The following discussion of our consolidated results of operations and cash flows for the years ended December 31, 2012, 2011 and 2010 and consolidated financial condition as of December 31, 2012 and 2011 should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this document.

We are a diversified Spanish-language media company utilizing a combination of television and radio operations, together with mobile, digital and other interactive media platforms, to reach Hispanic consumers across the United States, as well as the border markets of Mexico. We operate in two reportable segments: television broadcasting and radio broadcasting. Our net revenue for the year ended December 31, 2012 was $223.3 million. Of that amount, revenue generated by our television segment accounted for 70% and revenue generated by our radio segment accounted for 30%.

As of the date of filing this report, we own and/or operate 56 primary television stations located primarily in California, Colorado, Connecticut, Florida, Massachusetts, Nevada, New Mexico, Texas and Washington, D.C. We own and operate 49 radio stations (38 FM and 11 AM) located primarily in Arizona, California, Colorado, Florida, Nevada, New Mexico and Texas and a national sales representation firm. Our television and radio stations typically have local websites and other digital and interactive media platforms that provide users with news and information as well as a variety of other products and services.

We generate revenue primarily from sales of national and local advertising time on television and radio stations, and from retransmission consent agreements. Advertising rates are, in large part, based on each medium's ability to attract audiences in demographic groups targeted by advertisers. We recognize advertising revenue when commercials are broadcast. We do not obtain long-term commitments from our advertisers and, consequently, they may cancel, reduce or postpone orders without penalties. We pay commissions to agencies for local, regional and national advertising. For contracts directly with agencies, we record net revenue from these agencies. Seasonal revenue fluctuations are common in the broadcasting industry and are due primarily to variations in advertising expenditures by both local and national advertisers. In addition, advertising revenue is generally higher during even-numbered years resulting from political advertising and every four years resulting from advertising aired during the World Cup (2010 and 2014).

We also generate revenue from retransmission consent agreements that are entered into with MVPDs. We refer to such revenue as retransmission consent revenue, which represents payments from MVPDs for access to our television station signals so that they may rebroadcast our signals and charge their subscribers for this programming. We recognize retransmission consent revenue when it is accrued pursuant to the agreements we have entered into with respect to such revenue.

Our primary expenses are employee compensation, including commissions paid to our sales staff and amounts paid to our national representative firms, as well as expenses for marketing, promotion and selling, technical, local programming, engineering, and general and administrative. Our local programming costs for television consist primarily of costs related to producing a local newscast in most of our markets.

Highlights

During 2012, we achieved revenue growth primarily driven by increases in political advertising, core advertising and retransmission consent revenue. The increase in our political advertising revenue reflects the importance of our television and radio platforms in reaching Latino voters. Net revenue increased to

$223.3 million, an increase of $28.9 million, or 15%, from $194.4 million for 2011. Our audience shares remain strong in the nation's most densely populated Hispanic markets, and we believe we are well positioned to benefit as the U.S. Hispanic market continues to expand and advertisers increasingly recognize the importance of reaching our target audience.

Net revenue for our television segment increased to $156.8 million in 2012, from $131.5 million in 2011. This increase of $25.3 million, or 19%, was primarily due to increases in political advertising revenue, which was not material in 2011, core advertising revenue and retransmission consent revenue. We generated a total of $20.2 million in retransmission consent revenue in 2012. We anticipate that retransmission consent revenue for the full year 2013 will be greater than it was for the full year 2012 and will continue to be a growing source of net revenues in future periods.

Net revenue for our radio segment increased to $66.4 million in 2012, from $62.9 million in 2011. This increase of $3.5 million, or 6%, was primarily due to increases in political advertising revenue, which was not material in 2011, and core advertising revenue.

