As filed with the Securities and Exchange Commission on July 12, 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 May 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 July 10, 1996, was:
8,339,311 Shares of Class A Common Stock, $.01 Par Value
2,600,845 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 May 31, 1996 and February 29, 1996. . . . . . . . . .4
Condensed Consolidated Statements of
Operations for the three months
ended May 31, 1996 and 1995. . . . . . . . . . .5
Condensed Consolidated Statements of Cash
Flows for the three months ended
May 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 6. Exhibits and Reports on Form 8-K. . . . . . . . . . .9
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<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 May 31, 1996, and the related condensed consolidated statements of
operations and cash flows for the three-month period ended May 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
Indianapolis, Indiana,
June 25, 1996.
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<PAGE>
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
February 29, May 31,
1996 1996
----------- -----------
(Note 1) (unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,218 $ 1,234
Accounts receivable, net 19,172 23,302
Current income tax receivable 1,501 -
Prepaid expenses and other 2,331 3,306
-------- --------
Total current assets 24,222 27,842
Property and equipment, net 7,071 7,619
Intangible assets, net 135,830 134,822
Other assets, net 9,443 9,141
-------- --------
Total assets $176,566 $179,424
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 77 $ 77
Accounts payable 2,872 3,329
Accrued salaries and commissions 3,560 2,349
Accrued interest 320 285
Deferred revenue 1,198 1,375
Other 1,434 1,801
-------- --------
Total current liabilities 9,461 9,216
LONG-TERM DEBT, NET OF CURRENT MATURITIES 124,180 122,158
OTHER NONCURRENT LIABILITIES 1,361 1,361
DEFERRED INCOME TAXES 27,680 27,680
-------- --------
Total liabilities 162,682 160,415
-------- --------
SHAREHOLDERS' EQUITY:
Class A common stock, $.01 par value;
authorized 34,000,000 shares; issued and
outstanding 8,264,940 shares at
February 29, 1996 and 8,335,046 shares at
May 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 2,603,445 at May 31, 1996 26 26
Additional paid-in capital 65,852 67,472
Accumulated deficit (52,077) (48,572)
-------- --------
Total shareholders' equity 13,884 19,009
-------- --------
Total liabilities and shareholders'
equity $176,566 $179,424
======== ========
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these balance sheets.
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<PAGE>
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
May 31, (Unaudited)
------- ----------
1995 1996
------- ----------
<S> <C> <C>
GROSS BROADCASTING REVENUES $ 29,826 $ 29,948
LESS: AGENCY COMMISSIONS 4,469 4,598
-------- --------
NET BROADCASTING REVENUES 25,357 25,350
Broadcasting operating expenses 14,017 13,131
Publication and other revenue, net
of operating expenses 262 271
International business development expenses 370 260
Corporate expenses 1,201 1,468
Depreciation and amortization 1,418 1,345
Noncash compensation 500 1,131
-------- --------
OPERATING INCOME 8,113 8,286
-------- --------
OTHER INCOME (EXPENSE):
Interest expense (3,594) (2,502)
Equity in loss of unconsolidated affiliate (1,186) -
Other income (expense), net 4 21
-------- --------
Total Other Income (Expense) (4,776) (2,481)
-------- --------
INCOME BEFORE INCOME TAXES 3,337 5,805
PROVISION FOR INCOME TAXES 1,600 2,300
-------- --------
NET INCOME $ 1,737 $ 3,505
======== ========
Net income per common and common
equivalent share $ .16 $ .30
======== ========
Net income per fully diluted common share $ .16 $ .30
-------- --------
Weighted average common shares outstanding:
Before full dilution 11,028,517 11,497,105
Assuming full dilution 11,028,517 11,516,894
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these statements.
