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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

UNIVISION COMMUNICATIONS INC.
(Exact Name of Registrant as specified in its charter)

Univision Communications Inc.
1999 Avenue of the Stars, Suite 3050
Los Angeles, California 90067
Tel: (310) 556-7676
(address and telephone number of principal executive offices)

        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 ý    No o

        There were 160,215,687 shares of Class A Common Stock, 37,462,390 shares of Class P Common Stock, 13,593,034 shares of Class T Common Stock and 17,837,164 of Class V Common Stock outstanding as of October 18, 2002.

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
INDEX

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Part I

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
Financial Introduction

        The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with 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 December 31, 2001.

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Part I, Item 1

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per-share data)

See Notes to Condensed Consolidated Financial Statements.

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UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30,
(In thousands, except share and per-share data)
(Unaudited)

See Notes to Condensed Consolidated Financial Statements.

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UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30,
(Dollars in thousands)
(Unaudited)

See Notes to Condensed Consolidated Financial Statements.

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UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

September 30, 2002

(Unaudited)

1.    Organization of the Company

        The operations of Univision Communications Inc. and its wholly owned subsidiaries (the "Company," "we," "us" and "our"), the leading Spanish-language media company in the United States, include Univision Network, the most-watched Spanish-language television network in the United States; Univision Television Group ("UTG"), which owns and operates 16 full-power and 7 low-power television stations ("UTG O&Os"), including full-power stations in 11 of the top 15 U.S. Hispanic markets; TeleFutura, which consists of the TeleFutura Network, a 24-hour Spanish-language television network designed to counter-program traditional Spanish-language lineups and draw additional viewers to Spanish language television and TeleFutura Television Group ("TTG"), which owns and operates 14 full-power and 16 low-power television stations ("TTG O&Os"), including full-power stations in 8 of the top 10 U.S. Hispanic markets; Galavisión, the country's leading Spanish-language cable network; Univision Music Group, which includes the Univision Music label, Fonovisa record labels and a 50% interest in Disa Records ("Disa"), one of the leading music publishing and recording companies in Mexico, and Univision Online, Inc. ("Univision Online"), which operates the Company's Internet portal, Univision.com. Univision Network's signal covers 97 percent of all U.S. Hispanic households through UTG O&Os, Univision Network's affiliates (17 full-power and 25 low-power stations) and cable affiliates. TeleFutura Network's signal covers approximately 73% of all U.S. Hispanic households through TTG O&Os, TeleFutura Network's affiliates (2 full-power and 18 low-power stations) and cable affiliates.

        UTG's 15 full-power, Spanish-language television stations are located in Los Angeles, New York, Miami, Houston, Chicago, Dallas, San Francisco, San Antonio, Phoenix, Fresno, Sacramento, Cleveland, Atlanta, Philadelphia and Killeen, and the Company's one English-language, full-power television station is located in Bakersfield. UTG also owns and operates 7 low-power, Spanish-language television stations serving Amarillo, Austin, Bakersfield, Fort Worth, Phoenix, Santa Rosa and Tucson. UTG's Spanish-language television stations are affiliated with Univision Network, and the English-language station is affiliated with UPN (United Paramount Network).

        TTG's 14 full-power, Spanish-language television stations are located in Los Angeles, New York (2 stations), Miami, Houston, Chicago, Dallas, San Francisco, Phoenix, Washington, Tampa, Orlando, Boston, and Tucson. TTG also owns and operates 16 low-power, Spanish-language television stations serving Bakersfield (2 stations), Fresno, Lompoc, Paso Robles, Philadelphia, Phoenix, Sacramento (2 stations), San Antonio (3 stations), San Luis Obispo, Santa Barbara, Santa Maria and Tucson.

2.    Recent Developments

        On June 12, 2002 the Company and Hispanic Broadcasting Corporation ("HBC"), the nation's leading Spanish-language radio television company, entered into a definitive merger agreement under which the Company will acquire Hispanic Broadcasting in an all-stock transaction. Under the agreement, each share of HBC common stock will be exchanged for a fixed 0.85 shares of Univision Class A common stock. The Company's shareholders will have approximately 73.5% and HBC's shareholders 26.5% of the combined company's fully-diluted economic ownership. The proposed merger is intended to qualify as a tax-free reorganization pursuant to Section 368(a) of the Internal Revenue Code. In addition to stockholder approval, the closing of the proposed merger is subject to clearance or expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust

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Improvements Act of 1976 and approval of the Federal Communications Commission, and the satisfaction of other customary closing conditions.

        On April 16, 2002, in an effort to expand its music recording and publishing business, the Company acquired the stock of Fonovisa Inc., Fonovisa S.A. de C.V., America Musical S.A. de C.V. and Fonovisa de Centroamérica S.A. (collectively, "Fonovisa"). Fonovisa is considered to be one of the top record and publishing labels featuring Spanish-language music. The consideration consisted of 6,000,000 shares of Class A Common Stock and warrants to purchase an additional 100,000 shares of Class A Common Stock at an exercise price of $38.261 per share. The purchase agreement includes a working capital adjustment, which is currently being negotiated. The Company expects this to be resolved in early 2003. The results of operations of Fonovisa have been included in the accompanying condensed consolidated statement of income since April 16, 2002. The Company has made a preliminary allocation of the purchase price and expects that an appraisal of Fonovisa will be completed by the end of 2002.

        Through the acquisition of Fonovisa the Company acquired the following entities:

Fonovisa S.A. de C.V.—a Mexican recording corporation
Fonovisa de Centroamerica S.A.—a Costa Rican music distribution corporation
Fonovisa Inc.—a California recording and publishing corporation
America Musical S.A. de C.V.—a Mexican publishing corporation

        In addition, Fonovisa Inc. has two direct subsidiaries, Fonovisa Argentina S.R.L. and Fonomusic Inc., and one indirect subsidiary Fonohits Music Publishing Inc.

3.    New Accounting Pronouncements

        SFAS No. 143 addresses accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement is effective for fiscal years beginning after June 15, 2002. The Company has assessed the impact of this new standard and determined that the adoption of SFAS No. 143 is not expected to have a material effect on the Company's financial statements.

