and a related Guaranty given by Grupo Televisa to the Company. Televisa indicated, however, that it was not at that time exercising its purported termination rights and that it was seeking a declaration of its right to terminate in the litigation between the companies.

briefing by both sides and argument before the Court, on December 17, 2007, the Court issued an order denying the Company’s summary judgment motion, finding that disputed issues as to certain facts would need to be resolved by a jury.

Item 1A.

Risk Factors

Except as stated below, there have been no material changes in the discussion pertaining to the risk factors that were provided in the December 31, 2007 Annual Report on Form 10-K.

As the sale of our music recording and publishing businesses was completed on May 5, 2008, the risk factor “The consummation of our sale of our music recording and publishing businesses is subject to risk and uncertainties, including the satisfaction of specified closing conditions by both parties” as provided in our December 31, 2007 Annual Report on Form 10-K no longer applies. In addition, we have updated the following risk factor to exclude reference to our inability to complete the sale of our music recording and publishing businesses.

If we are unable to sell our other non-core assets, we may be unable to refinance our bank second-lien asset sale bridge loan.

In addition to the sale of our music recording and publishing businesses which was consummated on May 5, 2008, we intend to sell certain non-core assets, including certain non-core television and radio stations, investments and excess real estate. We have used approximately $114.7 million in gross proceeds from these sales and we intend to use the proceeds from the sale of other non-core assets, and to the extent necessary, borrowings under our bank senior secured revolving credit facility (which cannot exceed $250.0 million), to pay down our $500.0 million bank second-lien asset sale bridge loan due March 29, 2009. If we are unable to sell the other non-core businesses for as much as we estimated or at all, our ability to repay or refinance our bank second-lien asset sale bridge loan could be adversely affected.

We have also updated the following risk factor to reflect the expiration of the major contracts between the Screen Actors Guild and the Alliance of Motion Picture and Television Producers in June 2008.

We could be adversely affected by strikes or other union job actions.

We are directly or indirectly dependent upon highly specialized union members who are essential to the production of motion pictures and television programs. A strike by, or a lockout of, one or more of the unions that provide personnel essential to the production of motion pictures or television programs could delay or halt our ongoing production activities. Such a halt or delay, depending on the length of time, could cause a delay or interruption in our release of new motion pictures and television programs, which could have a material adverse effect on our business, results of operations and financial condition.

On October 31, 2007, the television business’ collective bargaining agreement with the Writers Guild of America (East and West) (the “WGA”) covering freelance writers expired. On November 5, 2007, the WGA

began an industry-wide strike which ended on February 12, 2008. In addition, the Screen Actors Guild’s (“SAG”) major contracts with the Alliance of Motion Picture and Television Producers expired in June 2008 and as of the date of the filing of this Quarterly report on Form 10-Q, the parties have not entered into a replacement agreement. There is no assurance that the SAG will not begin an industry-wide strike in the future. If a strike were to occur in the future and continue for an extended period of time, it may have a material adverse effect on our business, results of operations and financial condition.

In addition, the following risk factor has been updated to reflect the current status of our litigation with Televisa.

We receive from Televisa a significant amount of our network programming and we are engaged in litigation with Televisa.

We receive substantial amounts of programming for our three networks from Televisa pursuant to our PLA with Televisa, and a separate letter agreement of the same date (referred to as the “Soccer Agreement”) granting us rights to rebroadcast Televisa’s feeds of certain Mexican League soccer games. The programming we receive under the PLA accounts for a majority of our prime time programming and a substantial portion of the overall programming on all three networks. We currently pay a license fee to Televisa for programming, which is subject to certain upward adjustments. In June 2005, Televisa began litigation against us. Televisa’s current claims include breach for our alleged failure to pay Televisa royalties attributable to revenues from certain programs and from our use of unsold time to promote assets, the Company’s alleged unauthorized editing of certain Televisa programs and related copyright infringement claims, a claimed breach of the Soccer Agreement, a claim that we did not cooperate with various Televisa audit rights and efforts and a claim that we have not been properly carrying out a provision of the PLA that gives Televisa the secondary right to use our unsold advertising inventory. Televisa currently asserts that we were in material breach of the PLA and the Soccer Agreement, thereby giving Televisa the right to suspend or terminate those agreements. To date, mediation has failed. Televisa is seeking a declaration that we are in material breach of the PLA, that Televisa has the right to suspend or terminate its performance under the PLA and that Televisa may, without liability to Univision, transmit or permit others to transmit any television programming into the United States from Mexico over or by means of the Internet. We intend to continue to defend the litigation and pursue our counterclaims vigorously and plan to take all action necessary to ensure Televisa’s continued performance under the PLA until its expiration in 2017. We are currently in wide-ranging settlement negotiations with Televisa, however, there are significant unresolved elements to the negotiations and there can be no assurances that settlement will be reached, or if reached, what its terms will be. If we were held to be in material breach and unable to effect a timely cure, Televisa could elect to terminate the PLA and the Soccer Agreement, and we could be required to pay monetary damages, which could have a material adverse effect on our business and our results of operations. The programming we receive from Televisa has been very popular and it has helped us to achieve high ratings and grow our audience share. If Televisa were to stop providing us programming for any reason, it could be difficult to develop or acquire replacement programming of comparable quality whether on similar terms or at all, and our failure to do so could have a material adverse effect on the popularity of our network and TV stations, which in turn would have a material adverse effect on our results of operations. The trial is scheduled to commence on October 14, 2008. For a description of the litigation process, see Item 1. “Legal Proceedings.”