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<PAGE>
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
May 31, (Unaudited)
-------------------
1995 1996
------ ------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,737 $ 3,505
Adjustments to reconcile net income to net cash
provided by operating activities-
Depreciation and amortization of property
and equipment 405 337
Amortization of debt issuance costs and cost
of interest rate cap agreements 299 360
Amortization of intangible assets 1,013 1,008
Provision for deferred income taxes 1,500 -
Equity in loss of unconsolidated affiliate 1,186 -
Compensation related to stock options granted 375 930
Contribution to profit sharing plan paid with
common stock 125 201
(Increase) decrease in certain current assets -
Accounts receivable (4,945) (4,130)
Prepaid expenses and other (744) 526
Increase (decrease) in certain current
liabilities -
Accounts payable (68) 457
Accrued salaries and commissions (395) (1,211)
Accrued interest (752) (35)
Deferred revenue 224 177
Other 366 367
Decrease in other assets, net 26 (58)
------ ------
Net cash provided by operating activities 352 2,434
------ ------
INVESTING ACTIVITIES:
Purchases of property and equipment (212) (885)
Acquisition of intangible assets (124) -
------ ------
Net cash (used) by investment activities (336) (885)
------ ------
FINANCING ACTIVITIES:
Payments on long-term debt (1,022) (2,022)
Proceeds from exercise of stock options 58 489
------ ------
Net cash provided (used) by financing
activities (964) (1,533)
------ ------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (948) 16
CASH AND CASH EQUIVALENTS:
Beginning of period 3,205 1,218
------ ------
End of period $ 2,257 $ 1,234
====== ======
SUPPLEMENTAL DISCLOSURES:
Cash paid for-
Interest $ 4,047 $ 2,177
Income taxes 2 416
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these statements.
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<PAGE>
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MAY 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 May 31, 1996 and the results of its operations
for the three months ended May 31, 1996 and 1995 and its cash flows for the
three months ended May 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 May
31, 1995 of $1,534,000 ($1,186,000 loss for the three months ended May 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. 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.
NOTE 4. 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.
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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 development 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 May 31, 1996 were $25.4
million compared to $25.4 million for the same quarter of the prior year.
Broadcasting operating expenses for the quarter ended May 31, 1996 were
$13.1 million compared to $14.0 million for the same quarter of the prior
year, a decrease of $.9 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 May 31, 1996 was $12.2
million compared to $11.3 million for the same quarter of the prior year, an
increase of $.9 million or 8%. This increase is principally due to decreased
broadcasting operating expenses.
Corporate expenses for the quarter ended May 31, 1996 were $1.5 million
compared to $1.2 million for the same quarter of the prior year, an increase
of $0.3 million or 22%. This increase was primarily due to increased
compensation.
Operating Cash Flow for the quarter ended May 31, 1996 was $10.8 million
compared to $10.0 million for the same quarter of the prior year, an increase
of $.8 million or 7%. This increase is principally due to decreased
broadcasting operating expenses.
Interest expense was $2.5 million for the quarter ended May 31, 1996
compared to $3.6 million for the same quarter of the prior year, a decrease
of $1.1 million or 30%. This decrease reflects lower outstanding debt due
to voluntary repayments made under the Company's credit facility.
LIQUIDITY AND CAPITAL RESOURCES
The increase in accounts receivable from February 29, 1996 to May 31,
1996 is due to the increase of net broadcasting revenues in the quarter ended
May 31, 1996 compared to the quarter ended February 29, 1996.
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<PAGE>
In the fiscal quarter ended May 31, 1996, the Company made voluntary
payments of $2.0 million under its Credit Facility. As of May 31, 1996, the
Company had $49.2 million available for borrowing under the Credit Facililty.
In the fiscal quarter ended May 31, 1996, the Company had capital
expenditures of $.9 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.
PART II - OTHER INFORMATION
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:
10 Employment agreement with Howard L. Schrott
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.
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<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: July 15, 1996 By: /s/ Howard L. Schrott
-----------------------------
Howard L. Schrott
Vice President (Authorized Corporate
Officer), Chief Financial Officer and
Treasurer
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EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is effective as of March 1,
1996, by and between Emmis Broadcasting Corporation, an Indiana corporation
(the "Employer"), and Howard L. Schrott, an Indiana resident (the
"Executive"). This Agreement is made with reference to the following facts:
A. Employer and its subsidiaries are engaged in the ownership and
operation of various radio stations, magazines, and related operations
(together, the "Emmis Group").
B. Employer desires to employ Executive as an executive, and Executive
desires to be so employed.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, do hereby agree as follows:
1. Employment. Upon the terms and subject to the conditions of this
Agreement, Employer hereby employs Executive and Executive hereby accepts
employment by the Employer.
2. Term. The term of Executive's employment hereunder (the "Term")
shall commence on March 1, 1996 and continue until February 28, 1999, unless
terminated earlier in accordance with the provisions herein. As used herein,
the term "Contract Year" means the twelve (12) month period commencing on
March 1, 1996 and on each anniversary thereof during the Term.
