EMMIS CORP - Quarter Report: 2011 August (Form 10-Q)
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2011
EMMIS COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA
(State of incorporation or organization)
(State of incorporation or organization)
0-23264
(Commission file number)
(Commission file number)
35-1542018
(I.R.S. Employer Identification No.)
(I.R.S. Employer Identification No.)
ONE EMMIS PLAZA
40 MONUMENT CIRCLE, SUITE 700
INDIANAPOLIS, INDIANA 46204
(Address of principal executive offices)
40 MONUMENT CIRCLE, SUITE 700
INDIANAPOLIS, INDIANA 46204
(Address of principal executive offices)
(317) 266-0100
(Registrants Telephone Number,
Including Area Code)
(Registrants Telephone Number,
Including Area Code)
NOT APPLICABLE
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non accelerated filer, or a smaller reporting company. See definitions of large accelerated
filer, and accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the
Act).
Yes o No þ
The number of shares outstanding of each of Emmis Communications Corporations classes of
common stock, as of October 6, 2011, was:
33,495,861 | Shares of Class A Common Stock, $.01 Par Value |
||
4,722,684 | Shares of Class B Common Stock, $.01 Par Value |
||
0 | Shares of Class C Common Stock, $.01 Par Value |
INDEX
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Table of Contents
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three Months Ended | Six Months Ended | |||||||||||||||
August 31, | August 31, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
NET REVENUES |
$ | 66,709 | $ | 64,621 | $ | 126,918 | $ | 125,767 | ||||||||
OPERATING EXPENSES: |
||||||||||||||||
Station operating expenses excluding depreciation and amortization
expense of $2,020, $1,828, $4,070 and $3,675, respectively |
51,367 | 52,149 | 100,244 | 101,483 | ||||||||||||
Corporate expenses excluding depreciation and amortization
expense of $346, $282, $700 and $546, respectively |
4,697 | 2,969 | 9,875 | 10,304 | ||||||||||||
Depreciation and amortization |
2,366 | 2,110 | 4,770 | 4,221 | ||||||||||||
Loss on sale of assets |
| 817 | | 814 | ||||||||||||
Total operating expenses |
58,430 | 58,045 | 114,889 | 116,822 | ||||||||||||
OPERATING INCOME |
8,279 | 6,576 | 12,029 | 8,945 | ||||||||||||
OTHER EXPENSE: |
||||||||||||||||
Interest expense |
(5,209 | ) | (8,210 | ) | (10,889 | ) | (15,424 | ) | ||||||||
Loss on debt extinguishment |
| | | (1,478 | ) | |||||||||||
Other income (expense), net |
(93 | ) | 348 | (106 | ) | 342 | ||||||||||
Total other expense |
(5,302 | ) | (7,862 | ) | (10,995 | ) | (16,560 | ) | ||||||||
INCOME (LOSS) BEFORE INCOME TAXES AND
DISCONTINUED OPERATIONS |
2,977 | (1,286 | ) | 1,034 | (7,615 | ) | ||||||||||
PROVISION FOR INCOME TAXES |
1,692 | 3,232 | 248 | 490 | ||||||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS |
1,285 | (4,518 | ) | 786 | (8,105 | ) | ||||||||||
(GAIN) LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX |
(10 | ) | 104 | 195 | (2,790 | ) | ||||||||||
CONSOLIDATED NET INCOME (LOSS) |
1,295 | (4,622 | ) | 591 | (5,315 | ) | ||||||||||
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS |
1,225 | 1,392 | 2,058 | 2,744 | ||||||||||||
NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY |
70 | (6,014 | ) | (1,467 | ) | (8,059 | ) | |||||||||
PREFERRED STOCK DIVIDENDS |
2,408 | 2,563 | 4,780 | 5,086 | ||||||||||||
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS |
$ | (2,338 | ) | $ | (8,577 | ) | $ | (6,247 | ) | $ | (13,145 | ) | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated statements.
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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(Unaudited)
(In thousands, except per share data)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(Unaudited)
(In thousands, except per share data)
Three Months Ended | Six Months Ended | |||||||||||||||
August 31, | August 31, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Amounts attributable to common shareholders: |
||||||||||||||||
Continuing operations |
$ | (2,380 | ) | $ | (8,501 | ) | $ | (6,329 | ) | $ | (15,984 | ) | ||||
Discontinued operations |
42 | (76 | ) | 82 | 2,839 | |||||||||||
Net loss attributable to common shareholders |
$ | (2,338 | ) | $ | (8,577 | ) | $ | (6,247 | ) | $ | (13,145 | ) | ||||
Basic net income (loss) per share attributable to common shareholders: |
||||||||||||||||
Continuing operations |
$ | (0.06 | ) | $ | (0.22 | ) | $ | (0.17 | ) | $ | (0.42 | ) | ||||
Discontinued operations, net of tax |
| | | 0.08 | ||||||||||||
Net loss attributable to common shareholders |
$ | (0.06 | ) | $ | (0.22 | ) | $ | (0.17 | ) | $ | (0.34 | ) | ||||
Basic weighted average common shares outstanding |
37,844 | 38,210 | 37,782 | 38,205 | ||||||||||||
Diluted net income (loss) per share attributable to common shareholders: |
||||||||||||||||
Continuing operations |
$ | (0.06 | ) | $ | (0.22 | ) | $ | (0.17 | ) | $ | (0.42 | ) | ||||
Discontinued operations, net of tax |
| | | 0.08 | ||||||||||||
Net loss attributable to common shareholders |
$ | (0.06 | ) | $ | (0.22 | ) | $ | (0.17 | ) | $ | (0.34 | ) | ||||
Diluted weighted average common shares outstanding |
37,844 | 38,210 | 37,782 | 38,205 |
The accompanying notes are an integral part of these unaudited condensed consolidated statements.
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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
August 31, | ||||||||
February 28, | 2011 | |||||||
2011 | (Unaudited) | |||||||
ASSETS |
||||||||
CURRENT ASSETS: |
||||||||
Cash and cash equivalents |
$ | 6,068 | $ | 9,578 | ||||
Accounts receivable, net |
38,930 | 40,049 | ||||||
Prepaid expenses |
13,615 | 14,434 | ||||||
Other current assets |
2,329 | 1,851 | ||||||
Current assets discontinued operations |
2,063 | 1,872 | ||||||
Total current assets |
63,005 | 67,784 | ||||||
PROPERTY AND EQUIPMENT, NET |
44,816 | 42,877 | ||||||
INTANGIBLE ASSETS (Note 3): |
||||||||
Indefinite-lived intangibles |
328,796 | 328,796 | ||||||
Goodwill |
24,175 | 24,175 | ||||||
Other intangibles, net |
2,689 | 2,116 | ||||||
Total intangible assets |
355,660 | 355,087 | ||||||
OTHER ASSETS, NET |
8,051 | 5,426 | ||||||
NONCURRENT ASSETS DISCONTINUED OPERATIONS |
945 | 21 | ||||||
Total assets |
$ | 472,477 | $ | 471,195 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated statements.
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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands, except share data)
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands, except share data)
August 31, | ||||||||
February 28, | 2011 | |||||||
2011 | (Unaudited) | |||||||
LIABILITIES AND DEFICIT |
||||||||
CURRENT LIABILITIES: |
||||||||
Accounts payable and accrued expenses |
$ | 9,815 | $ | 10,762 | ||||
Current maturities of long-term debt |
3,293 | 3,205 | ||||||
Accrued salaries and commissions |
9,757 | 7,759 | ||||||
Accrued interest |
3,147 | 4,948 | ||||||
Deferred revenue |
18,595 | 18,537 | ||||||
Other current liabilities |
5,409 | 4,653 | ||||||
Current liabilities discontinued operations |
854 | 675 | ||||||
Total current liabilities |
50,870 | 50,539 | ||||||
LONG-TERM DEBT, NET OF CURRENT MATURITIES |
327,704 | 330,072 | ||||||
OTHER NONCURRENT LIABILITIES |
14,018 | 14,363 | ||||||
DEFERRED INCOME TAXES |
81,411 | 84,520 | ||||||
Total liabilities |
474,003 | 479,494 | ||||||
COMMITMENTS AND CONTINGENCIES |
||||||||
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK,
$0.01 PAR VALUE; $50.00 LIQUIDATION PREFERENCE;
AUTHORIZED 10,000,000 SHARES; ISSUED AND OUTSTANDING
2,809,170 SHARES AT FEBRUARY 28, 2011 AND AUGUST
31, 2011 |
140,459 | 140,459 | ||||||
SHAREHOLDERS DEFICIT: |
||||||||
Class A common stock, $.01 par value; authorized 170,000,000 shares;
issued and outstanding 33,499,770 shares at February 28, 2011
and 33,495,861 shares at August 31, 2011 |
335 | 335 | ||||||
Class B common stock, $.01 par value; authorized 30,000,000 shares;
issued and outstanding 4,722,684 shares at February 28, 2011 and
August 31, 2011, respectively |
47 | 47 | ||||||
Additional paid-in capital |
528,786 | 529,182 | ||||||
Accumulated deficit |
(720,693 | ) | (728,752 | ) | ||||
Accumulated other comprehensive income |
1,776 | 2,140 | ||||||
Total shareholders deficit |
(189,749 | ) | (197,048 | ) | ||||
NONCONTROLLING INTERESTS |
47,764 | 48,290 | ||||||
Total deficit |
(141,985 | ) | (148,758 | ) | ||||
Total liabilities and deficit |
$ | 472,477 | $ | 471,195 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated statements.
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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN DEFICIT
(Unaudited)
(In thousands, except share data)
Accumulated | ||||||||||||||||||||||||||||||||||||
Class A | Class B | Additional | Other | |||||||||||||||||||||||||||||||||
Common Stock | Common Stock | Paid-in | Accumulated | Comprehensive | Noncontrolling | Total | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Income | Interests | Deficit | ||||||||||||||||||||||||||||
BALANCE, FEBRUARY 28, 2011 |
33,499,770 | $ | 335 | 4,722,684 | $ | 47 | $ | 528,786 | $ | (720,693 | ) | $ | 1,776 | $ | 47,764 | $ | (141,985 | ) | ||||||||||||||||||
Issuance of Common Stock to employees
and officers and related income tax benefits |
(3,909 | ) | 396 | 396 | ||||||||||||||||||||||||||||||||
Payments of dividends and
distributions to noncontrolling interests |
(2,263 | ) | (2,263 | ) | ||||||||||||||||||||||||||||||||
Comprehensive Loss: |
||||||||||||||||||||||||||||||||||||
Net income (loss) |
(8,059 | ) | 2,744 | |||||||||||||||||||||||||||||||||
Change in value of derivative instrument and
related income tax effects |
(489 | ) | ||||||||||||||||||||||||||||||||||
Cumulative translation adjustment |
853 | 45 | ||||||||||||||||||||||||||||||||||
Total comprehensive loss |
| | | | | | | | (4,906 | ) | ||||||||||||||||||||||||||
BALANCE, AUGUST 31, 2011 |
33,495,861 | $ | 335 | 4,722,684 | $ | 47 | $ | 529,182 | $ | (728,752 | ) | $ | 2,140 | $ | 48,290 | $ | (148,758 | ) | ||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated statements.
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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Six Months Ended August 31, | ||||||||
2010 | 2011 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Consolidated net income (loss) |
$ | 591 | $ | (5,315 | ) | |||
Adjustments to reconcile consolidated net income (loss) to net cash
used in operating activities |
||||||||
Discontinued operations |
195 | (2,790 | ) | |||||
Depreciation and amortization |
5,362 | 4,606 | ||||||
Accretion of debt extinguishment premium |
| 1,262 | ||||||
Loss on debt extinguishment |
| 1,478 | ||||||
Provision for bad debts |
317 | 217 | ||||||
Provision for deferred income taxes |
861 | 315 | ||||||
Noncash compensation |
1,109 | 515 | ||||||
Loss on sale of assets |
| 814 | ||||||
Changes in assets and liabilities |
||||||||
Accounts receivable |
(4,373 | ) | (1,168 | ) | ||||
Prepaid expenses and other current assets |
570 | (227 | ) | |||||
Other assets |
(300 | ) | (108 | ) | ||||
Accounts payable and accrued liabilities |
401 | 705 | ||||||
Deferred revenue |
(2,195 | ) | (58 | ) | ||||
Income taxes |
(269 | ) | (74 | ) | ||||
Other liabilities |
(1,464 | ) | (1,241 | ) | ||||
Net cash provided by (used in) operating activities discontinued operations |
1,844 | (69 | ) | |||||
Net cash provided by (used in) operating activities |
2,649 | (1,138 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Purchases of property and equipment |
(1,600 | ) | (2,406 | ) | ||||
Proceeds from the sale of property and equipment |
| 160 | ||||||
Distributions from and proceeds from sale of equity investments |
18 | 1,280 | ||||||
Net cash provided by (used in) investing activities discontinued operations |
(144 | ) | 5,797 | |||||
Net cash provided by (used in) investing activities |
(1,726 | ) | 4,831 | |||||
The accompanying notes are an integral part of these unaudited condensed consolidated statements.
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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
(Dollars in thousands)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
(Dollars in thousands)
Six Months Ended August 31, | ||||||||
2010 | 2011 | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Payments on long-term debt |
(8,694 | ) | (10,719 | ) | ||||
Proceeds from long-term debt |
11,000 | 13,000 | ||||||
Debt-related costs |
| (553 | ) | |||||
Payments of dividends and distributions to noncontrolling interests |
(1,496 | ) | (2,263 | ) | ||||
Settlement of tax withholding obligations on stock issued to employees |
(82 | ) | (74 | ) | ||||
Net cash used in financing activities discontinued operations |
(386 | ) | | |||||
Net cash provided by (used in) financing activities |
342 | (609 | ) | |||||
Effect of exchange rates on cash and cash equivalents |
(623 | ) | 426 | |||||
INCREASE IN CASH AND CASH EQUIVALENTS |
642 | 3,510 | ||||||
CASH AND CASH EQUIVALENTS: |
||||||||
Beginning of period |
6,814 | 6,068 | ||||||
End of period |
$ | 7,456 | $ | 9,578 | ||||
SUPPLEMENTAL DISCLOSURES: |
||||||||
Cash paid for |
||||||||
Interest |
$ | 11,343 | $ | 11,977 | ||||
Income taxes, net of refunds |
334 | 923 | ||||||
Noncash financing transactions |
||||||||
Value of stock issued to employees under stock compensation
program and to satisfy accrued incentives |
1,088 | 470 |
The accompanying notes are an integral part of these unaudited condensed consolidated statements.