        In August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 144 "Accounting for Impairment or Disposal of Long-Lived Assets." The Company accounted for long-lived assets under the provisions of SFAS No. 121,

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"Accounting for the Impairment of Long-Lived Assets to be Disposed of," until it adopted SFAS No. 144 on January 1, 2002. SFAS No. 144 retains the fundamental provisions of SFAS No. 121 for (a) recognition and measurement of the impairment of long-lived assets to be held and used and (b) measurement of long-lived assets to be disposed of by sale. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001, and interim periods within those years. The adoption of SFAS No. 144 did not have a material effect on the Company's financial statements.

        SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections"("SFAS 145") was issued in April 2002. SFAS 145 rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt", and an amendment of that Statement, FASB Statement No. 44, "Accounting for Intangible Assets of Motor Carriers" and FASB Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements." SFAS 145 amends FASB Statement No. 13, "Accounting for Leases" and other existing authoritative pronouncements to make various technical corrections and clarify meanings, or describes their applicability under changed conditions. SFAS 145 will be effective for fiscal years beginning after May 15, 2002. The adoption of SFAS 145 will require that the Company's extraordinary loss recognized on the extinguishments of debt in 1999 and 2001 be reclassified to income or loss from continuing operations in its financial statement presentation beginning in 2003.

        SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" ("SFAS 146"), was issued on July 30, 2002 and replaces Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity". SFAS 146 requires companies to recognize certain costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS 146 will be effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of this Standard is not expected to have a material effect on the Company's financial statements.

4.    Changes in Common Stock and Redeemable Convertible Preferred Stock

        During the three months ended September 30, 2002, no options were exercised. During April 2002, the Company issued 6 million shares of Class A Common Stock for the acquisition of Fonovisa that resulted in an increase to Common Stock of $60,000 and to Paid-in-capital of $235,040,000. During the nine months ended September 30, 2002, options were exercised for 2,034,650 shares of Class A Common Stock, resulting in an increase to Common Stock of $20,347 and an increase to Paid-in-capital of $53,166,000, which included a tax benefit associated with the transactions of $23,480,000. In February 2002, 375,000 redeemable convertible preferred stock shares held by Grupo Televisa, S.A. and its affiliates ("Televisa"), which were issued in December 2001, were converted into a total of 10,594,500 shares of Class A Common Stock, resulting in an increase to Common Stock of approximately $106,000 and to Paid-in-capital of $374,894,000. In connection with the issuance of the redeemable convertible preferred stock, the Company incurred issuance costs of $5,555,000 primarily related to professional fees, which decreased Paid-in-capital. The Company recorded preferred stock dividend accretion of approximately $25,000 related to the $5,555,000 issuance costs, which increased Paid-in-capital.

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5.    Earnings Per Share

        The following is the reconciliation of the basic and diluted earnings-per-share computations required by Statement of Financial Accounting Standards ("SFAS") No. 128 ("Earnings Per Share"):

        (Dollars in thousands, except for share and per-share data):

        (Dollars in thousands, except for share and per-share data):

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6.    Business Segments

        The Company's principal business segment is television broadcasting, which includes the operations of the Company's Univision Network, TeleFutura Network, Galavisión and owned-and-operated stations. The Company launched Univision Online, its Internet portal during the third quarter of 2000. In April 2001, the Company also launched Univision Music Group, its music publishing and recording division. The Company manages its television, Internet and music businesses separately based on the fundamental differences in their operations. Presented below is segment information pertaining to the Company's television, Internet and music businesses.

        (Dollars in thousands)

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7.    New Emerging Issues Task Force Requirement

      In November 2001, the Emerging Issues Task Force published Issue 01-09 "Accounting for Consideration Given by a Vendor to a Customer or a Reseller of the Vendor's Products" ("EITF 01-09"). EITF 01-09 was effective for the Company in the first quarter of 2002. EITF 01-09 clarifies the income statement classification of costs incurred by a vendor in connection with the reseller's purchase or promotion of the vendor's products, resulting in certain cooperative advertising and product placement costs previously classified as selling expenses to be reflected as a reduction of revenues earned from that activity. The new guidance impacts primarily the Company's cable network, Galavisión, which amortized certain launch costs as selling expenses. As a result of applying the provisions of EITF 01-09, the Company's revenues and selling costs each were reduced by an equal amount of approximately $380,000 and $1,105,000 in the three and nine months ended September 30, 2002, respectively. Had this accounting change been in effect in 2001, Company's revenues and selling costs each would have been reduced by an equal amount of approximately $323,000 and $1,004,000 in the three and nine months ended September 30, 2001, respectively.

8.    Goodwill and Other Intangible Assets Amortization

        On June 30, 2001, the Financial Accounting Standards Board issued SFAS No. 141 "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets". SFAS No. 141 requires all business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting and eliminates the pooling method of accounting. SFAS No. 141 did not have an impact on the Company's business since the Company has historically accounted for all business combinations using the purchase method of accounting. With the adoption of SFAS No. 142, goodwill and other intangibles with an indefinite life, such as broadcast licenses, associated with acquisitions consummated prior to June 30, 2001, ceased being amortized after December 31, 2001 and those related to acquisitions after June 30, 2001 will never be amortized. However, goodwill and other intangibles will be subject to at least an annual assessment for impairment and more frequently if circumstances indicate a possible impairment exists. The Company has evaluated its goodwill and other intangible assets in accordance with the guidelines of SFAS No. 142 as it relates to assessing impairment and has concluded that it does not have an impairment loss related to these assets. In addition, under SFAS No. 141, an acquired intangible asset should be separately recognized if the benefit of the intangible is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented, or exchanged. Intangible assets with measurable lives will be amortized over their respective useful lives.

