As filed with the Securities and Exchange Commission on October 15, 1996
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended August 31, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________ to ________
Commission file number: 0-23264
EMMIS BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1542018
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
950 NORTH MERIDIAN STREET
SUITE 1200
INDIANAPOLIS, INDIANA 46204
(Address of principal executive offices) (Zip Code)
(317) 266-0100
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
(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 X No
--- ---
The number of shares outstanding of each of the Registrant's classes of
common stock, as of October 11, 1996, was:
8,363,991 Shares of Class A Common Stock, $.01 Par Value
2,581,345 Shares of Class B Common Stock, $.01 Par Value
<PAGE>
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets
at August 31, 1996 and February 29, 1996 . . . . . . . . 4
Condensed Consolidated Statements of
Operations for the three and six months
ended August 31, 1996 and 1995 . . . . . . . . . 5
Condensed Consolidated Statements of Cash
Flows for the six months ended
August 31, 1996 and 1995 . . . . . . . . . . . . 6
Notes to Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . 8
PART II - OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security
Holders. . . . . . . . . . . . . . . . . . 9
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . 9
-2-
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Emmis Broadcasting Corporation
and Subsidiaries:
We have reviewed the accompanying condensed consolidated balance sheet of
EMMIS BROADCASTING CORPORATION (an Indiana corporation) and
Subsidiaries as of August 31, 1996, and the related condensed consolidated
statements of operations for the three-month and six-month periods ended
August 31, 1996 and 1995 and the condensed consolidated statements of cash
flows for the six-month periods ended August 31, 1996 and 1995. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Emmis Broadcasting Corporation as
of February 29, 1996, and the related consolidated statements of operations,
changes in shareholders' equity (deficit) and cash flows for the year then
ended (not presented separately herein), and in our report dated March 28,
1996, we expressed an unqualified opinion on those financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of February 29, 1996 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
ARTHUR ANDERSEN LLP
Indiananpolis, Indiana,
September 24, 1996.
-3-
<PAGE>
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
February 29, August 31,
1996 1996
----------- -----------
(Note 1) (unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,218 $ 927
Accounts receivable, net 19,172 26,708
Current income tax receivable 1,501 -
Prepaid expenses and other 2,331 3,697
-------- --------
Total current assets 24,222 31,332
Property and equipment, net 7,071 9,927
Intangible assets, net 135,830 133,599
Other assets, net 9,443 9,148
-------- --------
Total assets $176,566 $184,006
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt $ 77 $ 77
Accounts payable 2,872 1,578
Accrued salaries and commissions 3,560 2,050
Accrued interest 320 303
Deferred revenue 1,198 1,512
Other 1,434 2,359
-------- --------
Total current liabilities 9,461 7,879
LONG-TERM DEBT, NET OF CURRENT MATURITIES 124,180 121,139
OTHER NONCURRENT LIABILITIES 1,361 1,036
DEFERRED INCOME TAXES 27,680 27,680
-------- --------
Total liabilities 162,682 157,734
-------- --------
SHAREHOLDERS' EQUITY (DEFICIT):
Class A common stock, $.01 par value;
authorized 34,000,000 shares; issued and
outstanding 8,264,940 shares at
February 29, 1996 and 8,345,547 shares at
August 31, 1996 83 83
Class B common stock, $.01 par value;
authorized 6,000,000 shares; issued and
outstanding 2,606,332 shares at February 29,
1996 and 2,600,845 at August 31, 1996 26 26
Additional paid-in capital 65,852 68,695
Accumulated deficit (52,077) (42,532)
-------- --------
Total shareholders' equity (deficit) 13,884 26,272
-------- --------
Total liabilities and shareholders'
equity (deficit) $176,566 $184,006
======== ========
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these balance sheets.