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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS UNLESS INDICATED OTHERWISE, EXCEPT SHARE DATA)
August 31, 2011
(Unaudited)
Note 1. Summary of Significant Accounting Policies
Preparation of Interim Financial Statements
Pursuant to the rules and regulations of the Securities and Exchange Commission (SEC), the
condensed consolidated interim financial statements included herein have been prepared, without
audit, by Emmis Communications Corporation (ECC) and its subsidiaries (collectively, our, us,
we, Emmis or the Company). As permitted under the applicable rules and regulations of the
SEC, certain information and footnote disclosures normally included in financial statements
prepared in conformity with accounting principles generally accepted in the United States of
America have been condensed or omitted pursuant to such rules and regulations; however, Emmis
believes that the disclosures are adequate to make the information presented not misleading. The
condensed consolidated financial statements included herein should be read in conjunction with the
consolidated financial statements and the notes thereto included in the Annual Report for Emmis
filed on Form 10-K for the year ended February 28, 2011. The Companys results are subject to
seasonal fluctuations. Therefore, results shown on an interim basis are not necessarily indicative
of results for a full year.
In the opinion of Emmis, the accompanying condensed consolidated interim financial statements
contain all material adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the consolidated financial position of Emmis at August 31, 2011, and the results of
its operations and cash flows for the three-month and six-month periods ended August 31, 2010 and
2011.
Basic and Diluted Net Income (Loss) Per Common Share
Basic net income (loss) per common share is computed by dividing net income (loss)
attributable to common shareholders by the weighted-average number of common shares outstanding for
the period. Diluted net income (loss) per common share reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or converted.
Potentially dilutive securities at August 31, 2010 and 2011, consisted of stock options, restricted
stock awards and the 6.25% Series A cumulative convertible preferred stock. We currently have 2.8
million shares of preferred stock outstanding and each share converts into 2.44 shares of common
stock. Shares excluded from the calculation as the effect of their conversion into shares of our
common stock would be antidilutive were as follows:
Three Months Ended August 31, | Six Months Ended August 31, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
(shares in 000s) | (shares in 000s) | |||||||||||||||
6.25% Series A cumulative convertible preferred stock |
6,854 | 6,854 | 6,854 | 6,854 | ||||||||||||
Stock options and restricted stock awards |
7,597 | 7,565 | 7,445 | 7,522 | ||||||||||||
Antidilutive common share equivalents |
14,451 | 14,419 | 14,299 | 14,376 | ||||||||||||
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Discontinued Operation Slager
On October 28, 2009, the Hungarian National Radio and Television Board (ORTT) announced that
it was awarding to another bidder the national radio license then held by our majority-owned
subsidiary, Slager. Slager ceased broadcasting effective November 19, 2009.
Slager had historically been included in the radio segment. The following table summarizes
certain operating results for Slager for all periods presented:
Three months ended August 31, | Six months ended August 31, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Net revenues |
$ | 13 | $ | | $ | 20 | $ | 7 | ||||||||
Station operating expenses, excluding
depreciation and amortization expense |
149 | 155 | 576 | 245 | ||||||||||||
Other income |
96 | 53 | 259 | 148 | ||||||||||||
Loss before income taxes |
(40 | ) | (102 | ) | (297 | ) | (90 | ) | ||||||||
Loss attributable to minority interests |
32 | 28 | 277 | 49 |
Discontinued Operation Flint Peak Tower Site
On April 6, 2011, Emmis sold land, towers and other equipment at its Glendale, CA tower site
(the Flint Peak Tower Site) to Richland Towers Management Flint, Inc. for $6.0 million in cash.
In connection with the sale, Emmis recorded a gain on sale of assets of approximately $4.9 million.
Net proceeds from the sale were used to repay amounts outstanding under the credit facility.
The operations of the Flint Peak Tower Site had historically been included in the radio
segment. The following table summarizes certain operating results for the Flint Peak Tower Site
for all periods presented:
Three months ended August 31, | Six months ended August 31, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Net revenues |
$ | 137 | $ | | $ | 268 | $ | 59 | ||||||||
Station operating expenses, excluding
depreciation and amortization expense |
36 | 2 | 62 | 51 | ||||||||||||
Depreciation and amortization |
17 | | 34 | 7 | ||||||||||||
Gain on sale of assets |
| | | 4,882 | ||||||||||||
Income (loss) before income taxes |
84 | (2 | ) | 172 | 4,883 | |||||||||||
Provision for income taxes |
34 | | 70 | 2,003 |
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Summary of Assets and Liabilities of Discontinued Operations:
As of February 28, 2011 | As of August 31, 2011 | |||||||||||||||
Flint Peak Tower | Flint Peak Tower | |||||||||||||||
Slager | Site and Other | Slager | Site and Other | |||||||||||||
Current assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 1,658 | $ | | $ | 1,455 | $ | | ||||||||
Accounts receivable, net |
63 | | | | ||||||||||||
Other |
342 | | 417 | | ||||||||||||
Total current assets |
2,063 | | 1,872 | | ||||||||||||
Noncurrent assets: |
||||||||||||||||
Property and equipment, net |
| 925 | | | ||||||||||||
Other noncurrent assets |
20 | | 21 | | ||||||||||||
Total noncurrent assets |
20 | 925 | 21 | | ||||||||||||
Total assets |
$ | 2,083 | $ | 925 | $ | 1,893 | $ | | ||||||||
Current liabilities: |
||||||||||||||||
Accounts payable and
accrued expenses |
$ | 723 | $ | 111 | $ | 581 | $ | 94 | ||||||||
Deferred revenue |
| 20 | | | ||||||||||||
Total current liabilities |
$ | 723 | $ | 131 | $ | 581 | $ | 94 | ||||||||
Local Programming and Marketing Agreement Fees
The Company from time to time enters into local programming and marketing agreements (LMAs)
in connection with acquisitions or dispositions of radio stations, pending regulatory approval of
transfer of the FCC licenses. In such cases where the Company enters into an LMA in connection
with a disposition, the Company generally receives specified periodic payments in exchange for the
counterparty receiving the right to program and sell advertising for a specified portion of the
stations inventory of broadcast time. Nevertheless, as the holder of the FCC license, the Company
retains control and responsibility for the operation of the station, including responsibility over
all programming broadcast on the station.
On June 20, 2011, Emmis entered into an LMA for WRXP-FM in New York, WKQX-FM in Chicago and
WLUP-FM in Chicago with LMA Merlin Media LLC. The LMA for these stations started on July 15, 2011
and terminated upon the sale of these stations on September 1, 2011 (see Note 11 for more
discussion of the sale of the stations). Emmis continues to operate KXOS-FM pursuant to an LMA
with Grupo Radio Centro, S.A.B. de C.V, a Mexican broadcasting company.
LMA fees, recorded as net revenues in the accompanying condensed consolidated statements of
operations, for the three-month and six-month periods ended August 31, 2011 were as follows:
Three months ended August 31, | Six months ended August 31, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Grupo Radio Centro LMA |
$ | 1,750 | $ | 1,750 | $ | 3,500 | $ | 3,500 | ||||||||
Merlin Media LMA |
| 310 | | 310 | ||||||||||||
Total |
1,750 | 2,060 | 3,500 | 3,810 | ||||||||||||
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Note 2. Share Based Payments
Stock Option Awards
The Company has granted options to purchase its common stock to employees and directors of the
Company under various stock option plans at no less than the fair market value of the underlying
stock on the date of grant. These options are granted for a term not exceeding 10 years and are
forfeited, except in certain circumstances, in the event the employee or director terminates his or
her employment or relationship with the Company. Generally, these options either vest annually
over three years (one-third each year for three years), or cliff vest at the end of three years.
The Company issues new shares upon the exercise of stock options.
The amounts recorded as share based compensation expense primarily relate to annual stock
option and restricted stock grants, but may also include restricted common stock issued under
employment agreements, common stock issued to employees and directors in lieu of cash payments, and
Company matches of common stock in our 401(k) plan.
The fair value of each option awarded is estimated on the date of grant using a Black-Scholes
option-pricing model and expensed on a straight-line basis over the vesting period. Expected
volatilities are based on historical volatility of the Companys stock. The Company uses
historical data to estimate option exercises and employee terminations within the valuation model.
The Company includes estimated forfeitures in its compensation cost and updates the estimated
forfeiture rate through the final vesting date of awards. The Company uses the simplified method
to estimate the expected term for all options granted. Although the Company has granted options
for many years, the historical exercise activity of our options was impacted by the way the Company
processed the equitable adjustment of our November 2006 special dividend. Consequently, the
Company believes that reliable data regarding exercise behavior only exists for the period
subsequent to November 2006, which is insufficient experience upon which to estimate the expected
term. The risk-free interest rate for periods within the life of the option is based on the U.S.
Treasury yield curve in effect at the time of grant. The following assumptions were used to
calculate the fair value of the Companys options on the date of grant during the six months ended
August 31, 2010 and 2011:
Six Months Ended August 31, | ||||||||
2010 | 2011 | |||||||
Risk-Free Interest Rate: |
2.9 | % | 1.8% 2.5 | % | ||||
Expected Dividend Yield: |
0 | % | 0 | % | ||||
Expected Life (Years): |
6.5 | 6.0 | ||||||
Expected Volatility: |
98.9 | % | 110.2% 110.9 | % |
The following table presents a summary of the Companys stock options outstanding at August
31, 2011, and stock option activity during the six months ended August 31, 2011 (Price reflects
the weighted average exercise price per share):
Weighted Average | Aggregate | |||||||||||||||
Remaining | Intrinsic | |||||||||||||||
Options | Price | Contractual Term | Value | |||||||||||||
Outstanding, beginning of period |
8,515,491 | $ | 9.26 | |||||||||||||
Granted |
808,536 | 1.12 | ||||||||||||||
Exercised (1) |
| | ||||||||||||||
Forfeited |
31,500 | 0.72 | ||||||||||||||
Expired |
985,106 | 18.11 | ||||||||||||||
Outstanding, end of period |
8,307,421 | 7.45 | 5.5 | $ | 752 | |||||||||||
Exercisable, end of period |
4,812,293 | 12.33 | 3.5 | $ | 16 |
(1) | No options were exercised during the six months ended August 31, 2010 or 2011; thus, the
Company did not record an income tax benefit related to option exercises. |
The weighted average grant date fair value of options granted during the three months ended
August 31, 2010 and 2011, was $0.73 and $0.93, respectively.
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A summary of the Companys nonvested options at August 31, 2011, and changes during the six
months ended August 31, 2011, is presented below:
Weighted Average | ||||||||
Grant Date | ||||||||
Options | Fair Value | |||||||
Nonvested, beginning of period |
2,946,661 | $ | 0.50 | |||||
Granted |
808,536 | 0.93 | ||||||
Vested |
228,569 | 1.28 | ||||||
Forfeited |
31,500 | 0.51 | ||||||
Nonvested, end of period |
3,495,128 | 0.55 |
There were 3.9 million shares available for future grants under the Companys various equity
plans at August 31, 2011. The vesting dates of outstanding options at August 31, 2011 range from
September 2011 to July 2014, and expiration dates range from March 2012 to July 2021.
Restricted Stock Awards
The Company grants restricted stock awards to employees and directors. These awards generally
vest at the end of the second or third year after grant and are forfeited, except in certain
circumstances, in the event the employee terminates his or her employment or relationship with the
Company prior to vesting. Restricted stock award grants prior to fiscal 2011 were granted out of
the Companys 2004 Equity Compensation Plan and restricted stock award grants since March 1, 2010
have been granted out of the Companys 2010 Equity Compensation Plan. The Company may also award,
out of the Companys 2010 Equity Compensation Plan, stock to settle certain bonuses and other
compensation that otherwise would be paid in cash. Any restrictions on these shares are
immediately lapsed on the grant date.
The following table presents a summary of the Companys restricted stock grants outstanding at
August 31, 2011, and restricted stock activity during the six months ended August 31, 2011 (Price
reflects the weighted average share price at the date of grant):
Awards | Price | |||||||
Grants outstanding, beginning of year |
174,956 | $ | 3.37 | |||||
Granted |
17,560 | 1.03 | ||||||
Vested (restriction lapsed) |
166,176 | 3.51 | ||||||
Forfeited |
| | ||||||
Grants outstanding, end of year |
26,340 | 0.91 | ||||||
The total grant date fair value of shares vested during the six months ended August 31, 2010
and 2011 was $2.0 million and $0.6 million, respectively.
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Recognized Non-Cash Compensation Expense
The following table summarizes stock-based compensation expense and related tax benefits
recognized by the Company in the three and six months ended August 31, 2010 and 2011:
Three Months | Six Months | |||||||||||||||
Ended August 31, | Ended August 31, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Station operating expenses |
$ | 87 | $ | 48 | $ | 518 | $ | 128 | ||||||||
Corporate expenses |
279 | 185 | 591 | 387 | ||||||||||||
Stock-based compensation expense included in operating expenses |
366 | 233 | 1,109 | 515 | ||||||||||||
Tax benefit |
| | | | ||||||||||||
Recognized stock-based compensation expense, net of tax |
$ | 366 | $ | 233 | $ | 1,109 | $ | 515 | ||||||||
As of August 31, 2011, there was $0.9 million of unrecognized compensation cost, net of
estimated forfeitures, related to nonvested share-based compensation arrangements. The cost is
expected to be recognized over a weighted average period of approximately 1.4 years.
Note 3. Intangible Assets and Goodwill
Valuation of Indefinite-lived Broadcasting Licenses
In accordance with Accounting Standards Codification (ASC) Topic 350, Intangibles Goodwill
and Other, the Companys Federal Communications Commission (FCC) licenses are considered
indefinite-lived intangibles. These assets, which the Company determined were its only
indefinite-lived intangibles, are not subject to amortization, but are tested for impairment at
least annually as discussed below.
The carrying amounts of the Companys FCC licenses were $328.8 million as of February 28, 2011
and August 31, 2011. This amount is entirely attributable to our radio division. The Company
generally performs its annual impairment test of indefinite-lived intangibles as of December 1 of
each year. When indicators of impairment are present, the Company will perform an interim
impairment test. During the quarter ended August 31, 2011, no new or additional impairment
indicators emerged; hence, no interim impairment testing was warranted. These impairment tests may
result in impairment charges in future periods.
Fair value of our FCC licenses is estimated to be the price that would be received to sell an
asset in an orderly transaction between market participants at the measurement date. To determine
the fair value of our FCC licenses, the Company uses an income valuation method when it performs
its impairment tests. Under this method, the Company projects cash flows that would be generated
by each of its units of accounting assuming the unit of accounting was commencing operations in its
respective market at the beginning of the valuation period. This cash flow stream is discounted to
arrive at a value for the FCC license. The Company assumes the competitive situation that exists
in each market remains unchanged, with the exception that its unit of accounting commenced
operations at the beginning of the valuation period. In doing so, the Company extracts the value
of going concern and any other assets acquired, and strictly values the FCC license. Major
assumptions involved in this analysis include market revenue, market revenue growth rates, unit of
accounting audience share, unit of accounting revenue share and discount rate. Each of these
assumptions may change in the future based upon changes in general economic conditions, audience
behavior, consummated transactions, and numerous other variables that may be beyond our control.