        The adoption of SFAS No. 142 has resulted in a substantial reduction of intangible amortization expense for the three and nine months ended September 30, 2002 since the Company's broadcast licenses and goodwill are no longer being amortized by the Company. In the accompanying statements of income, the Company had amortization of intangible assets of $6,222,000 and $14,366,000 for the three and nine months ended September 30, 2002, respectively and $10,747,000 and $30,323,000 for the three and nine months ended September 30, 2001, respectively. Had this accounting change been in effect in 2001, amortization of intangible assets would have been $290,000 and $875,000 for the three and nine months ended September 30, 2001, respectively. During the three and nine months ended September 30, 2002, the Company incurred amortization expense of $5,900,000 and $13,400,000,

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respectively, related to a preliminary valuation of amortizable identified intangibles, primarily artist contracts, resulting from the Fonovisa acquisition on April 16, 2002. Artist contracts are contracts acquired under the Fonovisa acquisition and represent agreements between Fonovisa and music artists to produce recording masters to be used primarily for future releases of albums. These contracts are being amortized over their remaining useful life. The Company expects the appraisal of Fonovisa to be completed by the end of 2002. In order to enhance comparability, below are the unaudited effect the accounting change would have had on reported income before extraordinary loss available to common stockholders and earnings-per-share amounts had SFAS No. 142 been in effect in 2001:

        (Dollars in thousands, except for share and per-share data)

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        Below is an analysis of the Company's intangible assets currently being amortized, intangible assets not being amortized, goodwill by segments and aggregate amortization expense for the years 2002 through 2007:

        (Dollars in thousands)

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9.    Reversal of Cumulative Effect of Accounting Change of Unconsolidated Subsidiary

        Univision has an approximate 31% equity interest in Entravision Communications Corporation ("Entravision"). The Company accounts for its investment in Entravision under the equity method of accounting with specific adherence to Accounting Principles Board Opinion No. 18, paragraphs 19(d) and 19(h). During the first and second quarters of 2002, Entravision reported a SFAS No. 142 transitional impairment loss as a cumulative effect of a change in accounting principle. In the third quarter, Entravision reversed its SFAS No. 142 loss based upon finalization of an independent appraisal. Since the Company accounts for its investment in Entravision under the equity method of accounting, the Company adjusted its share of Entravision's SFAS No. 142 impairment loss that it had reported as of June 30, 2002 totaling $7,887,000. Under the guidelines of SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements", the Company is reporting this reversal as if it occurred on January 1, 2002 and, therefore, has no impact on the financial results of the Company for the three and nine months ended September 30, 2002.

10.    Entravision Investment

        At September 30, 2002, the Company had an approximate 31% equity interest in Entravision, which is the largest affiliate group of the Company. Since Entravision is a significant subsidiary of the Company that is not consolidated because the Company accounts for its investment in Entravision under the equity method on a one month lag, the Company is providing the following income statement information for Entravision in accordance with the Securities and Exchange Commission's Rule 10(b)1 of Regulation S-X:

        (Dollars in thousands)

(1)

See Note 9 (Reversal of Cumulative Effect of Accounting Change of Unconsolidated Subsidiary)

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11.    Subsequent Event

        On November 7, 2002, the Company, through its wholly-owned subsidiary TeleFutura, entered into a limited liability company agreement with Roberts Brothers Broadcasting, LLC ("Roberts"), called St. Louis / Denver LLC ("LLC"). TeleFutura will contribute $26 million and its minority interests in the St. Louis and Denver stations and Roberts will contribute its majority interests in the St. Louis and Denver stations.

        TeleFutura and Roberts have each entered into Time Brokerage Agreements ("TBA") to program the Denver and St. Louis stations, respectively. The TeleFutura TBA will become effective on the earlier of February 23, 2003 or termination of the Denver station's current Affiliation Agreement with the Home Shopping Network.

        The transfer of both licenses to the LLC is subject to the Federal Communications Commission ("FCC") acceptance of the filing application and ultimate consent to such transfer by the FCC. If FCC consent is denied or has not been granted within twelve months from the date that the last application was listed as being accepted for filing with the FCC, then Roberts may require TeleFutura to purchase the Denver station through a put option agreement.

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Part I, Item 2

UNIVISION COMMUNICATIONS INC. AND SUBSIDIARIES

Form 10-Q
Management's Discussion and Analysis of Financial Condition and Results of Operations

        Univision Communications Inc., together with its wholly owned subsidiaries (the "Company," "we," "us" and "our"), operates in three business segments:

•

Television: The Company's principal business segment is television, which consists of the Univision, TeleFutura and Galavisión television networks, 53 owned-and-operated television stations (30 full-power and 23 low-power) and the Company's television production business.



•

Internet: Univision Online, Inc. ("Univision Online") operates the Company's Internet portal, Univision.com, which provides Spanish-language content directed at Hispanics in the U.S., Mexico and Latin America.



•

Music: The Company's music recording and publishing business consists of the operations of the Univision Music Group, which was launched in April 2001 and records and publishes the music of developing and established Latin artists. On April 16, 2002, Univision Music Group completed its acquisition of Fonovisa Music Group ("Fonovisa"), creating the leading Latin music company in the U.S. and Puerto Rico, with an approximate 35% market share. As part of the transaction, Univision Music Group also acquired Fonomusic and America Musical Publishing companies, which it will integrate into the newly formed Univision Music Publishing division.

        The majority of the Company's net revenues have been derived from the television segment, including the three networks, the 23 owned-and-operated stations that comprise the Univision Television Group ("UTG"), and the 30 owned-and-operated stations that comprise the TeleFutura Television Group ("TTG").

        UTG's net revenues are derived from its owned-and-operated stations (collectively, the "UTG O&Os") and include gross advertising revenues generated from the sale of national and local spot advertising time, net of agency commissions. Univision Network's net revenues include gross advertising revenues generated from the sale of Univision Network advertising, net of agency commissions and station compensation to Univision Network's affiliates (17 full-power and 25 low-power stations), as well as subscriber fees.

        TTG's net revenues are derived from its owned-and-operated stations (collectively, the "TTG O&Os") and include gross advertising revenues generated from the sale of national and local spot advertising time, net of agency commissions. TeleFutura Network's net revenues include gross advertising revenues generated from the sale of TeleFutura Network advertising, net of agency commissions. TeleFutura Network has 2 full-power and 18 low-power affiliates in addition to its 30 owned-and-operated stations.