-4-
<PAGE>
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
August 31, (Unaudited) August 31, (Unaudited)
----------------------- ------------------------
1995 1996 1995 1996
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
GROSS BROADCASTING REVENUES $ 33,127 $ 33,485 $ 62,953 $ 63,433
LESS: AGENCY COMMISSIONS 5,151 5,414 9,620 10,012
-------- -------- -------- --------
NET BROADCASTING REVENUES 27,976 28,071 53,333 53,421
Broadcasting operating expenses 12,881 12,178 26,898 25,309
Publication and other revenue, net
of operating expenses 188 543 450 814
International business development expenses 306 273 676 533
Corporate expenses 1,166 1,371 2,367 2,839
Depreciation and amortization 1,425 1,319 2,843 2,664
Noncash compensation 650 1,131 1,150 2,262
-------- -------- -------- --------
OPERATING INCOME 11,736 12,342 19,849 20,628
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense (3,389) (2,517) (6,983) (5,019)
Equity in loss of unconsolidated affilate (1,057) - (2,243) -
Other income (expense), net 22 215 26 236
-------- -------- -------- --------
Total Other Income (Expense) (4,424) (2,302) (9,200) (4,783)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 7,312 10,040 10,649 15,845
PROVISION FOR INCOME TAXES 3,100 4,000 4,700 6,300
-------- -------- -------- --------
NET INCOME $ 4,212 $ 6,040 $ 5,949 $ 9,545
======== ======== ======== ========
Net income per common and common
equivalent share $ .38 $ .53 $ .54 $ .83
======== ======== ======== ========
Net income per fully diluted common share $ .38 $ .53 $ .53 $ .83
======== ======== ======== ========
Weighted average common shares outstanding:
Before full dilution 11,119,458 11,411,982 11,089,875 11,452,907
Assuming full dilution 11,157,548 11,447,458 11,156,596 11,512,736
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these statements.
-5-
<PAGE>
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
August 31, (Unaudited)
--------------------
1995 1996
------ ------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 5,949 $ 9,545
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization of property
and equipment 818 682
Amortization of debt issuance costs and cost
of interest rate cap agreements 598 720
Amortization of intangible assets 2,025 1,982
Provision for deferred income taxes 4,370 -
Equity in loss of unconsolidated affiliate 2,243 -
Compensation related to stock options granted 900 1,860
Contribution to profit sharing plan paid with
common stock 250 402
Gain on sale of 60% ownership interest in
Duncan's American Radio, Inc. - (195)
(Increase) decrease in current assets -
Accounts receivable (8,439) (7,536)
Prepaid expenses and other (373) (12)
Increase (decrease) in current liabilities -
Accounts payable (1,338) (1,294)
Accrued salaries and commissions 634 (1,510)
Accrued interest (987) (17)
Deferred revenue 88 314
Other 480 600
Decrease (increase) in other assets, net 66 (69)
------ ------
Net cash provided by operating activities 7,284 5,472
------ ------
INVESTING ACTIVITIES:
Purchases of property and equipment (480) (3,543)
Investment in and advances to TalkRadio UK (980) -
Net proceeds from sale of 60% ownership interest in
Duncan's American Radio, Inc. - 240
Acquisition of intangible assets (186) -
------ ------
Net cash used by investment activities (1,646) (3,303)
------ ------
FINANCING ACTIVITIES:
Payments on long-term debt (7,025) (3,041)
Proceeds from exercise of stock options 88 581
------ ------
Net cash used by financing
activities (6,937) (2,460)
------ ------
DECREASE IN CASH AND CASH EQUIVALENTS (1,299) (291)
CASH AND CASH EQUIVALENTS:
Beginning of period 3,205 1,218
------ ------
End of period $ 1,906 $ 927
====== ======
SUPPLEMENTAL DISCLOSURES:
Cash paid for-
Interest $ 7,372 $ 4,316
Income taxes 2 4,053
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these statements.
-6-
<PAGE>
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
AUGUST 31, 1996
NOTE 1. GENERAL
The condensed consolidated interim financial statements included herein
have been prepared by Emmis Broadcasting Corporation and Subsidiaries (Emmis
or the Company) without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles 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 Company's Annual Report on Form 10-K for the year
ended February 29, 1996.
In the opinion of the registrant, the accompanying 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, 1996 and the results of its
operations for the three and six months ended August 31, 1996 and 1995 and its
cash flows for the six months ended August 31, 1996 and 1995.
NOTE 2. INVESTMENT IN TALK RADIO UK
On July 7, 1994, the Company invested approximately $2.5 million for a
24.5% interest in TalkRadio U.K. Limited (TRUK). Subsequently, the Company
invested an additional $1.0 million to support the operations of TRUK. This
investment was accounted for utilizing the equity method of accounting.
Emmis reported losses from the operations of TRUK from inception through August
31, 1995 of $2,591,000 ($2,243,000 loss for the six months ended August 31,
1995) which is included in equity in loss of unconsolidated affiliate in the
consolidated statements of operations. On November 7, 1995, Emmis sold its
24.5% interest in TRUK for approximately $3.0 million and recorded a gain on
sale of approximately $2.7 million.
NOTE 3. SALE OF DUNCAN'S AMERICAN RADIO, INC.
In June, 1996, the Company sold 60% of its ownership interest in Duncan's
American Radio, Inc. for $.5 million and recorded a gain of $.2 million. The
Company also paid $.3 million to buy out a management contract. The Company's
remaining 40% interest is accounted for under the equity method of accounting
and is reflected as other assets in the condensed consolidated balance sheet at
August 31, 1996.