When evaluating our radio broadcasting licenses for impairment, the testing is performed at the
unit of accounting level as determined by ASC Topic 350-30-35. In our case, radio stations in a
geographic market cluster are considered a single unit of accounting, provided that they are not
being operated under a Local Marketing Agreement by another broadcaster.
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Valuation of Goodwill
ASC Topic 350-20-35 requires the Company to test goodwill for impairment at least annually
using a two-step process. The first step is a screen for potential impairment, while the second
step measures the amount of impairment. The Company conducts the two-step impairment test on
December 1 of each fiscal year, unless indications of impairment exist during an interim period.
During the quarter ended August 31, 2011, no new or additional impairment indicators emerged;
hence, no interim impairment testing was warranted. When assessing its goodwill for impairment,
the Company uses an enterprise valuation approach to determine the fair value of each of the
Companys reporting units (radio stations grouped by market and magazines on an individual basis).
Management determines enterprise value for each of its reporting units by multiplying the two-year
average station operating income generated by each reporting unit (current year based on actual
results and the next year based on budgeted results) by an estimated market multiple. The Company
uses a blended station operating income trading multiple of publicly traded radio operators as a
benchmark for the multiple it applies to its radio reporting units. There are no publicly traded
publishing companies that are focused predominantly on city and regional magazines as is our
publishing segment. Therefore, the market multiple used as a benchmark for our publishing
reporting units has been based on recently completed transactions within the city and regional
magazine industry or analyst reports that include valuations of magazine divisions within publicly
traded media conglomerates. Management believes this methodology for valuing radio and publishing
properties is a common approach and believes that the multiples used in the valuation are
reasonable given our peer comparisons and recent market transactions. To corroborate the step-one
reporting unit fair values determined using the market approach described above, management also
uses an income approach, which is a discounted cash flow method to determine the fair value of the
reporting unit.
This enterprise valuation is compared to the carrying value of the reporting unit for the
first step of the goodwill impairment test. If the reporting unit exhibits impairment, the Company
proceeds to the second step of the goodwill impairment test. For its step-two testing, the
enterprise value is allocated among the tangible assets, indefinite-lived intangible assets (FCC
licenses valued using a direct-method valuation approach) and unrecognized intangible assets, such
as customer lists, with the residual amount representing the implied fair value of the goodwill.
To the extent the carrying amount of the goodwill exceeds the implied fair value of the goodwill,
the difference is recorded as an impairment charge in the statement of operations.
As of February 28, 2011 and August 31, 2011, the carrying amount of the Companys goodwill was
$24.2 million. As of February 28, 2011 and August 31, 2011 approximately $6.3 million and $17.9
million of our goodwill was attributable to our radio and publishing divisions, respectively.
Definite-lived intangibles
The Companys definite-lived intangible assets consist primarily of foreign broadcasting
licenses, trademarks, and favorable office leases, all of which are amortized over the period of
time the assets are expected to contribute directly or indirectly to the Companys future cash
flows. The following table presents the weighted-average useful life, gross carrying amount and
accumulated amortization for each major class of definite-lived intangible assets at February 28,
2011 and August 31, 2011:
February 28, 2011 | August 31, 2011 | |||||||||||||||||||||||||||
Weighted Average | Gross | Net | Gross | Net | ||||||||||||||||||||||||
Remaining Useful Life | Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | ||||||||||||||||||||||
(in years) | Amount | Amortization | Amount | Amount | Amortization | Amount | ||||||||||||||||||||||
Foreign Broadcasting Licenses |
9.6 | $ | 8,716 | $ | 6,331 | $ | 2,385 | $ | 8,716 | $ | 6,881 | $ | 1,835 | |||||||||||||||
Trademarks |
13.5 | 749 | 478 | 271 | 749 | 490 | 259 | |||||||||||||||||||||
Favorable Office Leases |
1.0 | 688 | 655 | 33 | 688 | 666 | 22 | |||||||||||||||||||||
TOTAL |
$ | 10,153 | $ | 7,464 | $ | 2,689 | $ | 10,153 | $ | 8,037 | $ | 2,116 | ||||||||||||||||
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Total amortization expense from definite-lived intangibles for the three months ended August
31, 2010 and 2011, was $0.3 million in each period. Total amortization expense from definite-lived
intangibles for the six months ended August 31, 2010 and 2011, was $0.6 million in each period.
The following table presents the Companys estimate of amortization expense for each of the five
succeeding fiscal years for definite-lived intangibles:
YEAR ENDED FEBRUARY 28 (29), |
||||
2012 |
$ | 692 | ||
2013 |
225 | |||
2014 |
210 | |||
2015 |
209 | |||
2016 |
209 |
In May 2011, Emmis was granted an extension of its broadcasting license in Slovakia, which now
expires in February 2021. Emmis was also awarded an option for an additional eight year extension.
The remaining carrying value of the broadcasting license in Slovakia is being amortized over the
initial eight-year term that expires in February 2021.
Note 4. Liquidity
The Company continually projects its anticipated cash needs, which include its operating
needs, capital needs, principal and interest payments on its indebtedness and preferred stock
dividends. As of the filing of this Form 10-Q, management believes the Company can meet its
liquidity needs through the end of fiscal year 2012 with cash and cash equivalents on hand,
projected cash flows from operations and, to the extent necessary, through its borrowing capacity
under the Credit Agreement, which was approximately $6.4 million at August 31, 2011. Based on
these projections, management also believes the Company will be in compliance with its debt
covenants through the end of fiscal year 2012.
Borrowings under the Credit Agreement depend upon our continued compliance with certain
operating covenants and financial ratios. The Company must maintain a minimum amount of trailing
twelve-month Consolidated EBITDA (as defined in the Credit Agreement) and at least $5 million in
Liquidity (as defined in the Credit Agreement). The Credit Agreement also contains certain other
non-financial covenants. We were in compliance with all financial and non-financial covenants as
of August 31, 2011. Our Liquidity (as defined in the Credit Agreement) as of August 31, 2011 was
$11.1 million. Our minimum Consolidated EBITDA (as defined in the Credit Agreement) requirement
and actual amount as of August 31, 2011 was as follows:
As of August 31, 2011 | ||||||||
Actual Trailing | ||||||||
Covenant | Twelve-Month | |||||||
Requirement | Consolidated EBITDA1 | |||||||
Trailing Twelve-month Consolidated EBITDA1 |
$ | 25,000 | $ | 29,837 |
Note 5. Derivative Instruments and Hedging Activities
As of August 31, 2011, the Company has no outstanding interest rate derivatives. The
discussion below describes the Companys interest rate derivatives that matured during the periods
presented.
1 | As defined in the Credit Agreement |
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Risk Management Objective of Using Derivatives
The Company is exposed to certain risk arising from both its business operations and economic
conditions. The Company principally manages its exposures to a wide variety of business and
operational risks through management of its core business activities. The Company manages economic
risks, including interest rate, liquidity, and credit risk primarily by managing the amount,
sources, and duration of its debt funding and the use of derivative financial instruments.
Specifically, the Company enters into derivative financial instruments to manage interest rate
exposure with the following objectives:
| manage current and forecasted interest rate risk while maintaining optimal financial
flexibility and solvency |
| proactively manage the Companys cost of capital to ensure the Company can effectively
manage operations and execute its business strategy, thereby maintaining a competitive
advantage and enhancing shareholder value |
| comply with covenant requirements in the Companys Credit Agreement |
Cash Flow Hedges of Interest Rate Risk
The Companys objectives in using interest rate derivatives were to add stability to interest
expense and to manage its exposure to interest rate movements. To accomplish this objective, the
Company primarily used interest rate swaps as part of its interest rate risk management strategy.
Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts
from a counterparty in exchange for the Company making fixed-rate payments over the life of the
agreements without exchange of the underlying notional amount. Under the terms of its Credit
Agreement, the Company was required to fix or cap the interest rate on at least 30% of its debt
outstanding (as defined in the Credit Agreement) for the three-year period ending November 2, 2009.
The effective portion of changes in the fair value of derivatives designated and that qualify
as cash flow hedges is recorded in accumulated other comprehensive income (loss) and is
subsequently reclassified into earnings in the period that the hedged forecasted transaction
affects earnings. The Companys interest rate derivatives were used to hedge the variable cash
flows associated with existing variable-rate debt. The ineffective portion of the change in fair
value of the derivatives was recognized directly in earnings. The Company did not record any hedge
ineffectiveness in earnings during the three or six months ended August 31, 2010 and 2011. Amounts
reported in accumulated other comprehensive income related to derivatives were reclassified to
interest expense as interest payments were made on the Companys variable-rate debt.
In March 2007, the Company entered into a three-year interest rate exchange agreement (a
Swap), whereby the Company paid a fixed rate of 4.795% on $165 million of notional principal to
Bank of America, and Bank of America paid to the Company a variable rate on the same amount of
notional principal based on the three-month London Interbank Offered Rate (LIBOR). This swap
matured in March 2010, at which time the Company recognized a $2.0 million tax benefit that had
previously been recorded in accumulated other comprehensive income. In March 2008, the Company
entered into an additional three-year Swap, whereby the Company paid a fixed rate of 2.964% on $100
million of notional principal to Deutsche Bank, and Deutsche Bank paid to the Company a variable
rate on the same amount of notional principal based on the three-month LIBOR. In January 2009, the
Company entered into an additional two-year Swap effective as of March 28, 2009, whereby the
Company paid a fixed rate of 1.771% on $75 million of notional principal to Deutsche Bank, and
Deutsche Bank paid to the Company a variable rate on the same amount of notional principal based on
the three-month LIBOR. The two swaps with Deutsche Bank matured in March 2011, at which time the
Company recognized a $0.8 million tax benefit that had previously been recorded in accumulated
other comprehensive income.
The Company does not use derivatives for trading or speculative purposes.
The table below presents the fair value of the Companys derivative financial instruments as
well as their classification on the balance sheet as of February 28, 2011. The accumulated other
comprehensive income
balance related to our derivative instruments at February 28, 2011 was $489. The fair values
of the derivative instruments was estimated by obtaining quotations from the financial institution
that were the counterparty to the instruments. The fair value was an estimate of the net amount
that the Company would have been required to pay on February 28, 2011, if the agreements were
transferred to other parties or cancelled by the Company, as further adjusted by a credit
adjustment required by ASC Topic 820, Fair Value Measurements and Disclosures, discussed below. As
discussed above, the derivative instruments matured in March 2011, thus no amounts related to
derivative instruments remain on the condensed consolidated balance sheets as of August 31, 2011.
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Tabular Disclosure of Fair Values of Derivative Instruments | ||||||||||||||||||||||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||||||||||
As of February 28, 2011 | As of August 31, 2011 | As of February 28, 2011 | As of August 31, 2011 | |||||||||||||||||||||||||||||
Balance Sheet | Balance Sheet | Balance Sheet | Balance Sheet | |||||||||||||||||||||||||||||
Location | Fair Value | Location | Fair Value | Location | Fair Value | Location | Fair Value | |||||||||||||||||||||||||
Derivatives designated as hedging instruments |
||||||||||||||||||||||||||||||||
Interest Rate Swap Agreements (Current Portion) |
N/A | | N/A | | Other Current Liabilities | 297 | N/A | | ||||||||||||||||||||||||
Total derivatives designated as hedging instruments |
$ | | $ | | $ | 297 | $ | | ||||||||||||||||||||||||
The table below presents the effect of the Companys derivative financial instruments on
the condensed consolidated statements of operations for the three months and six months ended
August 31, 2010 and 2011.
For the Three Months Ended August 31, | ||||||||||||||||||||||||||||||||
Location of Gain or (Loss) | ||||||||||||||||||||||||||||||||
Location of Gain or | Recognized in Income on | Amount of Gain or (Loss) | ||||||||||||||||||||||||||||||
(Loss) Reclassified | Derivative (Ineffective | Recognized in Income on Derivative | ||||||||||||||||||||||||||||||
Amount of Gain or (Loss) | from Accumulated | Amount of Gain or (Loss) | Portion and Amount | (Ineffective Portion and Amount | ||||||||||||||||||||||||||||
Derivatives in Cash Flow | Recognized in OCI on Derivative | OCI into Income | Reclassified from Accumulated OCI | Excluded from | Excluded from Effectiveness | |||||||||||||||||||||||||||
Hedging Relationships | (Effective Portion) | (Effective Portion) | into Income (Effective Portion) | Effectiveness Testing) | Testing) | |||||||||||||||||||||||||||
2010 | 2011 | 2010 | 2011 | 2010 | 2011 | |||||||||||||||||||||||||||
Interest Rate Swap
Agreements |
$ | (551 | ) | $ | | Interest expense | $ | (892 | ) | $ | (297 | ) | N/A | $ | | $ | | |||||||||||||||
Total |
$ | (551 | ) | $ | | $ | (892 | ) | $ | (297 | ) | $ | | $ | | |||||||||||||||||
For the Six Months Ended August 31, | ||||||||||||||||||||||||||||||||
Location of Gain or (Loss) | ||||||||||||||||||||||||||||||||
Location of Gain or | Recognized in Income on | Amount of Gain or (Loss) | ||||||||||||||||||||||||||||||
(Loss) Reclassified | Derivative (Ineffective | Recognized in Income on Derivative | ||||||||||||||||||||||||||||||
Amount of Gain or (Loss) | from Accumulated | Amount of Gain or (Loss) | Portion and Amount | (Ineffective Portion and Amount | ||||||||||||||||||||||||||||
Derivatives in Cash Flow | Recognized in OCI on Derivative | OCI into Income | Reclassified from Accumulated OCI | Excluded from | Excluded from Effectiveness | |||||||||||||||||||||||||||
Hedging Relationships | (Effective Portion) | (Effective Portion) | into Income (Effective Portion) | Effectiveness Testing) | Testing) | |||||||||||||||||||||||||||
2010 | 2011 | 2010 | 2011 | 2010 | 2011 | |||||||||||||||||||||||||||
Interest Rate Swap
Agreements |
$ | (395 | ) | $ | | Interest expense | $ | (2,469 | ) | $ | (297 | ) | N/A | $ | | $ | | |||||||||||||||
Total |
$ | (395 | ) | $ | | $ | (2,469 | ) | $ | (297 | ) | $ | | $ | | |||||||||||||||||
Credit-risk-related Contingent Features
The Company managed its counterparty risk by entering into derivative instruments with global
financial institutions where it believed the risk of credit loss resulting from nonperformance by
the counterparty is low. The Companys counterparty on its outstanding interest rate swaps was
Deutsche Bank.