3. Executive's Position, Duties and Authority.
3.1 Position. Employer shall employ Executive, and Executive
shall serve as an executive of Employer and of any successor by merger,
acquisition of substantially all of the assets or stock of Employer or
otherwise. Executive shall serve as Executive Vice President and Chief
Financial Officer of Employer or in such other position or positions to which
the Board of Directors of Employer (the "Board") shall appoint Executive.
3.2 Duties and Authority. Executive shall have executive
duties, functions, authority and responsibilities commensurate with the
office or offices he from time to time holds with Employer. Subject to any
change in title or duties pursuant to Section 3.1, Executive's duties,
functions, authority and responsibilities hereunder shall be substantially
the same as or greater than the duties, functions, authority and
responsibilities held by Executive immediately prior to the execution of this
Agreement. Executive's services hereunder shall be performed on a full-time
basis in a diligent and competent fashion to the best of his abilities.
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<PAGE>
Executive shall not undertake any outside employment or outside business
activities without the consent of the Board.
3.3 Emmis Group Directorships and Offices. If Executive is
elected as a director of Employer, Executive shall serve in such position
without additional remuneration. Executive shall also serve without
additional remuneration as a director or officer of one or more of Employer's
subsidiaries if appointed to such position or positions by Employer.
4. Base Compensation.
4.1 Base Salary. During the first Contract Year, Employer shall
pay or cause to be paid to Executive a base salary per annum (the "Base
Salary") of Two Hundred Thousand Dollars ($200,000), payable in bi-weekly
installments. For the second Contract Year, Employer shall pay or cause to
be paid to Executive a Base Salary per annum of Two Hundred Twenty Thousand
Dollars ($220,000). For the third Contract Year, Employer shall pay or cause
to be paid to Executive a Base Salary per annum of Two Hundred Forty-Two
Thousand Dollars ($242,000).
4.2 Car Allowance. During the Term, Executive shall receive a
car allowance paid monthly in the same amount received by Executive in the
month immediately following execution of this Agreement.
5. Additional Compensation.
5.1 Cash Incentive Compensation. If Employer pays cash bonuses
to its key executives with respect to a particular Contract Year and
Executive's performance justifies such a bonus, Executive shall receive an
annual cash bonus (the "Cash Bonus") for such Contract Year of not less than
Twenty Thousand Dollars ($20,000) or more than Fifty Thousand Dollars
($50,000). Subject to the foregoing, the amount of the Cash Bonus shall be
determined by the Chairman of the Board and Chief Executive Officer of
Employer based on Executive's performance during the Contract year and
Employer's bonus practices or guidelines with respect to its key executive
officers for such Contract Year.
5.2 Equity-Based Incentive Compensation. Executive shall be
entitled to receive equity-based incentive compensation as follows:
5.2.1 Stock Bonuses. On February 28, 1999, Executive
shall be awarded ten thousand (10,000) shares of Class A Common Stock of
Employer if Executive has performed under this Agreement for the entire
three-year Term and is still an employee of Employer on February 28, 1999.
The foregoing stock bonus is in consideration of Executive's employment for
the three-year period commencing March 1, 1996. Except as otherwise provided
in Section 11, no portion of the foregoing stock bonus shall be earned by
Executive unless he has performed under this Agreement for the entire three-year
Term.
5.2.2 Stock Options. On March 1 of each Contract Year
during the Term of this Agreement, Executive shall be granted an option (the
"Executive Option") to acquire the number of shares of Class A Common Stock
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of Employer designated below at an exercise price per share equal to its Fair
Market Value, as defined in the Emmis Broadcasting Corporation 1994 Equity
Incentive Plan ("Plan"), on the date of the grant of the option. The grant
date shall be the first day of the applicable Contract Year, so that the
first grant date shall be March 1, 1996. On that first grant date, Executive
shall be granted an Executive Option to acquire twenty-nine thousand eight
hundred and six (29,806) shares at an exercise price per share of $38.50, its
Fair Market Value on March 1, 1996. Each of the remaining two Executive
Options shall cover twelve thousand (12,000) shares. Each Executive Option
(i) shall be granted pursuant and subject to the terms and conditions of the
Plan; (ii) shall be evidenced by a written grant agreement containing such
terms as are generally provided for executives of Employer; and (iii) shall
be exercisable for Class A Common Stock, without restrictive legends on the
certificates therefor other than those appearing on the Class A Common Stock
generally.