        Also included in net revenues are Galavisión's gross advertising revenues, net of agency commissions, Galavisión's subscriber fee revenues, net revenues of Univision Online, net revenues from Univision Music Group, and other revenues.

        Direct operating expenses consist primarily of programming, news and general operating costs.

        "EBITDA" is defined as earnings before interest, taxes, depreciation and amortization and is therefore the sum of operating income plus depreciation and amortization. The Company has included EBITDA data because such data is commonly used as a measure of performance for broadcast companies and is also used by investors to measure a company's ability to service debt and other cash

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needs. EBITDA is not, and should not be used as, an indicator of or an alternative to operating income, net income or cash flow as reflected in the consolidated financial statements, is not a measure of financial performance under generally accepted accounting principles and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with generally accepted accounting principles. Since the definition of EBITDA may vary among companies and industries it should not be used as a measure of performance among companies.

Critical Accounting Policies

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 subsequently 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.

Revenue Recognition

        Net revenues comprise gross revenues from the Company's television, Internet and music businesses, including subscriber fees and a network service fee payable to the Company by the affiliated stations, less agency commissions and compensation costs paid to certain affiliated stations. The Company's gross revenues are recognized when advertising spots are aired for its television businesses. The Internet business recognizes primarily banner and sponsorship advertisement revenues. Banner revenues are recognized as "impressions" are delivered and sponsorship revenues are recognized ratably over their 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. Internet revenues are only recognized when collection of the resulting receivable is reasonably assured. Univision Music Group revenues are recognized based on product shipments to distributors less an allowance for returns. The majority of the Company's net revenues are derived from the advertising revenues of its television businesses.

Accounting for Intangibles

        On June 30, 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS') No. 142 "Goodwill and Other Intangible Assets". Under SFAS No. 142, goodwill and other intangibles with an indefinite life, such as broadcast licenses, associated with acquisitions consummated prior to June 30, 2001, ceased being amortized after December 31, 2001 and those related to acquisitions after June 30, 2001 will never be amortized. However, goodwill and other intangibles will be subject to at least an annual assessment for impairment and more frequently if circumstances indicate a possible impairment exists. The Company has evaluated its goodwill and other intangible assets in accordance with the guidelines of SFAS No. 142 as it relates to assessing impairment and has concluded that it does not have an impairment loss related to these assets. In addition, under SFAS No. 141, an acquired intangible asset should be separately recognized if the benefit of the intangible is obtained through contractual or other legal rights, or if the intangible asset can be sold, transferred, licensed, rented, or exchanged. Intangible assets with measurable lives will be amortized over their respective useful lives.

        The adoption of SFAS No. 142 has resulted in a substantial reduction of intangible amortization expense in the three and nine months ended September 30, 2002 since the Company's broadcast licenses and goodwill are no longer being amortized by the Company. On a historic basis, the Company had amortization of intangible assets of $6,222,000 and $14,366,000 for the three and nine months ended September 30, 2002, respectively, and $10,747,000 and $30,323,000 for the three and nine months

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ended September 30, 2001, respectively. Had this accounting change been in effect in 2001, amortization of intangible assets would have been $290,000 and $875,000 for the three and nine months ended September 30, 2001, respectively. During the three and nine months ended September 30, 2002, the Company incurred amortization expense of $5,900,000 and $13,400,000, respectively, related to a preliminary valuation of amortizable identified intangibles, primarily artist contracts, resulting from the Fonovisa acquisition on April 16, 2002.

Nine Months Ended September 30, 2002 ("2002"), Compared to Nine Months Ended September 30, 2001 ("2001")

        Revenues.    Net revenues were $807,079,000 in 2002 compared to $654,083,000 in 2001, an increase of $152,996,000 or 23.4%. Existing operations accounted for 7.0% of this growth while 16.4% of the growth was attributable to the launch of TeleFutura in 2002 and the music business in 2001. The Company's television segment revenues were $749,750,000 in 2002 compared to $646,833,000 in 2001, an increase of $102,917,000 or 15.9%. Univision Network had an increase in revenues of $12,760,000 or 3.6% resulting primarily from the 2002 World Cup Games. UTG O&Os had an increase in revenues of $35,852,000 or 13.7% attributable primarily to the Los Angeles, Houston, Chicago, Dallas and Phoenix stations, resulting primarily from increased market share and advertiser awareness of the growing importance of the Hispanic market, as well as from new UTG stations in Atlanta, Philadelphia, Cleveland and Killeen, offset in part by a slight decrease in revenues from the Miami station. Galavisión had a decrease in revenues of $2,360,000 or 9.3% due in part to the general softness in the advertising market. TeleFutura had revenues of $61,205,000 in 2002, since its launch on January 14, 2002, while the USA Broadcasting acquired stations had revenues of $4,540,000 in 2001. The Company's Internet segment had revenues of $8,197,000 in 2002 compared to $3,866,000 in 2001, an increase of $4,331,000, primarily resulting from an increase in advertisers. The Company's music segment, which began operations in April 2001, generated revenues of $49,132,000 in 2002 compared to $3,384,000 in 2001, an increase of $45,748,000 primarily related to the acquisition of Fonovisa in April 2002.

        Expenses.    Direct operating expenses, which include corporate charges of $268,000 and $244,000 in 2002 and 2001, respectively, increased to $359,797,000 in 2002 from $264,049,000 in 2001, an increase of $95,748,000 or 36.3%. The Company's television segment direct operating expenses were $323,851,000 in 2002 compared to $242,315,000 in 2001, an increase of $81,536,000 or 33.6%. The increase is due primarily to costs for the 2002 World Cup games of approximately $55,000,000, which includes program right and production costs. The television segment also had increased programming, technical, sports and news charges related to TeleFutura of $40,497,000 and increased license fees paid under the program license agreement of $655,000, offset in part by the elimination of 2001 costs related to the Copa America soccer games of $6,341,000, a cost reduction charge of $5,319,000, USA Broadcasting acquired station costs of $3,365,000 and cancelled shows of $3,012,000. The Company's Internet segment had direct operating expenses of $11,314,000 in 2002 compared to $19,532,000 in 2001, a decrease of $8,218,000 primarily due to a reduction in hosting and content costs. The Company's music segment had direct operating expenses of $24,632,000 in 2002 compared to $2,202,000, an increase of $22,430,000 primarily related to the acquisition of Fonovisa in April 2002. As a percentage of net revenues, direct operating expenses increased from 40.4% in 2001 to 44.6% in 2002.