In accordance with ASC Topic 820, the Company made Credit Value Adjustments (CVAs) to adjust
the valuation of derivatives to account for our own credit risk with respect to all derivative
liability positions. The CVA was accounted for as a decrease to the derivative position with the
corresponding increase or decrease reflected in accumulated other comprehensive income (loss) for
derivatives designated as cash flow hedges. The CVA also accounted for nonperformance risk of our
counterparty in the fair value measurement of all derivative asset positions, when appropriate. As
of February 28, 2011 , the fair value of our derivative instruments was net of less than $0.1
million in CVAs.
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Table of Contents
The Company did not post any collateral related to the interest rate swap agreements.
Note 6. Fair Value Measurements
As defined in ASC Topic 820, fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market participants at the
measurement date (exit price). The Company utilizes market data or assumptions that market
participants would use in pricing the asset or liability, including assumptions about risk and the
risks inherent in the inputs to the valuation technique. These inputs can be readily observable,
market corroborated or generally unobservable. The Company utilizes valuation techniques that
maximize the use of observable inputs and minimize the use of unobservable inputs. ASC Topic 820
establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical
assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3
measurement).
Recurring Fair Value Measurements
The following table sets forth by level within the fair value hierarchy the Companys
financial assets and liabilities that were accounted for at fair value on a recurring basis as of
February 28, 2011 and August 31, 2011. The financial assets and liabilities are classified in
their entirety based on the lowest level of input that is significant to the fair value
measurement. The Companys assessment of the significance of a particular input to the fair value
measurement requires judgment and may affect the valuation of fair value assets and liabilities and
their placement within the fair value hierarchy levels.
As of August 31, 2011 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical Assets | Observable | Unobservable | ||||||||||||||
or Liabilities | Inputs | Inputs | Total | |||||||||||||
Available for sale securities |
$ | | $ | | $ | 189 | $ | 189 | ||||||||
Total assets measured at fair value on a recurring basis |
$ | | $ | | $ | 189 | $ | 189 | ||||||||
As of February 28, 2011 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Quoted Prices | ||||||||||||||||
in Active | Significant | |||||||||||||||
Markets for | Other | Significant | ||||||||||||||
Identical Assets | Observable | Unobservable | ||||||||||||||
or Liabilities | Inputs | Inputs | Total | |||||||||||||
Available for sale securities |
$ | | $ | | $ | 189 | $ | 189 | ||||||||
Total assets measured at fair value on a recurring basis |
$ | | $ | | $ | 189 | $ | 189 | ||||||||
Interest rate swap agreements |
| | 297 | 297 | ||||||||||||
Total liabilities measured at fair value on a recurring basis |
$ | | $ | | $ | 297 | $ | 297 | ||||||||
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Table of Contents
Available for sale securities Emmis available for sale security is an investment in
preferred stock of a company that specializes in digital radio transmission technology that is not
traded in active markets. The investment is recorded at fair value. This is considered a Level 3
input.
Swap agreements Emmis derivative financial instruments consisted solely of interest rate cash
flow hedges in which the Company paid a fixed rate and receives a variable interest rate that was
observable based upon a forward interest rate curve, as adjusted for the CVA discussed in Note 5.
Because a more than insignificant portion of the valuation was based upon unobservable inputs,
these interest rate swaps were considered a Level 3 input.
The following table shows a reconciliation of the beginning and ending balances for fair value
measurements using significant unobservable inputs:
For the Six Months Ended | ||||||||||||||||
August 31, 2010 | August 31, 2011 | |||||||||||||||
Available | Available | |||||||||||||||
For Sale | Derivative | For Sale | Derivative | |||||||||||||
Securities | Instruments | Securities | Instruments | |||||||||||||
Beginning Balance |
$ | 452 | $ | 4,068 | $ | 189 | $ | 297 | ||||||||
Realized losses included in earnings |
| (2,469 | ) | | (297 | ) | ||||||||||
Changes in other comprehensive income |
| 395 | | | ||||||||||||
Ending Balance |
$ | 452 | $ | 1,994 | $ | 189 | $ | | ||||||||
Non-Recurring Fair Value Measurements
The Company has certain assets that are measured at fair value on a non-recurring basis under
circumstances and events that include those described in Note 3, Intangible Assets and Goodwill,
and are adjusted to fair value only when the carrying values are more than the fair values. The
categorization of the framework used to price the assets is considered a Level 3, due to the
subjective nature of the unobservable inputs used to determine the fair value (see Note 3 for more
discussion).
During the three months and six months ended August 31, 2011, there were no adjustments to the
fair value of these assets as there were no indicators that would have required interim testing.
Fair Value Of Other Financial Instruments
The estimated fair value of financial instruments is determined using the best available
market information and appropriate valuation methodologies. Considerable judgment is necessary,
however, in interpreting market data to develop the estimates of fair value. Accordingly, the
estimates presented are not necessarily indicative of the amounts that the Company could realize in
a current market exchange, or the value that ultimately will be realized upon maturity or
disposition. The use of different market assumptions may have a material effect on the estimated
fair value amounts.
The following methods and assumptions were used to estimate the fair value of financial
instruments:
Cash and cash equivalents, accounts receivable and accounts payable, including accrued
liabilities: The carrying amount of these assets and liabilities approximates fair value because of
the short maturity of these instruments.
Credit Agreement debt: As of February 28, 2011 and August 31, 2011, the fair value of the
Companys Credit Agreement debt as of those dates was $311.1 million and $320.5 million,
respectively, while the carrying value was $331.0 million and $333.3 million, respectively. The
Companys assessment of the fair value of the Credit Agreement debt is based on bid prices for the
portion of debt that is actively traded. The Extended Term Loans are not actively traded (see Note
9 for more discussion of the Extended Term Loans). The Company believes that the current carrying
value of the Extended Term Loans approximates its fair value.
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6.25% Series A cumulative convertible preferred stock: As of February 28, 2011 and August
31, 2011, the fair value of the Companys 6.25% Series A cumulative convertible preferred stock
based on quoted market prices was $49.2 million and $41.6 million, respectively, while the carrying
value was $140.5 million for both periods.
Note 7. Comprehensive Income (Loss)
Comprehensive income (loss) was comprised of the following for the three months and six months
ended August 31, 2010 and 2011:
Three Months Ended | Six Months Ended | |||||||||||||||
August 31, | August 31, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Consolidated net income (loss) |
$ | 1,295 | $ | (4,622 | ) | $ | 591 | $ | (5,315 | ) | ||||||
Comprehensive income (loss), net of tax: |
||||||||||||||||
Change in fair value of derivatives |
340 | | 81 | (489 | ) | |||||||||||
Translation adjustment |
(1,321 | ) | 464 | (1,728 | ) | 898 | ||||||||||
Comprehensive income (loss) |
$ | 314 | $ | (4,158 | ) | $ | (1,056 | ) | $ | (4,906 | ) | |||||
Less: Comprehensive income attributable
to noncontrolling interests |
(992 | ) | (1,468 | ) | (1,766 | ) | (2,789 | ) | ||||||||
Comprehensive loss attributable to the Company |
$ | (678 | ) | $ | (5,626 | ) | $ | (2,822 | ) | $ | (7,695 | ) | ||||
Note 8. Segment Information
The Companys operations are aligned into two business segments: (i) Radio and (ii)
Publishing. These business segments are consistent with the Companys management of these
businesses and its financial reporting structure. Corporate expenses are not allocated to
reportable segments. The results of operations of our Hungary radio operations and the operations
related to our Flint Peak Tower Site, both of which had previously been included in the radio
segment, have been classified as discontinued operations and have been excluded from the segment
disclosures below. See Note 1 for more discussion of our discontinued operations.
The Companys segments operate primarily in the United States, but we also operate radio
stations located in Slovakia and Bulgaria. The following table summarizes the net revenues and
long-lived assets of our international properties included in our condensed consolidated financial
statements.
Net Revenues | Net Revenues | Long-lived Assets | ||||||||||||||||||||||
Three Months Ended August 31, | Six Months Ended August 31, | As of February 28, | As of August 31, | |||||||||||||||||||||
2010 | 2011 | 2010 | 2011 | 2011 | 2011 | |||||||||||||||||||
Continuing Operations: |
||||||||||||||||||||||||
Slovakia |
$ | 3,167 | $ | 3,246 | $ | 6,226 | $ | 5,918 | $ | 7,521 | $ | 7,535 | ||||||||||||
Bulgaria |
407 | 363 | 720 | 618 | 778 | 705 | ||||||||||||||||||
Discontinued Operations (see Note 1): |
||||||||||||||||||||||||
Hungary |
$ | 13 | $ | | $ | 20 | $ | 7 | $ | 20 | $ | 21 |
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The accounting policies as described in the summary of significant accounting policies
included in the Companys Annual Report filed on Form 10-K, for the year ended February 28, 2011,
and in Note 1 to these condensed consolidated financial statements, are applied consistently across
segments.
Three Months Ended | ||||||||||||||||
August 31, 2011 | Radio | Publishing | Corporate | Consolidated | ||||||||||||
Net revenues |
$ | 50,028 | $ | 14,593 | $ | | $ | 64,621 | ||||||||
Station operating expenses, excluding
depreciation and amortization |
37,779 | 14,370 | | 52,149 | ||||||||||||
Corporate expenses, excluding
depreciation and amortization |
| | 2,969 | 2,969 | ||||||||||||
Depreciation and amortization |
1,710 | 118 | 282 | 2,110 | ||||||||||||
Loss on sale of assets |
793 | 24 | | 817 | ||||||||||||
Operating income (loss) |
$ | 9,746 | $ | 81 | $ | (3,251 | ) | $ | 6,576 | |||||||
Three Months Ended | ||||||||||||||||
August 31, 2010 | Radio | Publishing | Corporate | Consolidated | ||||||||||||
Net revenues |
$ | 51,572 | 15,137 | $ | | $ | 66,709 | |||||||||
Station operating expenses, excluding
depreciation and amortization |
37,041 | 14,326 | | 51,367 | ||||||||||||
Corporate expenses, excluding
depreciation and amortization |
| | 4,697 | 4,697 | ||||||||||||
Depreciation and amortization |
1,892 | 128 | 346 | 2,366 | ||||||||||||
Operating income (loss) |
$ | 12,639 | 683 | $ | (5,043 | ) | $ | 8,279 | ||||||||
Six Months Ended | ||||||||||||||||
August 31, 2011 | Radio | Publishing | Corporate | Consolidated | ||||||||||||
Net revenues |
$ | 95,398 | $ | 30,369 | $ | | $ | 125,767 | ||||||||
Station
operating expenses, excluding depreciation and amortization |
70,767 | 30,716 | | 101,483 | ||||||||||||
Corporate
expenses, excluding depreciation and amortization |
| | 10,304 | 10,304 | ||||||||||||
Depreciation and amortization |
3,445 | 230 | 546 | 4,221 | ||||||||||||
Loss on sale of assets |
790 | 24 | | 814 | ||||||||||||
Operating income (loss) |
$ | 20,396 | $ | (601 | ) | $ | (10,850 | ) | $ | 8,945 | ||||||
Six Months Ended | ||||||||||||||||
August 31, 2010 | Radio | Publishing | Corporate | Consolidated | ||||||||||||
Net revenues |
$ | 95,805 | $ | 31,113 | $ | | $ | 126,918 | ||||||||
Station operating expenses, excluding
depreciation and amortization |
70,051 | 30,193 | | 100,244 | ||||||||||||
Corporate expenses, excluding
depreciation and amortization |
| | 9,875 | 9,875 | ||||||||||||
Depreciation and amortization |
3,810 | 260 | 700 | 4,770 | ||||||||||||
Operating income (loss) |
$ | 21,944 | $ | 660 | $ | (10,575 | ) | $ | 12,029 | |||||||
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As of February 28, 2011 | ||||||||||||||||
Radio | Publishing | Corporate | Consolidated | |||||||||||||
Assets continuing operations |
$ | 404,302 | $ | 38,299 | $ | 26,868 | $ | 469,469 | ||||||||
Assets discontinued operations |
3,008 | | | 3,008 | ||||||||||||
Total assets |
$ | 407,310 | $ | 38,299 | $ | 26,868 | $ | 472,477 | ||||||||
As of August 31, 2011 | ||||||||||||||||
Radio | Publishing | Corporate | Consolidated | |||||||||||||
Assets continuing operations |
$ | 405,686 | $ | 36,337 | $ | 27,279 | $ | 469,302 | ||||||||
Assets discontinued operations |
1,893 | | | 1,893 | ||||||||||||
Total assets |
$ | 407,579 | $ | 36,337 | $ | 27,279 | $ | 471,195 | ||||||||
Note 9. Credit Agreement Amendment
On March 29, 2011, ECC and its principal operating subsidiary, Emmis Operating Company (EOC
and the Borrower) entered into the Third Amendment to Amended and Restated Revolving Credit and
Term Loan Agreement (the Third Amendment), by and among the Borrower, ECC, the lending
institutions party to the Credit Agreement and Bank of America, N.A., as administrative agent for
itself and the other lenders party to the Credit Agreement.
Among other things, the Third Amendment provides that (i) the leverage ratio and fixed charge
covenants will not apply to any amounts outstanding under the Credit Agreement until November 30,
2012, at which time they will be set at 5.0x and 1.15x for the life of the Credit Agreement and
from November 30, 2011 through August 31, 2012 there will be a minimum Consolidated EBITDA (as
defined in the Credit Agreement) test of $25.0 million per rolling four quarter test period, (ii)
the requirement that annual audits be certified without qualification will be waived for the fiscal
years ending February 2011 and 2012, (iii) the ability of Emmis to engage in certain activities or
transactions, including the payment of dividends, the incurrence of indebtedness and the ability to
invest certain proceeds including from asset sales will be further restricted or prohibited and
(iv) the terms of the existing Tranche B Term Loans held or purchased on or prior to the date of
the Third Amendment by funds or accounts managed by Canyon Capital Advisors LLC (Canyon), are
amended into an amended tranche of term loans with an extended maturity date of November 1, 2014.
The total amount of Tranche B Term Loans outstanding as of March 29, 2011 was $329.0 million, and
the amount of such term loans that Canyon amended into extended term loans was approximately $182.9
million (the Extended Term Loans). The pricing on the Extended Term Loans is based on Emmis
election on the following pricing grid:
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Cash Portion | Paid-in-Kind Portion | ||||
7.50 | % | 7.00 | % | ||
7.75 | % | 6.50 | % | ||
8.00 | % | 6.00 | % | ||
8.25 | % | 5.50 | % | ||
8.50 | % | 5.00 | % | ||
8.75 | % | 4.50 | % | ||
9.00 | % | 4.00 | % | ||
9.25 | % | 3.50 | % | ||
9.50 | % | 3.00 | % | ||
9.75 | %1 | 2.50 | %1 |
Prior to the entry into the Third Amendment, Emmis entered into a backstop letter agreement,
dated March 27, 2011, with Canyon (the Backstop Letter Agreement), pursuant to which Canyon
agreed to consent to the Third Amendment and to purchase loans necessary to provide the required
Lenders consent to the Third Amendment. In consideration of Canyons entering into the Backstop
Letter Agreement, Canyon will receive an exit fee of 6% (or 3% during the first six months after
the Third Amendment effective date) on the repayment of Tranche B Term Loans and revolving credit
commitments held or purchased by funds or accounts managed by Canyon as of March 29, 2011. The
Company is accreting the estimated exit fee due to Canyon over the estimated life of the Extended
Term Loans. For the three-month and six-month periods ended August 31, 2011, accretion of the exit
fee totaled $0.7 million and $1.3 million, respectively, and is included in the accompanying
condensed consolidated statements of operations as interest expense. The exit fee liability is
included in the condensed consolidated balance sheets in the other noncurrent liabilities.