Acquisitions and Dispositions

On January 3, 2011, we completed the acquisition of LER, a representation firm that sells national spots and digital advertising to advertising agencies on our behalf and other clients. We previously owned 50% of LER, which was accounted for under the equity method. We decided to acquire the 50% of LER that we did not own in order to integrate LER's sales force with our radio operations. We paid $1.1 million for the remaining 50% of LER. As a result of our obtaining control of LER, our previously-held 50% interest was remeasured to its fair value of $1.1 million. The resulting gain of $0.7 million is included in the line item 'Other income (loss)' on the consolidated statement of operations for the year ended December 31, 2011.

We evaluated the transferred set of activities, assets, inputs and processes applied to these inputs in this acquisition and determined that the acquisition did constitute a business. Currently, we are subject to certain limitations on acquisitions under the terms of the Indenture and the amended Credit Agreement. Please see "Liquidity and Capital Resources" below.

In a strategic effort to focus our resources on strengthening existing clusters and expanding into new U.S. Hispanic markets, we periodically review our portfolio of media properties and, from time to time, seek to divest assets in markets where we do not see the opportunity to grow to scale and build out media clusters, subject to limitations contained in our amended Credit Agreement. Please see "Liquidity and Capital Resources" below.

Relationship with Univision

Substantially all of our television stations are Univision- or UniMás-affiliated television stations. Our network affiliation agreements with Univision provide certain of our owned stations the exclusive right to broadcast Univision's primary network and UniMás network programming in their respective markets. These long-term affiliation agreements each expire in 2021, and can be renewed for multiple, successive two-year terms at Univision's option, subject to our consent. Under the network affiliation agreements, we generally retain the right to sell approximately six minutes per hour of the available advertising time on Univision's primary network, and approximately four and a half minutes per hour of the available advertising time on the UniMás network. Those allocations are subject to adjustment from time to time by Univision.

Under the network affiliation agreements, Univision acts as our exclusive sales representative for the sale of national advertising on our Univision- and UniMás-affiliate television stations, and we pay certain sales representation fees to Univision relating to sales of all advertising for broadcast on our Univision- and UniMás-affiliate television stations.

We also generate revenue under two marketing and sales agreements with Univision, which give us the right through 2021 to manage the marketing and sales operations of Univision-owned UniMás and Univision affiliates in six markets - Albuquerque, Boston, Denver, Orlando, Tampa and Washington, D.C.

In August 2008, we entered into a proxy agreement with Univision pursuant to which we granted to Univision the right to negotiate the terms of retransmission consent agreements for our Univision- and UniMás-affiliated television station signals for a term of six years. Among other things, the proxy agreement provides terms relating to compensation to be paid to us by Univision with respect to retransmission consent agreements entered into with MVPDs. During the years ended December 31, 2012 and 2011, retransmission consent revenue accounted for approximately $20.2 million and $17.1 million, respectively.

Univision currently owns approximately 10% of our common stock on a fully-converted basis. As of December 31, 2005, Univision owned approximately 30% of our common stock on a fully-converted basis. In connection with its merger with Hispanic Broadcasting Corporation in September 2003, Univision entered into an agreement with the U.S. Department of Justice, or DOJ, pursuant to which Univision agreed, among other things, to ensure that its percentage ownership of our company would not exceed 10% by March 26, 2009. In January 2006, we sold the assets of radio stations KBRG-FM and KLOK-AM, serving the San Francisco/San Jose, California market, to Univision for $90 million. Univision paid the full amount of the purchase price in the form of approximately 12.6 million shares of our Class U common stock held by Univision. Subsequently, in 2006, we repurchased 7.2 million shares of our Class U common stock held by Univision for $52.5 million. In February 2008, we repurchased 1.5 million shares of Class U common stock held by Univision for $10.4 million. In May 2009, we repurchased an additional 0.9 million shares of Class A common stock held by Univision for $0.5 million.

The Company's Class U common stock held by Univision has limited voting rights and does not include the right to elect directors. However, as the holder of all of the Company's issued and outstanding Class U common stock, Univision currently has the right to approve any merger, consolidation or other business combination involving the Company, any dissolution of the Company and any assignment of the Federal Communications Commission, or FCC, licenses for any of the Company's Univision-affiliated television stations. Each share of Class U common stock is automatically convertible into one share of the Company's Class A common stock (subject to adjustment for stock splits, dividends or combinations) in connection with any transfer to a third party that is not an affiliate of Univision.