Item 6.

Exhibits


Exhibit Number		Description
2.1		Agreement and Plan of Merger, dated June 26, 2006, by and among Umbrella Holdings, LLC., Umbrella Acquisition, Inc., and Univision Communications Inc. (4)

3.1		Certificate of Merger, dated March 28, 2007. (5)

3.2		Amended and Restated Certificate of Incorporation of the Company. (5)

3.3		Amended and Restated Bylaws of the Company. (5)

4.1		Form of specimen stock certificate. (5)

4.2		Indenture dated as of July 18, 2001, between Univision Communications Inc. and The Bank of New York as Trustee. (1)

4.3		Form of Supplemental Indenture to be delivered by additional guarantors, among Univision Communications Inc., the Guaranteeing Subsidiaries to be named therein and The Bank of New York as Trustee. (1)

4.4		Officer’s Certificate dated July 18, 2001 relating to the Company’s 7.85% Notes due 2011. (2)

4.5		Form of Officer’s Certificate for the Company’s 2008 Senior Notes. (3)

4.6		Form of Supplemental Indenture for the Company’s Senior Notes Due 2008. (3)

4.7		Form of 3.875% Senior Notes Due 2008. (3)

4.8		Form of Guarantee to Senior Notes Due 2008. (3)

4.9		Indenture dated as of March 29, 2007 between Umbrella Acquisition and Wells Fargo Bank, National Association, as trustee. (5)

4.10		First Supplemental Indenture, dated as March 29, 2007 among the Company, the Subsidiary Guarantors named therein and Wells Fargo Bank, National Association, as trustee. (5)

10.1		Credit Agreement dated March 29, 2007, among Umbrella Acquisition and Univision of Puerto Rico, Inc., as borrowers, the lenders from time to time party thereto, and Deutsche Bank AG New York Branch as administrative agent and collateral agent. (5)

10.2		Form of First-Lien Guarantee and Collateral Agreement (included in Exhibit 10.1). (5)

10.3		Form of Second-Lien Guarantee and Collateral Agreement (included in Exhibit 10.1). (5)

10.4		Form of First-Lien Trademark Security Agreement (included in Exhibit 10.1). (5)

10.5		Form of Second-Lien Trademark Security Agreement (included in Exhibit 10.1). (5)

10.6		Form of First-Lien Copyright Security Agreement (included in Exhibit 10.1). (5)

10.7		Form of Second-Lien Copyright Security Agreement (included in Exhibit 10.1). (5)

10.8		Principal Investors Agreement, dated March 29, 2007, by and among Broadcasting Media Partners, Inc., Broadcast Media Partners Holdings, Inc., Umbrella Acquisition, Inc. and certain Principal Investor signatories thereto. (5)

10.9		Stockholders Agreement dated as of March 29, 2007 by and among Broadcasting Media Partners, Inc., Broadcast Media Partners Holdings, Inc., Umbrella Acquisition, Inc. and certain Stockholder signatories thereto. (5)

10.10		Participation, Registration Rights, and Coordination Agreement, dated March 29, 2007, by and among Broadcasting Media Partners, Inc., Broadcast Media Partners Holdings, Inc., Umbrella Acquisition, Inc., and certain Stockholder signatories thereto. (5)


Exhibit Number		Description
10.11		First Amendment to Principal Investors Agreement (“PIA”), Participation, Registration Rights and Coordination Agreement and Stockholders Agreement, dated January 29, 2008, by and among Broadcasting Media Partners, Inc., Broadcast Media Partners Holdings, Inc., Umbrella Acquisition, Inc., and each person executing the PIA as a principal investor. (7)