The Third Amendment contains other terms and conditions customary for financing arrangements
of this nature.
Subsequent to the execution of the Third Amendment on March 29, 2011, the maturity dates of
the original term loan and revolver remain unchanged, but the term loans held by Canyon have been
extended to November 1, 2014. The contractual future amortization schedule for the Credit
Agreement subsequent to the execution of the Third Amendment, based upon amounts outstanding at
August 31, 2011 is as follows:
Amortization of | Amortization of | |||||||||||||||
Year Ended | Revolver | Term Loans | Term Loans | Total | ||||||||||||
February 28 (29), | Amortization | Held by Canyon | Held by Others | Amortization | ||||||||||||
2012 |
| 1,332 | 1,065 | 2,397 | ||||||||||||
2013 |
13,000 | 1,761 | 1,406 | 16,167 | ||||||||||||
2014 |
| 1,742 | 139,787 | 141,529 | ||||||||||||
2015 |
| 173,182 | | 173,182 | ||||||||||||
Total |
$ | 13,000 | $ | 178,017 | $ | 142,258 | $ | 333,275 | ||||||||
The Company recognized a $1.5 million loss on debt extinguishment related to the
write-off of existing deferred debt issuance costs related to the Extended Term Loans. The Company
incurred approximately $3.4 million of professional fees associated with the Third Amendment. The
Company capitalized approximately $0.4 million of these costs as debt issuance costs, which are
being amortized over the life of the Extended Term Loans. The remaining $3.0 million of these
costs were expensed as a component of corporate expenses in the six-month period ended August 31,
2011.
1 | If the Company elects 9.75% Cash Portion for any
payment, it may also elect to pay some or the entire Paid-in-Kind portion in
cash for such period. |
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Note 10. Regulatory, Legal and Other Matters
Certain individuals and groups have challenged applications for renewal of the FCC licenses of
certain of the Companys stations. The challenges to the license renewal applications are
currently pending before the FCC. Emmis does not expect the challenges to result in the denial of
any license renewals.
On December 24, 2010, Emmis entered into an agreement with Bose McKinney & Evans, LLP (Bose)
and JS Acquisition LLC for the purpose of coordinating the prosecution of certain litigation (the
Litigation) by JS Acquisition against Alden Global Distressed Opportunities Master Fund, L.P.,
Alden Global Value Recovery Master Fund, L.P., and Alden Media Holdings, LLC (collectively,
Alden) relating to the going private transaction in which Emmis, JS Acquisition and Alden
participated. Under the terms of the agreement, Bose is representing both Emmis and JS Acquisition
in connection with the Litigation. Emmis has agreed to initially invest up to $0.2 million in
support of the prosecution of JS Acquisitions claim in exchange for first recoupment of 150% of
the amount invested from any JS Acquisition recovery. The investment by Emmis, which is currently
included in other assets, net in the accompanying condensed consolidated balance sheets, was
unanimously approved by Emmis Board of Directors, including all of its independent directors.
Subsequently, Alden sued each of the directors of Emmis in New York state court alleging breach of
fiduciary duty and related claims. Aldens suit against each of the directors was dismissed on
July 14, 2011. In addition, on March 21, 2011, Emmis filed suit against Alden in Federal District
Court for the Southern District of New York, seeking recoupment of approximately $0.3 million of
short-swing profits under section 16 of the Securities Exchange Act of 1934.
The Company is a party to various other legal proceedings arising in the ordinary course of
business. In the opinion of management of the Company, there are no legal proceedings pending
against the Company likely to have a material adverse effect on the Company.
Effective December 31, 2009, our radio music license agreements with the two largest
performance rights organizations, American Society of Composers, Authors and Publishers (ASCAP)
and Broadcast Music, Inc. (BMI), expired. The Radio Music License Committee (RMLC), which
negotiates music licensing fees for most of the radio industry with ASCAP and BMI and of which we
are a participant, filed motions in the U.S. District Court in New York against BMI and ASCAP on
behalf of the radio industry, seeking interim fees and a determination of fair and reasonable
industry-wide license fees. The U.S. District Court in New York approved reduced interim fees for
ASCAP and BMI. The final fees, still to be determined by the court, may be retroactive to January
1, 2010 and may be different from the interim fees.
Note 11. Subsequent Event
On September 1, 2011, the Company completed the disposition of a controlling interest in
Merlin Media, LLC (Merlin Media), which owns the following radio stations: (i) WKQX-FM, 101.1
MHz, Channel 266, Chicago, IL (FIN 19525), (ii) WRXP-FM, 101.9 MHz, Channel 270, New York, NY (FIN
67846) and (iii) WLUP-FM, 97.9 MHz, Channel 250, Chicago, IL (FIN 73233). The Company received
gross sale proceeds of $130 million in the transaction, and has incurred or expects to incur
approximately $9.8 million of expenses, principally consisting of severance, state and local taxes,
and professional and other fees and expenses. The Company used the net cash proceeds to repay
approximately 38% of the term loans outstanding under its credit facility. Emmis also paid a $2.0
million exit fee to Canyon related to the repayment of Extended Term Loans on September 1, 2011.
On September 1, 2011, subsidiaries of Emmis entered into the 2nd Amended & Restated Limited
Liability Company Agreement (the LLC Agreement) of Merlin Media, together with Merlin Holdings,
LLC (Merlin Holdings), an affiliate of investment funds managed by GTCR, LLC, and Benjamin L.
Homel (aka Randy Michaels) (together with Merlin Holdings, the Investors).
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In connection with the completion of the disposition of assets to Merlin Media and sale of a
controlling interest in Merlin Media pursuant to the Purchase Agreement dated June 20, 2011 among
the Company, Merlin Holdings and Mr. Homel (the Purchase Agreement), the Company has retained
preferred equity and common equity interests in Merlin Media, the terms of which are governed by
the LLC Agreement. The Companys common equity interests in Merlin Media represent 20.6% of the
initial outstanding common equity interests of Merlin Media and are subject to dilution if the
Company fails to participate pro rata in future capital calls. The Companys preferred equity
interests in Merlin Media consist of approximately $28.7 million (at par) of non-redeemable
perpetual preferred interests, on which a preferred return accretes quarterly at a rate of 8% per
annum. The preferred interests held by the Company are junior to non-redeemable perpetual
preferred interests held by the Investors of approximately $87 million, on which a preferred return
accretes quarterly at a rate of 8% per annum. The preferred interests held by the Company and the
Investors are both junior to a $60 million senior secured note issued to an affiliate of Merlin
Holdings. The note matures five years from closing, and interest accrues on the note semi-annually
at a rate of 15% per annum, payable in cash or in-kind at Merlin Medias election. Distributions
in respect of Merlin Medias common and preferred interests are made when declared by Merlin
Medias board of managers. Given the Companys continued equity interests in the stations, it is
precluded from reclassifying the operating results of the stations to discontinued operations.
Under the LLC Agreement, the Company is entitled initially to appoint one out of five members
of Merlin Medias board of managers and has limited consent rights with respect to specified
transactions. The Company has no obligation to make ongoing capital contributions to Merlin Media,
but as noted above is subject to dilution if it fails to participate pro rata in future capital
calls.
Merlin Media is a private company and the Company will have limited ability to sell its
interests in Merlin Media, except pursuant to customary tag-along rights with respect to sales by
Merlin Medias controlling Investor or, after five years, in a private sale to third parties
subject to rights of first offer held by the controlling Investor. The Company has customary
registration rights and is subject to a drag-along right of the controlling Investor.
On September 30, 2011, the Compensation Committee of the
Companys Board of Directors approved a discretionary bonus of
$1.7 million to certain employees that
were key participants in the Merlin Media transaction. The discretionary bonus will be reflected in corporate expenses,
excluding depreciation and amortization expense during the three-month period ending November 30, 2011.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Note: Certain statements included in this report or in the financial statements contained herein
which are not statements of historical fact, including but not limited to those identified with the
words expect, should, will or look are intended to be, and are, by this Note, identified as
forward-looking statements, as defined in the Securities and Exchange Act of 1934, as amended.
Such statements involve known and unknown risks, uncertainties and other factors that may cause the
actual results, performance or achievements of the Company to be materially different from any
future result, performance or achievement expressed or implied by such forward-looking statement.
Such factors include, among others:
| general economic and business conditions; |
||
| fluctuations in the demand for advertising and demand for different types of advertising
media; |
||
| our ability to service our outstanding debt; |
||
| loss of key personnel; |
||
| increased competition in our markets and the broadcasting industry; |
||
| our ability to attract and secure programming, on-air talent, writers and photographers; |
||
| inability to obtain (or to obtain timely) necessary approvals for purchase or sale
transactions or to complete the transactions for other reasons generally beyond our
control; |
||
| increases in the costs of programming, including on-air talent; |
||
| new or changing regulations of the Federal Communications Commission or other
governmental agencies; |
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| changes in radio audience measurement methodologies; |
||
| competition from new or different technologies; |
||
| war, terrorist acts or political instability; and |
||
| other factors mentioned in other documents filed by the Company with the Securities and
Exchange Commission. |
For a more detailed discussion of these and other risk factors, see the Risk Factors section of our
Annual Report on Form 10-K, for the year ended February 28, 2011. Emmis does not undertake any
obligation to publicly update or revise any forward-looking statements because of new information,
future events or otherwise.
GENERAL
We are a diversified media company. We own and operate radio and publishing properties
located primarily in the United States. Our revenues are mostly affected by the advertising rates
our entities charge, as advertising sales represent approximately 70% of our consolidated revenues.
These rates are in large part based on our entities ability to attract audiences/subscribers in
demographic groups targeted by their advertisers. Arbitron Inc. generally measures radio station
ratings in our domestic markets on a weekly basis using a passive digital system of measuring
listening (the Portable People MeterTM). Because audience ratings in a
stations local market are critical to the stations financial success, our strategy is to use
market research and advertising and promotion to attract and retain audiences in each stations
chosen demographic target group.
Our revenues vary throughout the year. As is typical in the broadcasting industry, our
revenues and operating income are usually lowest in our fourth fiscal quarter.
In addition to the sale of advertising time for cash, stations typically exchange advertising
time for goods or services, which can be used by the station in its business operations. These
barter transactions are recorded at the estimated fair value of the product or service received.
We generally confine the use of such trade transactions to promotional items or services for which
we would otherwise have paid cash. In addition, it is our general policy not to pre-empt
advertising spots paid for in cash with advertising spots paid for in trade.
The following table summarizes the sources of our revenues for the three-month and six-month
periods ended August 31, 2010 and 2011. All revenues generated by our international radio
properties are included in the Local category. The category Non Traditional principally
consists of ticket sales and sponsorships of events our stations and magazines conduct in their
local markets. The category Other includes, among other items, revenues generated by the
websites of our entities and barter.
Three Months Ended August 31, | Six Months Ended August 31, | |||||||||||||||||||||||||||||||
2010 | %of Total | 2011 | %of Total | 2010 | %of Total | 2011 | %of Total | |||||||||||||||||||||||||
(Dollars in thousands) | (Dollars in thousands) | |||||||||||||||||||||||||||||||
Net revenues: |
||||||||||||||||||||||||||||||||
Local |
$ | 35,914 | 53.8 | % | $ | 33,185 | 51.4 | % | $ | 72,241 | 56.9 | % | $ | 68,351 | 54.3 | % | ||||||||||||||||
National |
9,029 | 13.5 | % | 8,993 | 13.9 | % | 17,733 | 14.0 | % | 18,041 | 14.3 | % | ||||||||||||||||||||
Political |
253 | 0.4 | % | 85 | 0.1 | % | 597 | 0.5 | % | 351 | 0.3 | % | ||||||||||||||||||||
Publication Sales |
2,725 | 4.1 | % | 2,626 | 4.1 | % | 6,260 | 4.9 | % | 6,070 | 4.8 | % | ||||||||||||||||||||
Non Traditional |
8,761 | 13.1 | % | 9,048 | 14.0 | % | 11,383 | 9.0 | % | 12,004 | 9.5 | % | ||||||||||||||||||||
Other |
10,027 | 15.1 | % | 10,684 | 16.5 | % | 18,704 | 14.7 | % | 20,950 | 16.8 | % | ||||||||||||||||||||
Total net revenues |
$ | 66,709 | $ | 64,621 | $ | 126,918 | $ | 125,767 | ||||||||||||||||||||||||
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As previously mentioned, we derive approximately 70% of our net revenues from advertising
sales. Our radio stations derive a higher percentage of their advertising revenues from local
sales than our publishing entities. In the six-month period ended August 31, 2011, local sales,
excluding political revenues, represented approximately 82% and 66% of our advertising revenues for
our radio and publishing divisions, respectively.
No customer represents more than 10% of our consolidated net revenues. Our top ten categories
for radio represent approximately 59% and 61% of our radio divisions total advertising net
revenues for the sixmonth periods ended August 31, 2010 and 2011, respectively. The automotive
industry, representing approximately 10% of our radio net revenues, is the largest category for our
radio division for the six-month periods ended August 31, 2010 and 2011, respectively.
The majority of our expenses are fixed in nature, principally consisting of salaries and
related employee benefit costs, office and tower rent, utilities, property and casualty insurance
and programming-related expenses. However, approximately 20% of our expenses vary in connection
with changes in revenues. These variable expenses primarily relate to sales commissions and bad
debt reserves. In addition, costs related to our marketing and promotions department are highly
discretionary and incurred primarily to maintain and/or increase our audience and market share.
KNOWN TRENDS AND UNCERTAINTIES
Although advertising revenues are on an upswing following the recent global recession,
domestic radio revenue growth has been challenged for several years. Management believes this is
principally the result of three factors: (1) the proliferation of advertising inventory caused by
the emergence of new media, such as various media distributed via the Internet, telecommunication
companies and cable interconnects, as well as social networks and social coupon sites, all of which
are gaining advertising share against radio and other traditional media, (2) the perception of
investors and advertisers that satellite radio and portable media players diminish the
effectiveness of radio advertising, and (3) the adoption of a new method of gathering ratings data,
which has shown an increase in cumulative audience size, but a decrease in time spent listening as
compared to the previous method of gathering ratings data.