Separate financial data for each of the Company's operating segments is provided below. Segment operating profit (loss) is defined as operating profit (loss) before corporate expenses, loss (gain) on sale of assets and impairment charge. The Company evaluates the performance of its operating segments based on the following (in thousands):

                                        Years Ended December 31,                   % Change                % Change
                                  2012            2011            2010           2012  to 2011           2011  to 2010
Net Revenue
Television                      $ 156,839       $ 131,490       $ 132,561                    19 %                    (1 )%
Radio                              66,414          62,906          67,915                     6 %                    (7 )%

Consolidated                      223,253         194,396         200,476                    15 %                    (3 )%

Direct operating expenses
Television                         56,664          53,789          52,882                     5 %                     2 %
Radio                              35,592          34,801          31,920                     2 %                     9 %

Consolidated                       92,256          88,590          84,802                     4 %                     4 %

Selling, general and
administrative expenses
Television                         20,571          19,606          20,249                     5 %                    (3 )%
Radio                              17,247          16,905          17,797                     2 %                    (5 )%

Consolidated                       37,818          36,511          38,046                     4 %                    (4 )%

Depreciation and
amortization
Television                         13,312          15,189          15,489                   (12 )%                   (2 )%
Radio                               3,114           3,464           3,740                   (10 )%                   (7 )%

Consolidated                       16,426          18,653          19,229                   (12 )%                   (3 )%

Segment operating profit
Television                         66,292          42,906          43,941                    55 %                    (2 )%
Radio                              10,461           7,736          14,458                    35 %                   (46 )%

Consolidated                       76,753          50,642          58,399                    52 %                   (13 )%
Corporate expenses                 17,976          15,669          18,416                    15 %                   (15 )%
Impairment charge                      -               -           36,109                     *                    (100 )%

Operating income (loss)         $  58,777       $  34,973       $   3,874                    68 %                     *

Consolidated adjusted
EBITDA (1)                      $  76,863       $  55,475       $  63,635                    39 %                   (13 )%

Capital expenditures
Television                      $   8,339       $   6,494       $   6,196
Radio                               1,561           1,724             981

Consolidated                    $   9,900       $   8,218       $   7,177

Total assets
Television                      $ 313,904       $ 342,462       $ 367,474
Radio                             124,147         124,859         123,336

Consolidated                    $ 438,051       $ 467,321       $ 490,810

* Percentage not meaningful.

(1) Consolidated adjusted EBITDA means net income (loss) plus gain (loss) on sale of assets, depreciation and amortization, non-cash impairment charge, non-cash stock-based compensation included in operating and corporate expenses, net interest expense, other income (loss), gain (loss) on debt extinguishment, income tax

Since our ability to borrow from our 2012 Credit Facility is based on a consolidated adjusted EBITDA financial covenant, we believe that it is important to disclose consolidated adjusted EBITDA to our investors. Our 2012 Credit Facility contains a total net leverage ratio financial covenant. The total net leverage ratio, or the ratio of consolidated total debt (net of up to $10 million of unrestricted cash) to trailing-twelve-month consolidated adjusted EBITDA, affects both our ability to borrow from our 2012 Credit Facility and our applicable margin for the interest rate calculation. Under our 2012 Credit Facility, our maximum total leverage ratio may not exceed 7.00 to 1. The total leverage ratio was as follows (in each case as of December 31): 2012, 4.3 to 1; 2011, 6.7 to 1. Therefore, we were in compliance with this covenant at each of those dates.