        Selling, general and administrative expenses, which include corporate charges of $11,130,000 and $9,017,000 in 2002 and 2001, respectively, increased to $219,684,000 in 2002 from $166,645,000 in 2001, an increase of $53,039,000 or 31.8%. The Company's television segment selling, general and administrative expenses were $189,034,000 in 2002 compared to $150,231,000 in 2001, an increase of $38,803,000 or 25.8%. The increase is primarily the result of selling, research and general and administrative costs related to TeleFutura of $31,912,000, increased severance and compensation costs

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of $9,175,000, increased selling costs of $2,815,000 resulting from higher sales, a charge for bad debt of $1,000,000 related to WorldCom, Inc.'s filing for bankruptcy court protection, offset in part by the elimination of 2001 costs related to a cost reduction charge of $6,573,000 and USA Broadcasting acquired station costs of $2,391,000. The Company's Internet segment had selling, general and administrative expenses of $7,947,000 in 2002 compared to $14,068,000 in 2001, a decrease of $6,121,000 primarily related to lower promotion and selling costs. The Company's music segment had selling, general and administrative expenses of $22,703,000 in 2002 compared to $2,346,000, an increase of $20,357,000 primarily related to the acquisition of Fonovisa in April 2002. As a percentage of net revenues, selling, general and administrative expenses increased from 25.5% in 2001 to 27.2% in 2002.

        Depreciation and Amortization.    Depreciation and amortization increased to $58,903,000 in 2002 from $58,521,000 in 2001, an increase of $382,000 or 0.7%. The Company's depreciation expense increased to $44,537,000 in 2002 from $28,198,000 in 2001, an increase of $16,339,000 primarily due to increased capital expenditures and station assets acquired. The Company had amortization of intangible assets of $14,366,000 and $30,323,000 for the nine months ended September 30, 2002 and 2001, respectively, a decrease of $15,957,000. On January 1, 2002, the Company adopted SFAS No. 142 "Goodwill and Other Intangible Assets," which resulted in a substantial reduction of intangible amortization expense for the nine months ended September 30, 2002 since the Company's broadcast licenses and goodwill are no longer being amortized by the Company. Had SFAS No. 142 been in effect in 2001, amortization of intangible assets would have been $875,000 in 2001. During the nine months ended September 30, 2002, the Company incurred amortization expense of $13,400,000 related to a preliminary valuation of amortizable identified intangibles, primarily artist contracts, resulting from the Fonovisa acquisition on April 16, 2002. Depreciation and amortization for the television segment decreased by $12,612,000 to $41,547,000 in 2002 from $54,159,000 in 2001 due primarily to lower goodwill and other intangible amortization resulting from the adoption of SFAS No. 142, which was offset in part by increased depreciation related to higher capital expenditures. Depreciation and amortization for the Internet segment decreased by $646,000 to $3,706,000 in 2002 from $4,352,000 in 2001 due primarily to decreased depreciation related to the disposal of certain technical assets. Depreciation and amortization for the music segment increased by $13,640,000 to $13,650,000 in 2002 from $10,000 in 2001 due primarily to increased amortization of $13,400,000 related to a preliminary valuation of amortizable identified intangibles, primarily artist contracts, resulting from the Fonovisa acquisition on April 16, 2002.

        Operating Income.    As a result of the above factors, operating income increased to $168,695,000 in 2002 from $164,868,000 in 2001, an increase of $3,827,000 or 2.3%. The Company's television segment had operating income of $195,318,000 in 2002 and $200,128,000 in 2001, a decrease of $4,810,000, after giving effect to an operating loss for TeleFutura of $29,466,000 in 2002 and an operating loss for the USA Broadcasting acquired stations of $5,027,000 in 2001. TeleFutura is expected to have operating losses in 2002 and 2003. These losses are not expected to have a material impact on the financial condition of the Company. The Company's Internet segment had an operating loss of $14,770,000 in 2002 and $34,086,000 in 2001, an improvement of $19,316,000. The Company's music segment had an operating loss of $11,853,000 in 2002 and $1,174,000 in 2001, an increase of $10,679,000. The Company's Internet and Music segments are each expected to generate an operating loss for the years ending 2002 and 2003. These losses are not expected to have a material impact on the financial condition of the Company. As a percentage of net revenues, operating income decreased from 25.2% in 2001 to 20.9% in 2002.

        Interest Expense, Net.    Interest expense increased to $66,043,000 in 2002 from $35,665,000 in 2001, an increase of $30,378,000 or 85.2%. The increase is due primarily to increased borrowings as a result of the acquisition of the TeleFutura stations.

        Equity Loss in Unconsolidated Subsidiaries and Other.    Equity loss in unconsolidated subsidiaries and other decreased to $12,164,000 in 2002 from $41,135,000 in 2001, an improvement of $28,971,000. The improvement is primarily the result of the elimination of 2001 costs of $16,804,000 related to the dissolution of the Company's investment in Ask Jeeves en Español, Inc. and an improvement of $11,946,000 related to the Company's investment in Entravision Communications Corporation ("Entravision").

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        Loss (gain) on Change in Entravision Ownership Interest.    Gain on change in Entravision ownership interest decreased to $1,837,000 in 2002 from $4,491,000 in 2001, a decrease of $2,654,000. These gains were derived in accordance with Securities and Exchange Commission ("SEC") guidelines, Staff Accounting Bulletin No. 51 "Accounting for the Sale of Stock by a Subsidiary," which allows the Company to recognize gains and losses from its subsidiaries stock issuances.