The Company and the radio industry have begun several initiatives to address these issues.
The radio industry is working aggressively to increase the number of portable digital media devices
that contain an FM tuner, including smartphones and music players. In many countries, FM tuners
are common features in portable digital media devices. The radio industry is working with leading
United States network providers, device manufacturers, regulators and legislators to ensure that FM
tuners are included in future portable digital media devices. Including FM as a feature on these
devices has the potential to increase radio listening and improve perception of the radio industry
while offering network providers the benefits of a proven emergency notification system, reduced
network congestion from audio streaming services, and a host of new revenue generating
applications.
The Company has also aggressively worked to harness the power of broadband and mobile media
distribution in the development of emerging business opportunities by becoming one of the fifteen
largest streaming audio providers in the United States, developing highly interactive websites with
content that engages our listeners, using SMS texting and delivering real-time traffic to
navigation devices.
Along with the rest of the radio industry, the majority of our stations have deployed HD
Radio®. HD Radio® offers listeners advantages over standard analog
broadcasts, including improved sound quality and additional digital channels. To make the rollout
of HD Radio® more efficient, a consortium of broadcasters representing a majority of
the radio stations in nearly all of our markets have agreed to work together in each radio market
to ensure the most diverse consumer offering possible and to accelerate the rollout of HD
Radio® receivers, particularly in automobiles. In addition to offering secondary
channels, the HD Radio® spectrum allows broadcasters to transmit other forms of data.
We are participating in a joint venture with other broadcasters to provide the bandwidth that a
third party uses to transmit location-based data to hand-held and in-car navigation devices. It is
unclear what impact HD Radio® will have on the markets in which we operate.
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Arbitron Inc., the supplier of ratings data for United States radio markets, has developed
technology to passively collect data for its ratings service. The Portable People
MeterTM (PPMTM) is a small, pager-sized device that does not
require any active manipulation by the end user and is capable of automatically measuring radio,
television, Internet, satellite radio and satellite television signals that are encoded for the
service by the broadcaster. The PPMTM offers a number of advantages over the
traditional diary ratings collection system including ease of use, more reliable ratings data and
shorter time periods between when advertising runs and when audience listening or viewing habits
can be reported. This service began in the New York, Los Angeles and Chicago markets in October
2008, in the St. Louis market in October 2009, and the Austin and Indianapolis markets in the fall
of 2010. In each market in which the service has launched, there has been a compression in the
relative ratings of all stations in the market, increasing the competitive pressure within the
market for advertising dollars. In addition, ratings for certain stations when measured by the
PPMTM as opposed to the traditional diary methodology can be materially different. The
Company continues to evaluate the impact PPMTM will have on our revenues in these
markets.
The results of our domestic radio operations are heavily dependent on the results of our New
York and Los Angeles markets. These markets account for approximately 45% of our domestic radio
net revenues. As discussed below, KPWR-FM in Los Angeles exceeded the performance of the overall
Los Angeles radio market, but our New York radio cluster trailed the performance of the overall New
York radio market.
KPWR-FM in Los Angeles outperformed the overall Los Angeles radio market during the
three-month period ended August 31, 2011. For the three-month period ended August 31, 2011,
KPWR-FMs gross revenues were up 12.0%, whereas Miller Kaplan reported that Los Angeles radio
market total gross revenues were up 1.2% versus the same period of the prior year.
Our radio cluster in New York trailed the performance of the overall New York radio market
during the three-month period ended August 31, 2011. For the three-month period ended August 31,
2011, our New York radio stations gross revenues, excluding WRXP-FM which was operated pursuant to
a Local Marketing Agreement with Merlin Media LLC for a portion of the quarter, were up 0.4%,
whereas Miller Kaplan reported that New York radio market total gross revenues were up 3.2% versus
the same period of the prior year.
We exceeded market performance in Los Angeles, Indianapolis and Austin, but trailed market
performance in New York and St. Louis. Revenue performance in Terre Haute is not measured by
Miller Kaplan.
As part of our business strategy, we continually evaluate potential acquisitions of radio
stations, publishing properties and other businesses that we believe hold promise for long-term
appreciation in value and leverage our strengths. However, Emmis Operating Companys (the
Companys principal operating subsidiary, hereinafter EOC) Credit Agreement substantially limits
our ability to make acquisitions. We also regularly review our portfolio of assets and may
opportunistically dispose of assets when we believe it is appropriate to do so. See Note 11 to our
condensed consolidated financial statements for a discussion of the sale of one of our radio
stations in New York and our two radio stations in Chicago.
CRITICAL ACCOUNTING POLICIES
Critical accounting policies are defined as those that encompass significant judgments and
uncertainties, and potentially lead to materially different results under different assumptions and
conditions. We believe that our critical accounting policies are those described below.
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Revenue Recognition
Broadcasting revenue is recognized as advertisements are aired. Publication revenue is
recognized in the month of delivery of the publication. Both broadcasting revenue and publication
revenue recognition is subject to meeting certain conditions such as persuasive evidence that an
arrangement exists and collection is reasonably assured. These criteria are generally met at the
time the advertisement is aired for broadcasting revenue and upon delivery of the publication for
publication revenue. Advertising revenues presented in the financial statements are reflected on a
net basis, after the deduction of advertising agency fees, usually at a rate of 15% of gross
revenues.
Allowance for Doubtful Accounts
An allowance for doubtful accounts is recorded based on managements judgment of the
collectability of receivables. When assessing the collectability of receivables, management
considers, among other things, historical loss experience and existing economic conditions.
FCC Licenses and Goodwill
We have made acquisitions in the past for which a significant amount of the purchase price was
allocated to FCC licenses and goodwill assets. As of August 31, 2011, we have recorded
approximately $353.0 in goodwill and FCC licenses, which represents approximately 75% of our total
assets.
In the case of our U.S. radio stations, we would not be able to operate the properties without
the related FCC license for each property. FCC licenses are renewed every eight years;
consequently, we continually monitor our stations compliance with the various regulatory
requirements. Historically, all of our FCC licenses have been renewed at the end of their
respective periods, and we expect that all FCC licenses will continue to be renewed in the future.
We consider our FCC licenses to be indefinite-lived intangibles. Our foreign broadcasting
licenses expire during periods ranging from February 2021 to February 2026. While all of our
international broadcasting licenses were recently extended, we will need to submit extension
applications upon their expiration to continue our broadcast operations in these countries. While
there is a general expectancy of renewal of radio broadcast licenses in most countries and we
expect to actively seek renewal of our foreign licenses, both of the countries in which we operate
do not have the regulatory framework or history that we have with respect to license renewals in
the United States. This makes the risk of non-renewal (or of renewal on less favorable terms) of
foreign licenses greater than for United States licenses. We treat our foreign broadcasting
licenses as definite-lived intangibles and amortize them over their respective license periods.
We do not amortize goodwill or other indefinite-lived intangible assets, but rather test for
impairment at least annually or more frequently if events or circumstances indicate that an asset
may be impaired. When evaluating our radio broadcasting licenses for impairment, the testing is
performed at the unit of accounting level as determined by Accounting Standards Codification
(ASC) Topic 350-30-35. In our case, radio stations in a geographic market cluster are considered
a single unit of accounting, provided that they are not being operated under a Local Marketing
Agreement by another broadcaster.
We complete our annual impairment tests on December 1 of each year and perform additional
interim impairment testing whenever triggering events suggest such testing is warranted.
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Valuation of Indefinite-lived Broadcasting Licenses
Fair value of our FCC licenses is estimated to be the price that would be received to sell an
asset in an orderly transaction between market participants at the measurement date. To determine
the fair value of our FCC licenses, the Company uses an income valuation method when it performs
its impairment tests. Under this method, the Company projects cash flows that would be generated
by each of its units of accounting assuming the unit of accounting was commencing operations in its
respective market at the beginning of the valuation period. This cash flow stream is discounted to
arrive at a value for the FCC license. The Company assumes the competitive situation that exists
in each market remains unchanged, with the exception that its unit of accounting commenced
operations at the beginning of the valuation period. In doing so, the Company extracts the value
of going concern and any other assets acquired, and strictly values the FCC license. Major
assumptions involved in this analysis include market revenue, market revenue growth rates, unit of
accounting audience share, unit of accounting revenue share and discount rate. Each of these
assumptions may change in the future based upon changes in general economic conditions, audience
behavior, consummated transactions, and numerous other variables that may be beyond our control.
Valuation of Goodwill
ASC Topic 350 requires the Company to test goodwill for impairment at least annually using a
two-step process. The first step is a screen for potential impairment, while the second step
measures the amount of impairment. The Company conducts the two-step impairment test on December 1
of each fiscal year, unless indications of impairment exist during an interim period. When
assessing its goodwill for impairment, the Company uses an enterprise valuation approach to
determine the fair value of each of the Companys reporting units (radio stations grouped by market
and magazines on an individual basis). Management determines enterprise value for each of its
reporting units by multiplying the two-year average station operating income generated by each
reporting unit (current year based on actual results and the next year based on budgeted results)
by an estimated market multiple. The Company uses a blended station operating income trading
multiple of publicly traded radio operators as a benchmark for the multiple it applies to its radio
reporting units. There are no publicly traded publishing companies that are focused predominantly
on city and regional magazines as is our publishing segment. Therefore, the market multiple used
as a benchmark for our publishing reporting units is based on recently completed transactions
within the city and regional magazine industry or analyst reports that include valuations of
magazine divisions within publicly traded media conglomerates. Management believes this
methodology for valuing radio and publishing properties is a common approach and believes that the
multiples used in the valuation are reasonable given our peer comparisons and recent market
transactions. To corroborate the step-one reporting unit fair values determined using the market
approach described above, management also uses an income approach, which is a discounted cash flow
method to determine the fair value of the reporting unit.
This enterprise valuation is compared to the carrying value of the reporting unit for the
first step of the goodwill impairment test. If the reporting unit exhibits impairment, the Company
proceeds to the second step of the goodwill impairment test. For its step-two testing, the
enterprise value is allocated among the tangible assets, indefinite-lived intangible assets (FCC
licenses valued using a direct-method valuation approach) and unrecognized intangible assets, such
as customer lists, with the residual amount representing the implied fair value of the goodwill.
To the extent the carrying amount of the goodwill exceeds the implied fair value of the goodwill,
the difference is recorded as an impairment charge in the statement of operations.
Deferred Taxes
The Company accounts for income taxes under the asset and liability method, which requires the
recognition of deferred tax assets and liabilities for the expected future tax consequence of
events that have been recognized in the Companys financial statements or income tax returns.
Income taxes are recognized during the year in which the underlying transactions are reflected in
the consolidated statements of operations. Deferred taxes are provided for temporary differences
between amounts of assets and liabilities as recorded for financial reporting purposes and amounts
recorded for income tax purposes. After determining the total amount of deferred tax assets, the
Company determines whether it is more likely than not that some portion of the deferred tax assets
will not be realized. If the Company determines that a deferred tax asset is not likely to be
realized, a valuation allowance will be established against that asset to record it at its expected
realizable value.
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Estimate of Effective Tax Rates
We estimate the effective tax rates and associated liabilities or assets for each legal entity
within Emmis. These estimates are based upon our interpretation of United States and local tax
laws as they apply to our legal entities and our overall tax structure. Audits by local tax
jurisdictions, including the United States Government, could yield different interpretations from
our own and cause the Company to owe more taxes than originally recorded. We utilize advisors in
the various tax jurisdictions to evaluate our position and to assist in our calculation of our tax
expense and related assets and liabilities.
Results of Operations for the Three-month and Six-Month Periods Ended August 31, 2011,
Compared to August 31, 2010
Net revenues:
For the three months ended August 31, | For the six months ended August 31, | |||||||||||||||||||||||||||||||
2010 | 2011 | $ Change | % Change | 2010 | 2011 | $ Change | % Change | |||||||||||||||||||||||||
(As reported, amounts in thousands) | (As reported, amounts in thousands) | |||||||||||||||||||||||||||||||
Net revenues: |
||||||||||||||||||||||||||||||||
Radio |
$ | 51,572 | $ | 50,028 | $ | (1,544 | ) | (3.0 | )% | $ | 95,805 | $ | 95,398 | $ | (407 | ) | (0.4 | )% | ||||||||||||||
Publishing |
15,137 | 14,593 | (544 | ) | (3.6 | )% | 31,113 | 30,369 | (744 | ) | (2.4 | )% | ||||||||||||||||||||
Total net revenues |
$ | 66,709 | $ | 64,621 | $ | (2,088 | ) | (3.1 | )% | $ | 126,918 | $ | 125,767 | $ | (1,151 | ) | (0.9 | )% | ||||||||||||||
Radio net revenues decreased in the three-month and six month periods ended August 31,
2011 as compared to the same period of the prior year principally due to the July 15, 2011
commencement of a Local Marketing Agreement related to our two stations in Chicago and one in New
York with Merlin Media LLC. During the time these stations were operated pursuant to the Local
Marketing Agreement (LMA), Emmis recorded, as net revenue, a $0.2 million monthly LMA fee, but
did not record advertising sales during this period. We typically monitor the performance of our
domestic stations against the aggregate performance of the markets in which we operate based on
reports for the periods prepared by Miller Kaplan. Miller Kaplan reports are generally prepared on
a gross revenues basis and exclude revenues from barter arrangements. Miller Kaplan reported gross
revenues for our domestic radio markets increased 2.2% for the six-month period ended August 31,
2011 as compared to the same period of the prior year. Excluding the stations operating under
LMAs, our gross revenues as reported to Miller Kaplan increased 3.8% compared to the prior year.
Our gross revenues exceeded the market average in Los Angeles, Indianapolis and Austin. However,
as previously discussed, our gross revenues trailed the market average in New York and St. Louis.
Miller Kaplan does not report gross revenue market data for our Terre Haute market. For the
six-month period ended August 31, 2011 as compared to the same period of the prior year, our
average rate per minute for our domestic radio stations was up 7.5%, and our minutes sold were down
3.7%.
Publishing net revenues decreased in the three-month and six-month periods ended August 31,
2011 as compared to the same periods of the prior year as the local advertising environment for
publications remains challenging. National advertising sales have continued to be stronger than
local advertising sales.