NOTE 4. NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE
Net income per common and common equivalent share is computed by dividing
net income, by the weighted average number of common shares outstanding
during the period. Weighted average common shares outstanding assumes the
exercise of stock options when the effect would be dilutive.
Fully diluted net income per share assumes the fully dilutive effect of
the exercise of stock options.
-7-
<PAGE>
NOTE 5. INCOME TAXES
Under Statement of Financial Accounting Standards No. 109, the Company
recognizes income taxes under the liability method of accounting for income
taxes. The liability method measures the expected tax impact of future
taxable income or deductions resulting from differences in the tax and
financial reporting bases of assets and liabilities reflected in the
consolidated balance sheet and the expected tax impact of carryforwards for
tax purposes.
Income tax expense is reported during interim periods on the basis of the
estimated annual effective tax rate for the taxable jurisdictions in which
the Company operates.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The performance of a radio group, such as the Company, is customarily
measured by the ability of its stations to generate Broadcast Cash Flow and
Operating Cash Flow. Operating Cash Flow is defined as operating income
before depreciation, amortization and noncash compensation expenses.
Broadcast Cash Flow is defined as Operating Cash Flow before corporate
expenses (excluding noncash compensation), publication and other revenue net
of operating expenses, and international business developmement expenses.
Although Broadcast Cash Flow and Operating Cash Flow are not measures of
performance calculated in accordance with generally accepted accounting
principles, and should be viewed as a supplement to and not a substitute for
the Company's results of operations presented on the basis of generally
accepted accounting principles, the Company believes that Broadcast Cash Flow
and Operating Cash Flow are useful because they are generally recognized by
the radio broadcasting industry as a measure of performance and are used by
analysts who report on the performance of broadcast companies.
RESULTS OF OPERATIONS
Net broadcasting revenues for the quarter ended August 31, 1996 were $28.1
million compared to $28.0 million for the same quarter of the prior year.
Broadcasting operating expenses for the quarter ended August 31, 1996 were
$12.2 million compared to $12.9 million for the same quarter of the prior
year, a decrease of $.7 million or 6%. This decrease is principally
attributable to decreased promotional spending at the Company's broadcasting
properties.
Broadcast Cash Flow for the fiscal quarter ended August 31, 1996 was $15.9
million compared to $15.1 million for the same quarter of the prior year, an
increase of $.8 million or 5%. This increase is principally due to decreased
broadcasting operating expenses.
Corporate expenses for the quarter ended August 31, 1996 were $1.4 million
compared to $1.2 million for the same quarter of the prior year, an increase
of $0.2 million or 18%. This increase was primarily due to increased
compensation.
Operating Cash Flow for the quarter ended August 31, 1996 was $14.8 million
compared to $13.8 million for the same quarter of the prior year, an increase
of $1.0 million or 7%. This increase is principally due to decreased
broadcasting operating expenses.
Interest expense was $2.5 million for the quarter ended August 31, 1996
compared to $3.4 million for the same quarter of the prior year, a decrease
of $.9 million or 26%. This decrease reflects lower outstanding debt due
to voluntary repayments made under the Company's credit facility.
-8-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The increase in accounts receivable from February 29, 1996 to August 31,
1996 is due to the increase of net broadcasting revenues in the quarter ended
August 31, 1996 compared to the quarter ended February 29, 1996.
In the fiscal quarter ended August 31, 1996, the Company made voluntary
payments of $1.0 million under its Credit Facility. As of August 31, 1996, the
Company had $47.4 million available for borrowing under the Credit Facililty.
In the fiscal quarter ended August 31, 1996, the Company had capital
expenditures of $2.7 million. These capital expenditures consist primarily
of leasehold improvements to office and studio facilities in connection with
the move of its New York broadcast properties to a new location.
The Company expects that cash flow from operating activities will be
sufficient to fund all debt service, working captial and capital expenditure
requirements. As part of its business strategy, the Company frequently
evaluates potential acquisitions of radio stations. In connection with
future acquisition opportunities, the Company may incur additional debt or
issue additional equity or debt securities depending on market conditions and
other factors.
In August, 1996, the Company announced its plans to build an office building
in downtown Indianapolis for its corporate headquarters. The project is
expected to be completed in late 1998 for an estimated cost of $12-$15 million.