        Provision for Income Taxes.    In 2002, the Company reported an income tax provision of $39,345,000, representing $15,215,000 of current tax expense and $24,130,000 of deferred tax expense. In 2001, the Company reported an income tax provision of $47,283,000, representing $38,080,000 of current tax expense and $9,203,000 of deferred tax expense. The total effective tax rate was 44.0% in 2002 and 51.9% in 2001. The Company's effective tax rate in 2002 is lower than in 2001 primarily as a result of the adoption of SFAS No. 142, which eliminated the amortization of non-deductible goodwill and other intangibles for book purposes. The increase in deferred tax expense in 2002 relative to 2001 is attributable to a significant increase in favorable temporary differences primarily due to new "bonus depreciation" rules and the full year impact of the tax amortization of the intangibles from the asset acquisition of the USA Broadcasting stations.

        Extraordinary Loss on Extinguishment of Debt, Net of Tax.    The Company's extraordinary loss on extinguishment of debt of $2,306,000 in 2001 is due to the write-off of deferred financing cost related to its terminated credit facilities.

        Net Income.    As a result of the above factors, the Company reported net income in 2002 of $50,097,000 compared to net income of $41,494,000 in 2001, a increase of $8,603,000. The 2001 net income includes a cost reduction charge of $7,075,000 and an extraordinary loss on extinguishments of debt of $2,306,000, all net of tax.

        Corporate Charges.    Corporate charges increased to $11,398,000 in 2002 from $9,261,000 in 2001, an increase of $2,137,000. The increase is primarily due to costs associated with compensation and benefits. As a percentage of net revenues, corporate charges were 1.4% in 2001 and in 2002.

        EBITDA.    EBITDA increased to $227,598,000 in 2002 from $223,389,000 in 2001, an increase of $4,209,000 or 1.9%. As a percentage of net revenues, EBITDA decreased from 34.2% in 2001 to 28.2% in 2002. The 2001 EBITDA includes a cost reduction charge of $11,892,000.

Three Months Ended September 30, 2002 ("2002"), Compared to Three Months Ended September 30, 2001 ("2001")

        Revenues.    Net revenues were $269,834,000 in 2002 compared to $221,694,000 in 2001, an increase of $48,140,000 or 21.7%. Existing operations accounted for 2.0% of this growth while 19.7% of the growth was attributable to the launch of TeleFutura in 2002 and the music business in 2001. The Company's television segment revenues were $239,791,000 in 2002 compared to $216,834,000 in 2001, an increase of $22,957,000 or 10.6%. Univision Network had a decrease in revenues of $4,820,000 or 4.2% due in part to the general softness in the advertising market. UTG O&Os had an increase in revenues of $12,545,000 or 14.0% attributable primarily to the Houston, Los Angeles, Fresno, Phoenix and Dallas stations, resulting primarily from increased market share and advertiser awareness of the growing importance of the Hispanic market, as well as from new UTG stations in Atlanta, Philadelphia, Cleveland and Killeen. Galavisión had a decrease in revenues of $494,000 or 5.9% due in part to the general softness in the advertising market. TeleFutura had revenues of $19,576,000 in 2002, while the USA Broadcasting acquired stations had revenues of $3,850,000 in 2001. The Company's Internet segment had revenues of $2,544,000 in 2002 compared to $1,476,000 in 2001, an increase of $1,068,000, primarily resulting from an increase in advertisers. The Company's music segment, which began operations in April 2001, generated revenues of $27,499,000 in 2002 compared to $3,384,000, an increase of $24,115,000 primarily related to the acquisition of Fonovisa in April 2002.

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        Expenses.    Direct operating expenses, which include corporate charges of $34,000 and $79,000 in 2002 and 2001, respectively, increased to $109,484,000 in 2002 from $88,721,000 in 2001, an increase of $20,763,000 or 23.4%. The Company's television segment direct operating expenses were $91,501,000 in 2002 compared to $81,188,000 in 2001, an increase of $10,313,000 or 12.7%. The television segment had increased programming, technical, sports and news charges related to TeleFutura of $14,354,000 and increased license fees paid under the program license agreement of $3,022,000, offset in part by elimination of 2001 costs related to the Copa America soccer games of $6,341,000 and USA Broadcasting acquired stations of $2,750,000. The Company's Internet segment had direct operating expenses of $3,701,000 in 2002 compared to $5,331,000 in 2001, a decrease of $1,630,000 primarily due to a reduction in hosting and content costs. The Company's music segment had direct operating expenses of $14,282,000 in 2002 compared to $2,202,000 in 2001, an increase of $12,080,000 primarily related to the acquisition of Fonovisa in April 2002. As a percentage of net revenues, direct operating expenses increased from 40.0% in 2001 to 40.6% in 2002.

        Selling, general and administrative expenses, which include corporate charges of $3,862,000 and $2,529,000 in 2002 and 2001, respectively, increased to $74,367,000 in 2002 from $51,391,000 in 2001, an increase of $22,976,000 or 44.7%. The Company's television segment selling, general and administrative expenses were $60,285,000 in 2002 compared to $45,733,000 in 2001, an increase of $14,552,000 or 31.8%. The increase is primarily the result of selling, research and general and administrative costs related to TeleFutura of $9,569,000 and an increase in compensation costs of $4,685,000, offset in part by elimination of 2001 costs related to USA Broadcasting acquired stations of $2,008,000. The Company's Internet segment had selling, general and administrative expenses of $2,619,000 in 2002 compared to $4,146,000 in 2001, a decrease of $1,527,000 primarily related to lower promotion and selling costs. The Company's music segment had selling, general and administrative expenses of $11,463,000 in 2002 compared to $1,512,000 in 2001, an increase of $9,951,000 primarily related to the acquisition of Fonovisa in April 2002. As a percentage of net revenues, selling, general and administrative expenses increased from 23.2% in 2001 to 27.6% in 2002.