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Station operating expenses, excluding depreciation and amortization expense:
For the three months ended August 31, | For the six months ended August 31, | |||||||||||||||||||||||||||||||
2010 | 2011 | $ Change | % Change | 2010 | 2011 | $ Change | % Change | |||||||||||||||||||||||||
(As reported, amounts in thousands) | (As reported, amounts in thousands) | |||||||||||||||||||||||||||||||
Station operating expenses, excluding
depreciation and amortization expense: |
||||||||||||||||||||||||||||||||
Radio |
$ | 37,041 | $ | 37,779 | $ | 738 | 2.0 | % | $ | 70,051 | $ | 70,767 | $ | 716 | 1.0 | % | ||||||||||||||||
Publishing |
14,326 | 14,370 | 44 | 0.3 | % | 30,193 | 30,716 | 523 | 1.7 | % | ||||||||||||||||||||||
Total station operating expenses, excluding
depreciation and amortization expense |
$ | 51,367 | $ | 52,149 | $ | 782 | 1.5 | % | $ | 100,244 | $ | 101,483 | $ | 1,239 | 1.2 | % | ||||||||||||||||
Station operating expenses, excluding depreciation and amortization expense, for the
three months and six months ended August 31, 2011 were up approximately $0.7 million for our radio
division. In connection with the commencement of the LMA for our two stations in Chicago and one
station in New York, we incurred severance and other transaction related costs during the quarter
ended August 31, 2011 of approximately $3.3 million. These costs were mostly offset by a reduction
in ongoing operating costs for the three stations as Merlin Media LLC bore most of the operating
costs of the stations commencing with the July 15, 2011 LMA starting date. Station operating
expenses, excluding depreciation and amortization expense, for the six-months ended August 31, 2011
for our publishing division include a lease termination payment of $0.3 million related to the
office space of our Texas Monthly publication.
Corporate expenses, excluding depreciation and amortization expense:
For the three months ended August 31, | For the six months ended August 31, | |||||||||||||||||||||||||||||||
2010 | 2011 | $ Change | % Change | 2010 | 2011 | $ Change | % Change | |||||||||||||||||||||||||
(As reported, amounts in thousands) | (As reported, amounts in thousands) | |||||||||||||||||||||||||||||||
Corporate expenses excluding
depreciation and amortization expense |
$ | 4,697 | $ | 2,969 | $ | (1,728 | ) | (36.8 | )% | $ | 9,875 | $ | 10,304 | $ | 429 | 4.3 | % |
During the three months and six months ended August 31, 2010, the company incurred
approximately $1.7 million and $3.1 million of expenses related to a going private transaction.
During the six months ended August 31, 2011, the company incurred approximately $3.0 million of
costs associated with the Third Amendment discussed in Note 9 to the accompanying condensed
consolidated financial statements and approximately $0.7 million for a discretionary bonus paid to
substantially all corporate employees. Absent these items, corporate expenses, excluding
depreciation and amortization expense are comparable for both periods presented.
Depreciation and amortization:
For the three months ended August 31, | For the six months ended August 31, | |||||||||||||||||||||||||||||||
2010 | 2011 | $ Change | % Change | 2010 | 2011 | $ Change | % Change | |||||||||||||||||||||||||
(As reported, amounts in thousands) | (As reported, amounts in thousands) | |||||||||||||||||||||||||||||||
Depreciation and amortization: |
||||||||||||||||||||||||||||||||
Radio |
$ | 1,892 | $ | 1,710 | $ | (182 | ) | (9.6 | )% | $ | 3,810 | $ | 3,445 | $ | (365 | ) | (9.6 | )% | ||||||||||||||
Publishing |
128 | 118 | (10 | ) | (7.8 | )% | 260 | 230 | (30 | ) | (11.5 | )% | ||||||||||||||||||||
Corporate |
346 | 282 | (64 | ) | (18.5 | )% | 700 | 546 | (154 | ) | (22.0 | )% | ||||||||||||||||||||
Total depreciation and amortization |
2,366$ | $ | 2,110 | $ | (256 | ) | (10.8 | )% | $ | 4,770 | $ | 4,221 | $ | (549 | ) | (11.5 | )% | |||||||||||||||
The decrease in depreciation expense for the three-month and six-month periods ended
August 31, 2011 is attributable to certain assets becoming fully depreciated; thus the Company has
ceased to record depreciation expense on those assets.
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Loss on sale of assets:
For the three months ended August 31, | For the six months ended August 31, | |||||||||||||||||||||||
2010 | 2011 | $ Change | 2010 | 2011 | $ Change | |||||||||||||||||||
(As reported, amounts in thousands) | (As reported, amounts in thousands) | |||||||||||||||||||||||
Loss on sale of assets: |
||||||||||||||||||||||||
Radio |
$ | | $ | 793 | $ | 793 | $ | | $ | 790 | $ | 790 | ||||||||||||
Publishing |
| 24 | 24 | | 24 | 24 | ||||||||||||||||||
Corporate |
| | | | | | ||||||||||||||||||
Total loss
on sale of assets: |
$ | | $ | 817 | $ | 817 | $ | | $ | 814 | $ | 814 | ||||||||||||
In July 2011, Emmis sold its office building in Terre Haute, Indiana for $0.2 million and
recorded a loss on sale of assets of $0.8 million.
Operating income (loss):
For the three months ended August 31, | For the six months ended August 31, | |||||||||||||||||||||||||||||||
2010 | 2011 | $ Change | % Change | 2010 | 2011 | $ Change | % Change | |||||||||||||||||||||||||
(As reported, amounts in thousands) | (As reported, amounts in thousands) | |||||||||||||||||||||||||||||||
Operating income (loss): |
||||||||||||||||||||||||||||||||
Radio |
$ | 12,639 | $ | 9,746 | $ | (2,893 | ) | (22.9 | )% | $ | 21,944 | $ | 20,396 | $ | (1,548 | ) | (7.1 | )% | ||||||||||||||
Publishing |
683 | 81 | (602 | ) | (88.1 | )% | 660 | (601 | ) | (1,261 | ) | (191.1 | )% | |||||||||||||||||||
Corporate |
(5,043 | ) | (3,251 | ) | 1,792 | 35.5 | % | (10,575 | ) | (10,850 | ) | (275 | ) | (2.6 | )% | |||||||||||||||||
Total operating income: |
$ | 8,279 | $ | 6,576 | $ | (1,703 | ) | (20.6 | )% | $ | 12,029 | $ | 8,945 | $ | (3,084 | ) | (25.6 | )% | ||||||||||||||
Radio operating income decreased in the three-month and six-month periods ended August
31, 2011 mostly due to the commencement of the LMA for our two stations in Chicago and one station
in New York and related severance and transactions costs as described above.
Publishing operating income decreased in the three-month and six-month periods ended August
31, 2011 mostly due to declining net revenues attributable to weak local advertising environments
as described above.
Corporate operating losses varied during the three-month and six-month periods ended August
31, 2011 predominately due to significant transaction-related costs in all periods as described
above.
Interest expense:
For the three months ended August 31, | For the six months ended August 31, | |||||||||||||||||||||||||||||||
2010 | 2011 | $ Change | % Change | 2010 | 2011 | $ Change | % Change | |||||||||||||||||||||||||
(As reported, amounts in thousands) | (As reported, amounts in thousands) | |||||||||||||||||||||||||||||||
Interest expense |
$ | 5,209 | $ | 8,210 | $ | 3,001 | 57.6 | % | $ | 10,889 | $ | 15,424 | $ | 4,535 | 41.6 | % |
The increase in interest expense for both the three-month and six-month periods ended
August 31, 2011 is due to the Third Amendment to our Credit Agreement, which was effective March
29, 2011. Subsequent to the Third Amendment, the interest rate on our Credit Agreement debt held
by Canyon, which as of August 31, 2011 was $178.0 million, changed from LIBOR + 4% to a minimum of
12.25% per annum. Also in accordance with the Third Amendment, the Company now pays an exit fee
upon repayment of a portion of our term loans ranging from 3% to 6% of the balance repaid. The
Company is accruing this exit fee over the term of the Extended Term Loans as a component of
interest expense.
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Loss on debt extinguishment:
For the three months ended August 31, | For the six months ended August 31, | |||||||||||||||||||||||
2010 | 2011 | $ Change | 2010 | 2011 | $ Change | |||||||||||||||||||
(As reported, amounts in thousands) | (As reported, amounts in thousands) | |||||||||||||||||||||||
Loss on debt extinguishment |
$ | | $ | | $ | | $ | | $ | 1,478 | $ | 1,478 |
A portion of our term loans were deemed to be substantially modified in connection with
the Third Amendment and the Company wrote-off $1.5 million of existing deferred debt issuance costs
related to the Extended Term Loans.
Provision for income taxes:
For the three months ended August 31, | For the six months ended August 31, | |||||||||||||||||||||||||||||||
2010 | 2011 | $ Change | % Change | 2010 | 2011 | $ Change | % Change | |||||||||||||||||||||||||
(As reported, amounts in thousands) | (As reported, amounts in thousands) | |||||||||||||||||||||||||||||||
Provision for income taxes |
$ | 1,692 | $ | 3,232 | $ | 1,540 | (91.0 | )% | $ | 248 | $ | 490 | $ | 242 | (97.6 | )% |
The Company is recording a valuation allowance for its net deferred tax assets, including
its net operating loss carryforwards, but excluding deferred tax liabilities related to
indefinite-lived intangibles. The provision for income taxes associated with deferred tax
liabilities related to indefinite-lived intangibles is approximately $6 million for fiscal 2012.
During the six-month period ended August 31, 2011, the Company recorded a benefit for income
taxes of approximately $0.8 million related to interest rate swap agreements that matured during
the period. A full valuation allowance was previously established for the deferred tax asset
related to the interest rate swap agreement and was realized during the period. This benefit had
previously been recorded in accumulated other comprehensive income (loss) pending the maturity of
the swap agreement. The Company also recorded a benefit for income taxes in continuing
operations, consistent with the intraperiod allocation method, to offset the income tax provision
recorded in discontinued operations related to the sale of the Flint Peak Tower Site.
(Gain) loss from discontinued operations, net of tax:
For the three months ended August 31, | For the six months ended August 31, | |||||||||||||||||||||||
2010 | 2011 | $ Change | 2010 | 2011 | $ Change | |||||||||||||||||||
(As reported, amounts in thousands) | (As reported, amounts in thousands) | |||||||||||||||||||||||
(Gain) loss from discontinued
operations, net of tax |
$ | (10 | ) | $ | 104 | $ | 114 | $ | 195 | $ | (2,790 | ) | $ | (2,985 | ) |
Our Hungarian radio operations and the operations of our Flint Peak Tower Site have been
classified as discontinued operations in the accompanying condensed consolidated statements. The
increase in income from discontinued operations, net of tax, for the six months ended August 31,
2011 mostly relates to the gain on sale of the Flint Peak Tower Site.
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Consolidated net income (loss):
For the three months ended August 31, | For the three months ended August 31, | |||||||||||||||||||||||
2010 | 2011 | $ Change | 2010 | 2011 | $ Change | |||||||||||||||||||
(As reported, amounts in thousands) | (As reported, amounts in thousands) | |||||||||||||||||||||||
Consolidated net income (loss) |
$ | 1,295 | $ | (4,622 | ) | $ | (5,917 | ) | $ | 591 | $ | (5,315 | ) | $ | (5,906 | ) |
Consolidated net income decreased between periods mostly due to the decline in operating
income, an increase in interest expense, and an increase in the provision for income taxes, all of
which are discussed above.
Liquidity and Capital Resources
Our primary sources of liquidity are cash provided by operations and cash available through
revolver borrowings under our credit facility. Our primary uses of capital during the past few
years have been, and are expected to continue to be, capital expenditures, working capital, debt
service requirements and the repayment of debt.
At August 31, 2011, we had cash and cash equivalents of $9.6 million and net working capital
of $17.2 million. At February 28, 2011, we had cash and cash equivalents of $6.1 million and net
working capital of $12.1 million. Cash and cash equivalents held at various European banking
institutions at February 28, 2011 and August 31, 2011 was $5.8 million and $5.5 million (which
includes approximately $1.4 million of cash related to our Slager discontinued operation which is
classified as current assets discontinued operations in the condensed consolidated balance
sheets), respectively. Our ability to access our share of these international cash balances (net
of noncontrolling interests) is limited by country-specific statutory requirements.
During the three months ended August 31, 2011, the Company sold its 50% share of a partnership
in which the sole asset is land in New Jersey on which a transmission tower is located to the other
partner for $1.3 million in cash. Prior to its sale, the carrying value of this investment was
$1.2 million and was shown in other assets, net on the condensed consolidated balance sheets.
Proceeds from the sale were used to repay amounts outstanding under our senior credit facility.
On September 1, 2011, the Company completed the disposition of a controlling interest in
Merlin Media, LLC (Merlin Media), which owns the following radio stations: (i) WKQX-FM, 101.1
MHz, Channel 266, Chicago, IL (FIN 19525), (ii) WRXP-FM, 101.9 MHz, Channel 270, New York, NY (FIN
67846) and (iii) WLUP-FM, 97.9 MHz, Channel 250, Chicago, IL (FIN 73233). The sale was made
pursuant to the Purchase Agreement, initially disclosed on the Companys Current Report on Form 8-K
filed with the SEC on June 21, 2011 (as amended by a Current Report on Form 8-K/A filed with the
Commission on June 24, 2011). The Company received gross sale proceeds of $130 million in the
transaction, and has incurred or expects to incur approximately $9.8 million of expenses,
principally consisting of severance, state and local taxes, and professional and other fees and
expenses. The Company used the net cash proceeds to repay approximately 38% of the term loans
outstanding under its credit facility. Emmis also paid a $2.0 million exit fee to Canyon related
to the repayment of Extended Term Loans on September 1, 2011.
On September 30, 2011, the Compensation Committee of the
Companys Board of Directors approved a discretionary bonus of
$1.7 million to certain employees that
were key participants in the Merlin Media transaction. The discretionary bonus will be reflected in corporate expenses,
excluding depreciation and amortization expense during the three-month period ending November 30, 2011.
In recent years, the Company has recorded significant impairment charges, mostly attributable
to our FCC licenses. These impairment charges have had no impact on our liquidity or compliance
with debt covenants.
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Operating Activities
Cash used in operating activities was $1.1 million for the six-month period ended August 31,
2011 versus cash provided by operating activities of $2.6 million in the same period of the prior
year. The decrease in cash flows from operating activities is mostly due to the increase in
interest costs as a result of higher interest rates associated with the Third Amendment as
previously discussed and a decrease in cash provided by our discontinued operations, both of which
are partially offset by reduced working capital needs.
Investing Activities
Cash provided by investing activities was $4.8 million for the six-month period ended
August 31, 2011 versus cash used in investing activities of $1.7 million in the same period
of the prior year. During the six-month period ended August 31, 2011, the Company sold its Flint
Peak Tower Site for $5.8 million of net cash proceeds and sold its 50% share of a partnership in
which the sole asset is land in New Jersey on which a transmission tower is located to the other
partner for $1.3 million of net cash proceeds. The proceeds related to the Flint Peak Tower sale
are classified as cash provided by discontinued operations in the accompanying condensed
consolidated statements of cash flows. Partially offsetting the net cash proceeds on the sales
described above was approximately $2.4 million of capital expenditures. In the prior year, the
only substantial use of cash was for $1.6 million of capital expenditures. Investing activities
generally include capital expenditures and business acquisitions and dispositions.