6. Expenses. Employer shall pay or reimburse Executive for all
reasonable expenses actually incurred or paid by Executive during the Term
of this Agreement in the performance of Executive's services hereunder upon
presentation of expense statements or vouchers or such other supporting
information as Employer may reasonably require of Executive.
7. Vacation and Other Benefits. Executive shall be entitled to paid
vacation per Contract Year in accordance with Employer's company practices.
In addition, Executive shall be eligible to participate in and receive the
fringe benefits generally made available to all other employees of the Emmis
Group in accordance with, and to the extent that he is eligible under, the
general provisions of such plans or programs; provided, however, that
Executive shall not be required to pay any portion of the premium for the
group medical policy issued by Massachusetts Mutual Life Insurance Company
and maintained by Employer or for any substantially similar policy issued in
replacement thereof.
8. Confidential Information.
8.1 Non-disclosure. Executive acknowledges that certain
information concerning the business of the Emmis Group is of a confidential
nature and that as a result of his employment with Employer, Executive may
have received or may hereafter receive confidential information concerning
the business of Employer or its subsidiaries which, if known to competitors
of Employer, would damage Employer, its subsidiaries or their respective
businesses. Executive agrees that during the Term and for a period of six
(6) months from the termination of this Agreement, by expiration or otherwise
(in the aggregate, the "Applicable Period"), Executive will not divulge or
appropriate to his own use, or to the use of any third party (other than
Employer and its representatives or as directed in writing by Employer), any
information or knowledge concerning the business of Employer or its
subsidiaries which is not generally available to the public other than
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through the activities of Executive. Executive further agrees that upon
termination of his employment for any reason, Employee will surrender to
Employer all documents, brochures, writings, illustrations, price lists,
marketing plans, budgets and other such materials which he received from or
developed on behalf of Employer or any member of the Emmis Group through his
employment. Executive acknowledges that all such materials are at all times
property of Employer.
8.2 Injunctive Relief. Executive acknowledges that his breach
of Section 8.1 will cause irreparable injury and damage to Employer, the
exact amount of which will be difficult to ascertain, that the remedies at
law for any such breach would be inadequate, and that the provisions of this
Section 8 have been negotiated and written to prevent such irreparable injury
and damage. Accordingly, if Executive breaches Section 8.1, then Employer
shall be entitled to injunctive relief enforcing Section 8.1 to the extent
reasonably necessary to protect Employer's legitimate interests, without
posting bond or other security. If Executive violates Section 8.1 and
Employer brings legal action for injunctive or other relief, Employer shall
not, as a result of the time involved in obtaining such relief, be deprived
of the benefit of the full period of non-disclosure set forth herein.
Accordingly, the obligations set forth in Section 8.1 shall be deemed to have
the duration set forth therein, computed from the date such relief is granted
but reduced by the time expired between the date the Applicable Period began
to run and the date of the first violation of the covenants by Executive.
9. Non-interference and Non-competition.
9.1 Non-interference. During the Applicable Period, Executive
will not, directly or indirectly, take any action (or permit any action to
be taken by an entity with which he is associated) which has the effect of
interfering with (i) on-air talent of Employer or its subsidiaries or (ii)
any other employee of either Employer or any member of the Emmis Group.
Without limiting the generality of the foregoing, Executive specifically
agrees that during the Applicable Period neither he nor any entity with which
he is associated shall hire or engage any on-air talent of Employer or any
of its subsidiaries or any other employee of Employer or any of its
subsidiaries to provide services for any other business or solicit them to
cease their employment with Employer or any member of the Emmis Group.
9.2 Non-competition. During the Applicable Period, Executive
will not, without the prior written approval of the Board, engage directly
or indirectly in, or become employed by, serve as an agent or consultant to
or become an officer, director, partner, principal or shareholder of any
corporation, partnership or other entity which is engaged in the broadcasting
business in any ADI radio market in which any member of the Emmis Group owns,
operates or has an interest in any broadcasting station at such time. As
long as Executive does not engage in any other activity prohibited by the
immediately preceding sentence, Executive's ownership of less than five
percent (5%) of the issued and outstanding stock of any corporation whose
stock is traded on an established securities market shall not constitute
competition with Employer for the purpose of this Section 9.2.