        Depreciation and Amortization.    Depreciation and amortization increased to $21,656,000 in 2002 from $21,603,000 in 2001, an increase of $53,000 or 0.2%. The Company's depreciation expense increased to $15,434,000 in 2002 from $10,856,000 in 2001, an increase of $4,578,000 primarily due to increased capital expenditures and station assets acquired. The Company had amortization of intangible assets of $6,222,000 and $10,747,000 for the three months ended September 30, 2002 and 2001, respectively, a decrease of $4,525,000. On January 1, 2002, the Company adopted SFAS No. 142 "Goodwill and Other Intangible Assets," which resulted in a substantial reduction of intangible amortization expense for the three months ended September 30, 2002 since the Company's broadcast licenses and goodwill are no longer being amortized by the Company. Had SFAS No. 142 been in effect in 2001, amortization of intangible assets would have been $290,000 in 2001. During the three months ended September 30, 2002, the Company incurred amortization expense of $5,900,000 related to a preliminary valuation of amortizable identified intangibles, primarily artist contracts, resulting from the Fonovisa acquisition on April 16, 2002. Depreciation and amortization for the television segment decreased by $5,597,000 to $14,484,000 in 2002 from $20,081,000 in 2001 due primarily to lower goodwill and other intangible amortization resulting from the adoption of SFAS No. 142, which was offset in part by increased depreciation related to higher capital expenditures. Depreciation and amortization for the Internet segment decreased by $343,000 to $1,170,000 in 2002 from $1,513,000 in 2001 due primarily to decreased depreciation related to the disposal of certain technical assets. Depreciation and amortization for the music segment increased by $5,993,000 to $6,002,000 in 2002 from $9,000 in 2001 due to increased amortization of $5,900,000 related to a preliminary valuation of amortizable identified intangibles, primarily artist contracts, resulting from the Fonovisa acquisition on April 16, 2002.

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        Operating Income.    As a result of the above factors, operating income increased to $64,327,000 in 2002 from $59,979,000 in 2001, an increase of $4,348,000 or 7.2%. The Company's television segment had operating income of $73,521,000 in 2002 and $69,831,000 in 2001, an increase of $3,690,000, after giving effect to an operating loss for TeleFutura of $8,406,000 in 2002 and an operating loss for the USA Broadcasting acquired stations of $4,081,000 in 2001. The Company's Internet segment had an operating loss of $4,946,000 in 2002 and $9,514,000 in 2001, an improvement of $4,568,000. The Company's music segment had an operating loss of $4,248,000 in 2002 and $338,000 in 2001, an increase of $3,910,000. As a percentage of net revenues, operating income decreased from 27.1% in 2001 to 23.8% in 2002.

        Interest Expense, Net.    Interest expense increased to $22,409,000 in 2002 from $16,480,000 in 2001, an increase of $5,929,000 or 36.0%. The increase is due primarily to increased borrowings as a result of the acquisition of the TeleFutura stations.

        Equity Loss in Unconsolidated Subsidiaries and Other.    Equity loss in unconsolidated subsidiaries and other decreased to $4,763,000 in 2002 from $23,808,000 in 2001, an improvement of $19,045,000. The improvement is primarily the result of the elimination of 2001 costs of $16,804,000 related to the dissolution of the Company's investment in Ask Jeeves en Español, Inc.

        Loss (gain) on Change in Entravision Ownership Interest.    Loss (gain) on change in Entravision ownership interest decreased to a loss of $146,000 in 2002 from a gain of $931,000 in 2001, a decrease of $1,077,000. These gains and losses were derived in accordance with Securities and Exchange Commission ("SEC") guidelines, Staff Accounting Bulletin No. 51 "Accounting for the Sale of Stock by a Subsidiary," which allows the Company to recognize gains and losses from its subsidiaries stock issuances.

        Provision for Income Taxes.    In 2002, the Company reported an income tax provision of $15,750,000, representing $3,418,000 of current tax expense and $12,332,000 of deferred tax expense. In 2001, the Company reported an income tax provision of $10,933,000, representing $3,230,000 of current tax expense and $7,703,000 of deferred tax expense. The total effective tax rate was 43.7% in 2002 and 55.2% in 2001. The Company's effective tax rate in 2002 is lower than in 2001 primarily as a result of the adoption of SFAS No. 142, which eliminated the amortization of non-deductible goodwill and other intangibles for book purposes. The increase in deferred tax expense in 2002 relative to 2001 is attributable to a significant increase in favorable temporary differences primarily due to new "bonus depreciation" rules and the full year impact of the tax amortization of the intangibles from the asset acquisition of the USA Broadcasting stations.

        Extraordinary Loss on Extinguishment of Debt, Net of Tax.    The Company's extraordinary loss on extinguishment of debt of $1,976,000 in 2001 is due to the write-off of deferred financing cost related to its terminated credit facilities.

        Net Income.    As a result of the above factors, the Company reported net income in 2002 of $20,308,000 compared to net income of $6,914,000 in 2001, an increase of $13,394,000.

        Corporate Charges.    Corporate charges increased to $3,896,000 in 2002 from $2,608,000 in 2001, an increase of $1,288,000. The increase is primarily due to costs associated with compensation and benefits. As a percentage of net revenues, corporate charges increased from 1.2% in 2001 to 1.4% in 2002.

        EBITDA.    EBITDA increased to $85,983,000 in 2002 from $81,582,000 in 2001, an increase of $4,401,000 or 5.4%. As a percentage of net revenues, EBITDA decreased from 36.8% in 2001 to 31.9% in 2002.

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Liquidity and Capital Resources

        The Company's primary source of cash flow is its television operations. Funds for debt service, capital expenditures and operations historically have been provided by funds from operations and by borrowings.

        Capital expenditures totaled $69,744,000 for the nine months ended September 30, 2002. This amount excludes the capitalized lease obligations of the Company. In addition to performing normal capital improvements, the Company is still in the process of replacing and upgrading several towers, transmitters and antennas. In 2002, the Company plans on spending a total of approximately $115,000,000 that will consist of $50,000,000 for towers, transmitters, antennas and digital technology, $16,000,000 for the completion of the build-out of TeleFutura Network and station facilities, $4,000,000 for Univision Network facilities expansion, $18,000,000 for the completion of the construction of the Los Angeles and Phoenix stations and approximately $27,000,000 for normal capital improvements and management information systems. The Company expects to fund its capital expenditures for the remainder of 2002 of approximately $45,000,000 primarily with operating cash flow and, if necessary, from proceeds available under its bank facility.