While many in the financial community and we consider consolidated adjusted EBITDA to be important, it should be considered in addition to, but not as a substitute for or superior to, other measures of liquidity and financial performance prepared in accordance with accounting principles generally accepted in the United States of America, such as cash flows from operating activities, operating income and net income. As consolidated adjusted EBITDA excludes non-cash gain (loss) on sale of assets, non-cash depreciation and amortization, non-cash impairment charge, non-cash stock-based compensation expense, net interest expense, other income (loss), gain (loss) on debt extinguishment, income tax (expense) benefit, equity in net income (loss) of nonconsolidated affiliate, non-cash losses and syndication programming amortization and includes syndication programming payments, consolidated adjusted EBITDA has certain limitations because it excludes and includes several important non-cash financial line items. Therefore, we consider both non-GAAP and GAAP measures when evaluating our business. Consolidated adjusted EBITDA is also used to make executive compensation decisions.

Consolidated adjusted EBITDA is a non-GAAP measure. The most directly comparable GAAP financial measure to consolidated adjusted EBITDA is cash flows from operating activities. A reconciliation of this non-GAAP measure to cash flows from operating activities follows (in thousands):

                                                            Years Ended December 31,
                                                      2012            2011            2010
Consolidated adjusted EBITDA (1)                    $  76,863       $  55,475       $  63,635
Interest expense                                      (35,407 )       (37,650 )       (24,429 )
Interest income                                            86               3             260
Gain (loss) on debt extinguishment                     (3,743 )          (423 )          (987 )
Income tax (expense) benefit                           (6,112 )        (5,790 )         3,376
Amortization of syndication contracts                    (707 )        (1,482 )        (1,159 )
Payments on syndication contracts                       1,698           1,976           2,724
Non-cash stock-based compensation included in
direct operating expenses                                (146 )          (229 )          (454 )
Non-cash stock-based compensation included in
selling, general and administrative expenses             (767 )          (812 )          (897 )
Non-cash stock-based compensation included in
corporate expenses                                     (1,738 )        (1,302 )        (1,619 )
Depreciation and amortization                         (16,426 )       (18,653 )       (19,229 )
Impairment charge                                          -               -          (36,109 )
Other income (loss)                                        -              687              -
Reserve for note receivable                                -               -           (3,018 )
Equity in net income (loss) of nonconsolidated
affiliates                                                 -               -             (180 )

Net income (loss)                                      13,601          (8,200 )       (18,086 )
Depreciation and amortization                          16,426          18,653          19,229
Impairment charge                                          -               -           36,109
Deferred income taxes                                   6,477           4,565          (4,342 )
Amortization of debt issue costs                        2,284           2,207           1,140
Amortization of syndication contracts                     707           1,482           1,159
Payments on syndication contracts                      (1,698 )        (1,976 )        (2,724 )
Equity in net (income) loss of nonconsolidated
affiliate                                                  -               -              180
Non-cash stock-based compensation                       2,651           2,343           2,970
Other (income) loss                                         -            (687 )             -
Loss (gain) on debt extinguishment                      3,743             423             934
Reserve for note receivable                                -               -            3,018
Change in fair value of interest rate swap
agreements                                                 -               -          (12,188 )
Changes in assets and liabilities, net of effect
of acquisitions and dispositions:
(Increase) decrease in restricted cash                     -              809            (809 )
(Increase) decrease in accounts receivable             (3,740 )          (574 )         2,091
(Increase) decrease in prepaid expenses and
other assets                                              321             336             310
Increase (decrease) in accounts payable, accrued
expenses and other liabilities                           (740 )        (1,770 )         8,134

Cash flows from operating activities                $  40,032       $  17,611       $  37,125

(footnotes on preceding page)

Year Ended December 31, 2012 Compared to Year Ended December 31, 2011

Consolidated Operations

Net Revenue. Net revenue increased to $223.3 million for the year ended December 31, 2012 from $194.4 million for the year ended December 31, 2011, an increase of $28.9 million. Of the overall increase, $25.4 million came from our television segment and was primarily attributable to increases in political advertising revenue, which was not material in 2011, core advertising revenue and retransmission consent revenue. Additionally, $3.5 million of the overall increase came from our radio segment and was primarily attributable to increases in political advertising revenue, which was not material in 2011, and core advertising revenue.