9.3 Injunctive Relief. Executive acknowledges and agrees that
the provisions of this Section 9 have been specifically negotiated and
carefully worded in recognition of the opportunities which will be afforded
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to Executive by Employer by virtue of his continued association with
Employer, and the influence that Executive will have over Employer's
employees, customers and suppliers by virtue of Executive's relationships
with such persons. Executive further acknowledges that his breach of Section
9.1 or 9.2 will cause irreparable injury and damage to Employer, the exact
amount of which will be difficult to ascertain, that the remedies at law for
any such breach would be inadequate, and that the provisions of this Section
9 have been negotiated and written to prevent such irreparable injury and
damage. Accordingly, if Executive breaches Section 9.1 or Section 9.2, then
Employer shall be entitled to injunctive relief enforcing Section 9.1 or 9.2,
as the case may be, to the extent reasonably necessary to protect Employer's
legitimate interests, without posting bond or other security. If Executive
violates Section 9.1 or 9.2 and Employer brings legal action for injunctive
or other relief, Employer shall not, as a result of the time involved in
obtaining such relief, be deprived of the benefit of the full period of
non-interference or non-competition set forth herein. Accordingly, the
obligations set forth in Sections 9.1 and 9.2 shall be deemed to have the
duration set forth therein, computed from the date such relief is granted but
reduced by the time expired between the date the Applicable Period began to
run and the date of the first violation of the covenants by Executive.
9.4 Construction. In the event that, despite the express
agreement herein of Employer and Executive, any provisions of this Section
9 shall be determined by any court or other tribunal of competent
jurisdiction to be unenforceable for any reason whatsoever, the parties agree
that this Section 9 shall be interpreted to extend only to the maximum extent
as to which it may be enforceable, and that the Section shall be severable
into its component parts, all as determined by such court or tribunal.
10. Termination of Agreement by Employer for Cause.
10.1 Termination. Employer may, by action of the Board,
terminate Executive's employment hereunder for Cause (as defined in Section
10.3 below) in accordance with the terms and conditions of this Section.
Following a determination by the Board that Executive should be terminated
for Cause, Employer shall give written notice (the "Preliminary Notice") to
Executive specifying the grounds for such termination, and Executive shall
have ten (10) days after receipt of the Preliminary Notice to respond. If
following expiration of such ten (10) day period the Board reaffirms its
determination that Executive should be terminated for Cause, such termination
shall be effective upon delivery by Employer to Executive of a final notice
of termination (the "Final Notice").
10.2 Effect of Termination. In the event of termination for
Cause as provided in Section 10.1 above:
(i) Executive shall have no further obligations or
liabilities hereunder except his obligations under Sections 8 and 9, which
shall survive such termination of this Agreement and except for any
obligations arising in connection with any conduct of Executive described in
Section 10.3;
-5-
<PAGE>
(ii) Employer shall have no further obligations or
liabilities hereunder, except that Employer shall, not later than two (2)
weeks after the termination date:
(A) Pay to Executive all unpaid Base Salary with
respect to any period ending on or before the termination date; and
(B) Pay to Executive any Cash Bonus which may have
been earned for a Contract Year ending on or prior to the termination date
pursuant to Section 5.1 but which is unpaid as of the termination date.
10.3 Definition of Cause. As used herein, "Cause" means either
(i) action by Executive involving willful or repeated failure, neglect or
refusal to perform any material obligation under this Agreement (or any
duties assigned to Executive consistent with the terms of this Agreement) at
the time and in the manner set forth herein (or in such assignment), and
continuation of such breach after written notice and the expiration of a
thirty (30) day cure period (provided, however, that it is not the parties'
intention that Employer shall be required to provide successive such notices,
and in the event Employer has provided Executive with a notice and
opportunity to cure pursuant to this clause (i), it may terminate this
Agreement for a subsequent breach similar or related to the breach for which
notice was previously given or for a continuing series or pattern of breaches
(whether or not similar or related) without providing notice or an
opportunity to cure); or (ii) Executive's commission of a felony involving
moral turpitude or Executive's action, knowing allowance of actions, or
omissions which are in violation of the communications laws or the rules and
regulations of the Federal Communications Commission (the "FCC") or which
otherwise jeopardize the FCC licenses granted to Employer or its
subsidiaries.