        The Company's 7.85% Senior Notes due July 18, 2011 (the "Notes") have a face value of $500,000,000 and bear simple interest at 7.85%. The Company received net proceeds of $495,370,000 from the issuance of the Notes and pays interest on the Notes on January 15 and July 15 of each year. The Notes are the Company's senior unsecured obligations, are equal in right of payment with all of the Company's existing and future senior unsecured indebtedness, are senior in right of payment to any of the Company's future subordinated indebtedness and are fully and unconditionally guaranteed by all of the Company's guarantors, who are described below. The Company has the option to redeem all or a portion of the Notes at any time at the redemption prices set forth in the note agreement. The indenture does not contain any provisions that would require us to repurchase or redeem or otherwise modify the terms of the Notes upon a change of control. The indenture does not limit our ability to incur indebtedness or require the maintenance of financial ratios or specified levels of net worth or liquidity.

        The Company also has a $1.22 billion credit agreement with a syndicate of commercial lenders. The credit agreement consists of a $500,000,000 revolving credit facility and a $720,000,000 term loan. Each of the credit facilities will mature on July 18, 2006. At September 30, 2002, the Company had borrowings of $720,000,000 outstanding under its term loan and $67,000,000 outstanding under its revolving credit facility.

        The Company's unsecured Junior Subordinated notes are due December 17, 2002 for approximately $97,500,000. The Company expects to provide for the payment of these notes with funds from operations and, if necessary, with borrowings under its revolving credit facility.

        The subsidiaries that guarantee the Company's obligations under the revolving credit facility and term loan also guarantee the Notes. The subsidiary guarantors under the credit facilities are all of our domestic subsidiaries other than certain immaterial subsidiaries. The guarantees of the obligations under the revolving credit facility, term loan and the Notes will be released if our senior unsecured debt is rated BBB or better by Standard & Poor's Rating Services and Baa2 or better by Moody's Investor Service, Inc. The guarantees of such subsidiary will be reinstated if such ratings fall below BBB- by Standard & Poor's or Baa3 by Moody's. The Company's senior unsecured debt is currently rated BB+ by Standard & Poor's Rating Services and Baa3 by Moody's Investor Service, Inc.

        Loans made under the revolving credit facility and term loan bear interest determined by reference to LIBOR or a base rate equal to the higher of the prime rate of Chase Manhattan Bank or 0.50% per annum over the federal funds rate. Depending on the rating assigned by rating agencies to our senior unsecured debt, the LIBOR interest rate margin on the Company's term loans ranges from 0.75% to

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1.5% per annum and the base rate margin ranges from 0% to 0.50% per annum. The Company's LIBOR interest rate margin on its term loans was 1.25% for the three months ended September 30, 2002. During the nine months ended September 30, 2002, the interest rates applicable to the Company's bank credit facilities ranged from approximately 2.99% to 3.479% for LIBOR rate loans and 5% for prime rate loans. The Company borrows at the prime rate from time to time but attempts to maintain these loans at a minimum. Interest is generally payable quarterly.

        The credit agreement contains customary covenants, including restrictions on liens and dividends, and financial covenants relating to interest coverage and maximum leverage. Under the credit agreement, the Company is also limited in the amount of other debt it can incur and in its ability to engage in mergers, sell assets and make material changes to its program license agreements with Televisa or Venevision in a manner the lenders determine is materially adverse to the Company.

        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 borrows at the U.S. prime rate from time to time but attempts to maintain these loans at a minimum. Based on the Company's overall interest rate exposure on its LIBOR loans at September 30, 2002, a change of 10% in interest rates would have an impact of approximately $2,600,000 on pre-tax earnings and pre-tax cash flows over a one-year period. The Company has foreign exchange exposure in Mexico in connection with its Internet and music segments which is immaterial to the Company.

        Effective February 1, 2002, the Company entered into a time brokerage agreement with Raycom Media, Inc. ("Raycom") to manage its two stations in Puerto Rico. Under the agreement, the Company will program WLII-TV 11 in San Juan and WSUR-TV 9 in Ponce, collectively branded as "Teleonce," on behalf of Raycom. The new programming under the agreement will also be telecast through WORA-TV 5 in Mayaguez, the long-term western affiliate to Teleonce. The management fee to the Company will be $500,000 per year. In addition, the Company entered into an option agreement that expires on December 31, 2004 to acquire these stations for $190,000,000. The purchase price will be reduced if certain earnings targets are met during the period prior to the expiration of the option agreement.

        On June 12, 2002 the Company and Hispanic Broadcasting Corporation ("HBC"), the nation's leading Spanish-language radio television company, entered into a definitive merger agreement under which the Company will acquire Hispanic Broadcasting in an all-stock transaction. Under the agreement, each share of HBC common stock will be exchanged for a fixed 0.85 shares of Univision Class A common stock. The Company's shareholders will have approximately 73.5% and HBC's shareholders 26.5% of the combined company's fully-diluted economic ownership. The proposed merger is intended to qualify as a tax-free reorganization pursuant to Section 368(a) of the Internal Revenue Code. In addition to stockholder approval, the closing of the proposed merger is subject to clearance or expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and approval of the Federal Communications Commission, and the satisfaction of other customary closing conditions.

        The Company expects the acquisition of Hispanic Broadcasting to be accretive to its earnings per share. The proposed merger may give rise to several uncertainties. First, Univision must successfully integrate with Hispanic Broadcasting in order to achieve the intended benefits of the merger, some of which include lower promotion costs, the opportunity for cross-promotion, and faster revenue growth. Integrating the two businesses will be difficult and may require substantial changes to the way either company currently does business. Furthermore, integration may distract management or employees from the operation of the businesses or may require the combined company to allocate resources that otherwise would be allocated to developing the business or other matters. In addition, antitrust authorities could take a variety of actions under applicable laws, including seeking to prevent the merger or seeking the divestiture of substantial assets of Univision or Hispanic Broadcasting. These