A project agreement between the City of Indianapolis and the Company has not
been finalized.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
At the annual meeting of the shareholders of the Company held on June 26,
1996, the following matters received the following votes:
<TABLE>
<CAPTION>
VOTES VOTES
MATTER DESCRIPTION FOR AGAINST ABSTAINING
------------------ ------- -------- ----------
<S> <C> <C> <C>
1. Election of Directors:
Jeffrey H. Smulyan 33,028,542 -- 115,500
Doyle L. Rose 33,026,542 -- 117,500
Gary L. Kaseff 33,028,542 -- 115,500
Samuel W. Smulyan 33,028,542 -- 115,500
Lawrence B. Sorrel 33,028,542 -- 115,500
Susan B. Bayh* 6,991,692 -- 115,500
Richard A. Leventhal* 6,991,692 -- 115,500
*Class A Director
2. Approval of Appointment of Auditors 33,127,711 -- 251
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits.
The following exhibits are filed or incorporated by reference as a part
of this report:
11 Statements re: Calculations of per share net income (loss)
15 Letter re: unaudited interim financial information
27 Financial data schedule (Edgar version only)
Reports on Form 8-K
No reports on Form 8-K were filed during the period.
-9-
<PAGE>
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 BROADCASTING CORPORATION
Date: October 15, 1996 By: /s/ Howard L. Schrott
-----------------------------
Howard L. Schrott
Vice President (Authorized Corporate
Officer), Chief Financial Officer and
Treasurer
-10-
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
SCHEDULE OF CALCULATION OF PER SHARE NET INCOME
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
August 31, 1996 August 31, 1996
Weighted Calculated Weighted Calculated
Net Average Per Net Average Per
Income Shares Share Income Shares Share
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding and net income used in the
determination of basic net income per share $6,040,000 10,888,234 $0.55 $ 9,545,000 10,948,277 $0.87
---------- ---------- ----- ----------- ---------- -----
Options 523,748 504,630
---------- ---------- ----- ----------- ---------- -----
Used in the determination of primary net
income per share 6,040,000 11,411,982 0.53 9,545,000 11,452,907 0.83
---------- ---------- ----- ----------- ---------- -----
Options 35,476 59,829
---------- ---------- ----- ----------- ---------- -----
Used in the determination of fully diluted
net income per share $6,040,000 11,447,458 $0.53 $ 9,545,000 11,512,736 $0.83
========== ========== ===== =========== ========== =====
<CAPTION>
For the Three Months Ended For the Six Months Ended
August 31, 1995 August 31, 1995
Weighted Calculated Weighted Calculated
Net Average Per Net Average Per
Income Shares Share Income Shares Share
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding and net income used in the
determination of basic net income per share $4,212,000 10,667,464 $0.39 $5,949,000 10,661,620 $0.56
---------- ---------- ----- ---------- ---------- -----
Options 451,994 428,255
---------- ---------- ----- ---------- ---------- -----
Used in the determination of primary net
income per share 4,212,000 11,119,458 0.38 5,949,000 11,089,875 0.54
---------- ---------- ----- ---------- ---------- -----
Options 38,090 66,721
---------- ---------- ----- ---------- ---------- -----
Used in the determination of fully diluted
net income per share $4,212,000 11,157,548 $0.38 $5,949,000 11,156,596 $0.53
========== ========== ===== ========== ========== =====
</TABLE>
October 15, 1996
Mr. Howard Schrott
Chief Financial Officer
Emmis Broadcasting Corporation
950 N. Meridian Street, Suite 1200
Indianapolis, Indiana 46204
Dear Mr. Schrott:
We are aware that Emmis Broadcasting Corporation has incorporated by reference
in its Registration Statement No. 33-83890 its Form 10-Q for the quarter ended
August 31, 1996, which includes our report dated September 24, 1996, covering
the unaudited interim financial information contained therein. Pursuant to
Regulation C of the Securities Act of 1933, that report is not considered a
part of the registration statement prepared or certified by our firm or a
report prepared or certified by our firm within the meaning of Sections 7 and
11 of the Act.
Very truly yours,
ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000783005
<NAME> EMMIS BROADCASTING CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> AUG-31-1996
<CASH> 927
<SECURITIES> 0
<RECEIVABLES> 27,635
<ALLOWANCES> 927
<INVENTORY> 0
<CURRENT-ASSETS> 31,332
<PP&E> 25,742
<DEPRECIATION> 15,815
<TOTAL-ASSETS> 184,006
<CURRENT-LIABILITIES> 7,879
<BONDS> 121,139
0
0
<COMMON> 109
<OTHER-SE> 26,163
<TOTAL-LIABILITY-AND-EQUITY> 184,006
<SALES> 33,485
<TOTAL-REVENUES> 33,485
<CGS> 5,414
<TOTAL-COSTS> 5,414
<OTHER-EXPENSES> 15,497
<LOSS-PROVISION> 17
<INTEREST-EXPENSE> 2,517
<INCOME-PRETAX> 10,040
<INCOME-TAX> 4,000
<INCOME-CONTINUING> 6,040
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,040
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
</TABLE>