We believe that we will continue to face a challenging advertising environment in 2013 as our advertising customers continue to make difficult choices in the current uncertain economic environment and we will not have revenue from political advertising that positively impacted our results of operations in 2012.

Direct Operating Expenses. Direct operating expenses increased to $92.3 million for the year ended December 31, 2012 from $88.6 million for the year ended December 31, 2011, an increase of $3.7 million. Of the overall increase, $2.9 million came from our television segment and was primarily attributable to an increase in expenses associated with the increase in net revenue and an increase in salary expense. Additionally, $0.8 million of the overall increase came from our radio segment and was primarily attributable to an increase in salary expense. As a percentage of net revenue, direct operating expenses decreased to 41% for the year ended December 31, 2012 from 46% for the year ended December 31, 2011. Direct operating expenses as a percentage of net revenue decreased because the increase in net revenue outpaced the increase in direct operating expenses.

We believe that direct operating expenses will continue to increase during 2013 primarily as a result of employee salary increases.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $37.8 million for the year ended December 31, 2012 from $36.5 million for the year ended December 31, 2011, an increase of $1.3 million. Of the overall increase, $1.0 million came from our television segment and was primarily attributable to an increase in salary expense and an increase in bad debt expense. Additionally, $0.3 million of the overall increase came from our radio segment and was primarily attributable to an increase in salary expense. As a percentage of net revenue, selling, general and administrative expenses decreased to 17% for the year ended December 31, 2012 from 19% for the year ended December 31, 2011. Selling, general and administrative expenses as a percentage of net revenue decreased because the increase in net revenue outpaced the increase in selling, general and administrative expenses.

We believe that selling, general and administrative expenses will continue to increase during 2013 primarily as a result of employee salary increases.

Corporate expenses increased to $18.0 million for the year ended December 31, 2012 from $15.7 million for the year ended December 31, 2011, an increase of $2.3 million. The increase was primarily attributable to the increase in bonuses, non-cash stock-based compensation, salary expense and interactive media-related expenses. As a percentage of net revenue, corporate expenses remained constant at 8% for each of the year ends December 31, 2012 and 2011.

We believe that corporate expenses will continue to increase during 2013 primarily as a result of employee salary increases and interactive media-related expenses.

Depreciation and Amortization. Depreciation and amortization decreased to $16.4 million for the year ended December 31, 2012 from $18.7 million for the year ended December 31, 2011, a decrease of $2.3 million. The decrease was primarily due to a decrease in depreciation as certain assets are now fully depreciated.

Operating Income. As a result of the above factors, operating income was $58.8 million for the year ended December 31, 2012, compared to $35.0 million for the year ended December 31, 2011.

Interest Expense. Interest expense decreased to $35.4 million for the year ended December 31, 2012 from $37.7 million for the year ended December 31, 2011, a decrease of $2.3 million. On December 31, 2012 and May 30, 2012, we repurchased $40.0 million and $20.0 million, respectively, of our Notes. During the fourth quarter of 2011, we repurchased $16.2 million of our Notes. The decrease in interest expense was primarily attributable to the decrease in our outstanding debt.

Other Income. We recorded other income of $0.7 million related to the remeasurement of our previously-held 50% interest in LER to fair value in connection with our acquisition of the remaining 50% interest of LER during the year ended December 31, 2011.

Loss on Debt Extinguishment. We recorded a loss on debt extinguishment of $3.7 million related to the premium paid, unamortized finance costs and unamortized bond discount associated with the repurchases of Notes during the year ended December 31, 2012. We recorded a loss on debt extinguishment of $0.4 million related to unamortized finance costs and bond discount associated with the repurchase of Notes during the year ended December 31, 2011.

Income Tax Expense. Income tax expense for the year ended December 31, 2012 was $6.1 million. The effective income tax rate was lower than our statutory rate of 34% due to changes in the valuation allowance and deductions attributable to indefinite-lived intangible assets. Income tax expense for the year ended December 31, 2011 was $5.8 million. The effective income tax rate was lower than our statutory rate of 34% due to changes in the valuation allowance and . . .