We expect capital expenditures related to continuing operations to be approximately $6.4
million in the current fiscal year, compared to $4.2 million in fiscal 2011. We expect that future
requirements for capital expenditures will include capital expenditures incurred during the
ordinary course of business. We expect to fund such capital expenditures with cash generated from
operating activities and borrowings under our credit facility.
Financing Activities
Cash used in financing activities was $0.6 million for the six-month period ended August 31,
2011, versus cash provided by financing activities of $0.3 million in the same period of the prior
year. Cash used in financing activities in the six-month period ended August 31, 2011 primarily
relates to distributions to noncontrolling interests of $2.3 million and debt related costs of $0.6
million, both of which are partially offset by net borrowings of $2.3 million.
Cash provided by financing activities for the six-month period ended August 31, 2010 primarily
relates to the $2.3 million of net borrowings of debt under our Credit Agreement partially offset
by $1.9 million used to pay cash distributions to noncontrolling interests ($0.4 million of which
is related to Slager and thus classified as discontinued operations).
As of August 31, 2011, Emmis had $333.3 million of borrowings under the Credit Agreement ($3.2
million current and $330.1 million long-term) and $140.5 million of Preferred Stock outstanding.
Approximately $178.0 million of borrowings under the Credit Agreement bears interest pursuant to a
grid under which 7.5% to 12.25% per annum is to be paid in cash and 7.0% to 0.0% per annum is to be
paid in kind, subject to a minimum yield of 12.25% per annum. The remainder of the Credit
Agreement debt bears interest, at our option, at a rate equal to the Eurodollar rate or an
alternative Base Rate plus a margin. As of August 31, 2011, our weighted average borrowing rate
under our Credit Agreement was approximately 8.6%.
In connection with the closing of the sale of our two Chicago stations and one of our New York
stations on September 1, 2011, Emmis repaid approximately $120.2 million of Credit Agreement debt
($66.8 million of which related to the Extended Term Loans).
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The debt service requirements of Emmis over the next twelve-month period, after taking into
account the September 1, 2011 repayments described above, are expected to be $2.0 million for
mandatory repayment of term notes under our Credit Agreement and a minimum of $13.6 million related
to interest on the Extended Term Loans. The Company may, at its election, choose to pay a portion
of the interest due on the Extended Term Loans in-kind. The remainder of the Credit Agreement debt
bears interest at variable rates and is not included in the debt service requirements previously
discussed.
The terms of Emmis Preferred Stock provide for a quarterly dividend payment of $.78125 per
share on each January 15, April 15, July 15 and October 15. Emmis has not declared a preferred
stock dividend since October 15, 2008. As of the filing date of this report, cumulative preferred
dividends in arrears total $26.1 million. Failure to pay the dividend is not a default under the
terms of the Preferred Stock. However, since dividends remain unpaid for more than six quarters,
the holders of the Preferred Stock exercised their right to elect two persons to our board of
directors. The Third Amendment to our Credit Agreement prohibits the Company from paying dividends
on the Preferred Stock during the Suspension Period (as defined in the Credit Agreement) (See
Liquidity and Capital Resources). Subject to the restrictions of the Credit Agreement, payment
of future preferred stock dividends is at the discretion of the Companys Board of Directors.
As of October 10, 2011, we had $6.4 million available for additional borrowing under our
credit facility, which is net of $0.6 million in outstanding letters of credit. Availability under
the credit facility depends upon our continued compliance with certain operating covenants and
financial ratios. Emmis was in compliance with these covenants as of August 31, 2011. As part of
our business strategy, we continually evaluate potential acquisitions of radio stations, publishing
properties and other businesses that we believe hold promise for long-term appreciation in value
and leverage our strengths. However, Emmis Operating Companys Credit Agreement, as amended,
substantially limits our ability to make acquisitions. We also regularly review our portfolio of
assets and may opportunistically dispose of assets when we believe it is appropriate to do so. See
Note 11 to our condensed consolidated financial statements for a discussion of the sale of one of
our radio stations in New York and our two radio stations in Chicago.
Intangibles
Approximately 75% of our total assets consisted of intangible assets, such as FCC broadcast
licenses, foreign broadcasting licenses, and goodwill, the value of which depends significantly
upon the operational results of our businesses. In the case of our U.S. radio stations, we would
not be able to operate the properties without the related FCC license for each property. FCC
licenses are renewed every eight years; consequently, we continually monitor our stations
compliance with the various regulatory requirements. Historically, all of our FCC licenses have
been renewed at the end of their respective periods, and we expect that all FCC licenses will
continue to be renewed in the future. Our foreign broadcasting licenses expire during periods
ranging from February 2021 to February 2026. While all of our international broadcasting licenses
were recently extended, we will need to submit extension applications upon their expiration to
continue our broadcast operations in these countries. While we expect to actively seek renewal of
our foreign licenses, both of the countries in which we operate do not have the regulatory
framework or history that we have with respect to license renewals in the United States. This
makes the risk of non-renewal (or of renewal on less favorable terms) of foreign licenses greater
than for United States licenses.
Regulatory, Legal and Other Matters
Certain individuals and groups have challenged applications for renewal of the FCC licenses of
certain of the Companys stations. The challenges to the license renewal applications are
currently pending before the FCC. Emmis does not expect the challenges to result in the denial of
any license renewals.
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On December 24, 2010, Emmis entered into an agreement with Bose McKinney & Evans, LLP (Bose)
and JS Acquisition LLC for the purpose of coordinating the prosecution of certain litigation (the
Litigation) by JS Acquisition against Alden Global Distressed Opportunities Master Fund, L.P.,
Alden Global Value Recovery Master Fund, L.P., and Alden Media Holdings, LLC (collectively,
Alden) relating to the going private transaction in which Emmis, JS Acquisition and Alden
participated. Under the terms of the agreement, Bose is representing both Emmis and JS Acquisition
in connection with the Litigation. Emmis has agreed to initially invest up to $0.2 million in
support of the prosecution of JS Acquisitions claim in exchange for first recoupment of 150% of
the amount invested from any JS Acquisition recovery. The investment by Emmis, which is currently
included in other assets, net in the accompanying condensed consolidated balance sheets, was
unanimously approved by Emmis Board of Directors, including all of its independent directors.
Subsequently, Alden sued each of the directors of Emmis in New York state court alleging breach of
fiduciary duty and related claims. Aldens suit against each of the directors was dismissed on
July 14, 2011. In addition, on March 21, 2011, Emmis filed suit against Alden in Federal District
Court for the Southern District of New York, seeking recoupment of approximately $0.3 million of
short-swing profits under section 16 of the Securities Exchange Act of 1934.
The Company is a party to various other legal proceedings arising in the ordinary course of
business. In the opinion of management of the Company, there are no legal proceedings pending
against the Company likely to have a material adverse effect on the Company.
Effective December 31, 2009, our radio music license agreements with the two largest
performance rights organizations, American Society of Composers, Authors and Publishers (ASCAP)
and Broadcast Music, Inc. (BMI), expired. The Radio Music License Committee (RMLC), which
negotiates music licensing fees for most of the radio industry with ASCAP and BMI and of which we
are a participant, filed motions in the U.S. District Court in New York against BMI and ASCAP on
behalf of the radio industry, seeking interim fees and a determination of fair and reasonable
industry-wide license fees. The U.S. District Court in New York approved reduced interim fees for
ASCAP and BMI. The final fees, still to be determined by the court, may be retroactive to January
1, 2010 and may be different from the interim fees.
The Company is a party to various other legal and regulatory proceedings arising in the
ordinary course of business. In the opinion of management of the Company, there are no other legal
or regulatory proceedings pending against the Company that are likely to have a material adverse
effect on the Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide this information.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this quarterly report, the Company evaluated the
effectiveness of the design and operation of its disclosure controls and procedures (Disclosure
Controls). This evaluation (the Controls Evaluation) was performed under the supervision and
with the participation of management, including our Chief Executive Officer (CEO) and Chief
Financial Officer (CFO).
Based upon the Controls Evaluation, our CEO and CFO concluded that as of August 31, 2011 our
Disclosure Controls are effective to provide reasonable assurance that information relating to
Emmis Communications Corporation and Subsidiaries that is required to be disclosed by us in the
reports that we file or submit, is recorded, processed, summarized and reported, within the time
periods specified in the Securities and Exchange Commissions rules and forms, and is accumulated
and communicated to our management, including our principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure.
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Changes in Internal Control over Financial Reporting
During the period covered by this quarterly report, there were no changes in the Companys
internal control over financial reporting that have materially affected, or are reasonably likely
to materially affect, the Companys internal control over financial reporting.
It should be noted that any control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the control systems objectives will be met.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Refer to Item 2 Managements Discussion and Analysis of Financial Condition and Results of
Operations for a discussion of various legal proceedings pending against the Company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three-month period ended August 31, 2011, there were no repurchases of our Class A
common stock or Preferred Stock pursuant to a previously announced share repurchase program by the
Companys Board of Directors. There was, however, withholding of shares of stock upon vesting of
restricted stock to cover withholding tax obligations. The following table provides information on
our repurchases related to the withholding of shares of stock in payment of employee tax
obligations upon vesting of restricted stock during the three months ended August 31, 2011:
(c) | (d) | |||||||||||||||
Total Number of | Maximum | |||||||||||||||
Shares | Approximate | |||||||||||||||
Purchased as | Dollar Value of | |||||||||||||||
(a) | (b) | Part of Publicly | Shares That May | |||||||||||||
Total Number | Average Price | Announced | Yet Be Purchased | |||||||||||||
of Shares | Paid Per | Plans or | Under the Plans | |||||||||||||
Period | Purchased | Share | Programs | or Programs(1) | ||||||||||||
June 1, 2011 - June 30, 2011 |
| N/A | | $ | 36,150,565 | |||||||||||
July 1, 2011 - July 31, 2011 |
13,170 | $ | 1.03 | | $ | 36,150,565 | ||||||||||
August 1, 2011 - August 31, 2011 |
| N/A | | $ | 36,150,565 | |||||||||||
13,170 | | |||||||||||||||
(1) | On August 8, 2007, Emmis Board of Directors authorized a share
repurchase program pursuant to which Emmis is authorized to purchase up to an aggregate value of
$50 million of its outstanding Class A common stock within the parameters of SEC Rule 10b-18.
Common stock repurchase transactions may occur from time to time at our discretion, either on the
open market or in privately negotiated purchases, subject to prevailing market conditions and other
considerations. On May 22, 2008, Emmis Board of Directors revised the share repurchase program to
allow for the repurchase of both Class A common stock and Series A cumulative convertible preferred
stock. No common stock repurchases pursuant to this program were made during the three months
ended August 31, 2011. |
Item 3. Defaults Upon Senior Securities
The terms of Emmis Preferred Stock provide for a quarterly dividend payment of $.78125 per
share on each January 15, April 15, July 15 and October 15. Emmis has not declared a preferred
stock dividend since October 15, 2008. As of the filing date of this report, cumulative preferred
dividends in arrears total $26.1 million. Failure to pay the dividend is not a default under the
terms of the Preferred Stock. However, since dividends remain unpaid for more than six quarters,
the holders of the Preferred Stock exercised their right to elect two persons to our board of
directors.
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Item 6. Exhibits
(a) Exhibits.
The following exhibits are filed or incorporated by reference as a part of this
report:
2.1
|
Purchase Agreement, dated June 20, 2011, by and among Emmis Operating Company, Emmis Radio, LLC, Emmis Radio License, LLC, Emmis Radio Holding Corporation, Emmis Radio Holding II Corporation, GTCR Merlin Holdings, LLC and Benjamin L. Homel, incorporated by reference from Exhibit 2.1 to the Companys Form 8-K/A filed June 24, 2011. | |
2.2
|
Merlin Media, LLC Second Amended and Restated Limited Liability Company Agreement, to be dated as of the Closing Date under the Purchase Agreement by and among Emmis Operating Company, Emmis Radio, LLC, Emmis Radio License, LLC, Emmis Radio Holding Corporation, Emmis Radio Holding II Corporation, GTCR Merlin Holdings, LLC and Benjamin L. Homel, incorporated by reference from Exhibit 2.2 to the Companys Form 8-K/A filed June 24, 2011. | |
3.1
|
Second Amended and Restated Articles of Incorporation of Emmis Communications Corporation, as amended effective June 13, 2005 incorporated by reference from Exhibit 3.1 to the Companys Form 10-K for the fiscal year ended February 28, 2006. | |
3.2
|
Second Amended and Restated Bylaws of Emmis Communications Corporation incorporated by reference from Exhibit 3.2 to the Companys Form 8-K filed June 3, 2011. | |
10.1
|
Second Amended and Restated Limited Liability Company Agreement of Merlin Media, dated September 1, 2011, incorporated by reference from Exhibit 10.1 to the Companys Form 8-K filed September 1, 2011. | |
10.2
|
Contribution Agreement, dated as of June 20, 2011, by and among Emmis Operating Company, Emmis Radio, LLC, Emmis Radio License, LLC, Emmis Radio Holding Corporation, Emmis Radio Holding II Corporation and Merlin Media, LLC, incorporated by reference from Exhibit 2.3 to the Companys Form 8-K/A filed June 24, 2011. | |
10.3
|
Local Programming and Marketing Agreement, dated as of June 20, 2011, by and among Emmis Radio, LLC, Emmis Radio License, LLC, Merlin Media, LLC and LMA Merlin Media, LLC, incorporated by reference from Exhibit 10.1 to the Companys Form 8-K/A filed June 24, 2011. | |
10.4
|
Guarantee of Emmis Communications Corporation, dated June 20, 2011, incorporated by reference from Exhibit 10.2 to the Companys Form 8-K/A filed June 24, 2011. |
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31.1
|
Certification of Principal Executive Officer of Emmis Communications Corporation pursuant to Rule 13a-14(a) under the Exchange Act.* | |
31.2
|
Certification of Principal Financial Officer of Emmis Communications Corporation pursuant to Rule 13a-14(a) under the Exchange Act.* | |
32.1
|
Section 1350 Certification of Principal Executive Officer of Emmis Communications Corporation.* | |
32.2
|
Section 1350 Certification of Principal Financial Officer of Emmis Communications Corporation.* | |
101.INS
|
XBRL Instance Document** | |
101.SCH
|
XBRL Taxonomy Extension Schema Document** | |
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document** | |
101.LAB
|
XBRL Taxonomy Extension Labels Linkbase Document** | |
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document** | |
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document** |
* | Filed with this report |
|
** | Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or
part of a registration statement or prospectus for purposes of Sections 11 or 12 of the
Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise
are not subject to liability. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
EMMIS COMMUNICATIONS CORPORATION |
||||
Date: October 13, 2011 | By: | /s/ PATRICK M. WALSH | ||
Patrick M. Walsh | ||||
Executive Vice President, Chief Financial Officer and Chief Operating Officer | ||||
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