10.12		First Amendment to Participation, Registration Rights and Coordination Agreement and Stockholders Agreement, dated January 29, 2008, by and among Broadcasting Media Partners, Inc., Broadcast Media Partners Holdings, Inc., Umbrella Acquisition, Inc., and certain persons who will be stockholders of Broadcasting Media Partners, Inc. (7)

10.13		Management Agreement, dated March 29, 2007, by and among Broadcasting Media Partners, Inc., Broadcast Media Partners Holdings, Inc., Madison Dearborn Partners IV, L.P., Madison Dearborn Partners V-B, L.P., Providence Equity Partners V Inc., Providence Equity Partners L.L.C., KSF Corp., THL Managers VI, LLC and TPG Capital, L.P. (5)

10.14		Employment Agreement dated March 29, 2007 between Broadcasting Media Partners, Inc. and Joseph Uva. (5)

10.15		Employment Agreement dated March 29, 2007 between Broadcasting Media Partners, Inc. and Ray Rodriguez. (5)

10.16		Employment Agreement dated March 29, 2007 between Broadcasting Media Partners, Inc. and Andrew Hobson. (5)

10.17		Employment Agreement dated March 29, 2007 between Broadcasting Media Partners, Inc. and Douglas Kranwinkle. (5)

10.18		Form of Indemnification Agreement for Outside Directors. (5)

10.19		Broadcasting Media Partners, Inc. 2007 Equity Incentive Plan. (5)

10.20		Form of Restricted Stock Award Agreement. (5)

10.21		Form of Restricted Stock Unit Award Agreement. (5)

10.22		Form of Notice of Restricted Stock Award for Andrew W. Hobson, Ray Rodriguez and Joseph Uva. (5)

10.23		Notice of Restricted Stock Awards for Joseph Uva. (6)

10.24		Form of Notice of Restricted Stock Unit Award for Andrew W. Hobson, Ray Rodriguez and Joseph Uva. (5)

10.25		Promissory Note and Stock Pledge Agreement dated June 19, 2007 between Joseph Uva and Broadcasting Media Partners, Inc. (6)

10.26		Services Agreement, dated as of January 29, 2008 and effective as of March 29, 2007, by and between Broadcasting Media Partners, Inc., SCG Investments IIB LLC and BMPI Services LLC. (7)

10.27		Employment Agreement dated January 1, 2005 between Univision Management Company and Peter H. Lori. (7)

10.28		Amendment to Employment Agreement effective as of December 2, 2006 between Univision Management Company and Peter H. Lori. (7)

10.29		Option Award Agreement and Notice of Stock Option Grant for Douglas Kranwinkle. (7)

10.30		Option Award Agreement and Notice of Stock Option Grant for Peter H. Lori. (7)

10.31*		Purchase Agreement, dated as of February 27, 2008, between Univision Communications Inc., a Delaware corporation and UMG Recordings, Inc., a Delaware corporation. (7)

10.32*		Agreement and First Amendment to Purchase Agreement dated as of May 5, 2008 between Univision Communications Inc., a Delaware corporation and UMG Recordings, Inc., a Delaware corporation.


Exhibit Number		Description
21.1		Subsidiaries of the Company.

31.1		Certification of CEO pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

31.2		Certification of CFO pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

32.1		Certification of CEO and CFO pursuant to Section 906 of Sarbanes-Oxley Act of 2002.

(1)	Previously filed as an exhibit to Univision Communications Inc.’s Registration Statement on Form S-4 (File No. 333-71426-01).

(2)	Previously filed as an exhibit to Univision Communications Inc.’s Registration Statement on Form S-3 filed on September 30, 2003 (File No. 333-105933).

(3)	Previously filed as an exhibit to Univision Communications Inc.’s Report on Form 8-K filed October 15, 2003.

(4)	Previously filed as an exhibit to Univision Communications Inc.’s Report on Form 8-K filed June 28, 2006.

(5)	Previously filed as an exhibit to Univision Communications Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2007.

(6)	Previously filed as an exhibit to Univision Communications Inc.’s report on Form 8-K, filed June 25, 2007.

(7)	Previously filed as an exhibit to Univision Communications Inc.’s Annual Report on Form 10-K for the year ended December 31, 2007.

*	Confidential treatment has been requested for portions of this exhibit. Portions of this document have been omitted and submitted separately to the Securities and Exchange Commission.

SIGNATURE

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.


UNIVISION COMMUNICATIONS INC. (Registrant)

By		/s/ PETER H. LORI
		Peter H. Lori Duly Authorized Officer, Corporate Controller and Chief Accounting Officer

August 11, 2008