11. Disability.
11.1 Termination of Employment. If Executive shall become
Disabled (as defined in Section 11.2), Employer shall continue to compensate
Executive under the terms of this Agreement without diminution and otherwise
without regard to such disability or nonperformance of duties, until
Executive has been disabled for a cumulative period of six (6) months, at
which time Executive's employment shall automatically terminate on the last
day of such six (6) month period. The date that Executive's employment
terminates pursuant to this Section is referred to herein as the "Disability
Termination Date."
11.2 Disability Definition. Executive shall be deemed to have
become "Disabled" for purposes of this Agreement if, during the term of this
Agreement, because of ill health, physical or mental disability or for other
causes beyond his control, he shall have been unable or unwilling or shall
have failed to perform his duties hereunder.
11.3 Obligations after Termination. Executive shall have no
further obligations or liabilities hereunder after a Disability Termination
Date except his obligations under Sections 8 and 9 which shall survive.
After a Disability Termination Date, Employer shall have no further
obligations or liabilities hereunder except its obligations under Section
11.4, 11.5 and 11.6 below which shall survive.
-6-
<PAGE>
11.4 Payment of Unpaid Salary after Termination. Employer
shall, not later than two (2) weeks after a Disability Termination Date, pay
to Executive all unpaid Base Salary with respect to any period ending on or
before the Disability Termination Date.
11.5 Post-Termination Compensation. Following a Disability
Termination Date, Employer shall pay to Executive in bi-weekly payments
during each Contract Year or partial Contract Year which would have otherwise
been remaining under this Agreement an amount equal to fifty percent (50%)
of the Base Salary for such Contract Year or partial Contract Year. The
benefits required to be paid under this Section 11.5 shall be reduced by the
amount of any benefits payable to Executive under any group or individual
disability insurance plan or policy, the premiums for which are paid by
Employer.
11.6 Prorated Stock Bonuses. Employer shall, not later than two
(2) weeks after a Disability Termination Date, award to Executive a prorated
portion of the ten thousand (10,000) shares to which Executive would have
otherwise been entitled had he been employed for the entire three-year Term,
as provided in Section 5.2.1. The percentage of shares to be awarded to
Executive shall equal the ratio that the number of full months during which
Executive was employed hereunder, from March 1, 1996 through the Disability
Termination Date, bears to thirty-six (36) months. No fractional shares
shall be awarded; the resulting product obtained by multiplying ten thousand
(10,000) shares by the foregoing percentage shall be rounded off to the next
highest number.
12. Death of Executive.
12.1 Termination of Agreement. This Agreement shall terminate
upon Executive's death. In the event of such termination, Employer shall
have no further obligations or liabilities hereunder (including, but not
limited to, any obligation to make payments under Section 11 for any period
after Executive's date of death) except its obligations under Section 12.2
below which shall survive such termination.
12.2 Compensation. Employer shall, not later than two (2) weeks
after Executive's date of death, pay to the Executive's estate or designated
beneficiary all unpaid Base Salary with respect to any period ending on or
before Executive's date of death.
12.3 No Reduction. Amounts payable pursuant to this Section
shall not be reduced by the value of any benefits payable to the Executive's
estate or designated beneficiary under any life insurance plan or policy.
12.4 Death After Termination. In the event Executive dies after
termination of this Agreement pursuant to Sections 10 or 11, all amounts or
shares required to be paid or delivered by Employer prior to Executive's
death in connection with such termination that remain unpaid or undelivered
as of Executive's date of death shall be paid or delivered to Executive's
estate or designated beneficiary.
13. No Mitigation Required. Executive shall not be required to
mitigate any damages suffered by him by reason of Employer's breach hereof.
-7-
<PAGE>
No amounts payable to Executive by reason of the termination of his
employment hereunder shall be subject to reduction or offset, or otherwise
diminished, by reason of any other compensation received by Executive.
14. Change in Control.
14.1 Change in Duties. Following the occurrence of a Change in
Control (as defined below), any change in duties pursuant to Section 3.1 that
increases Executive's duties, functions or responsibilities hereunder shall
be reasonable under the circumstances then existing and shall not
unreasonably impair Executive's ability to perform the services then required
of him under this Agreement.
14.2 Location of Employment.. Following the occurrence of a
Change in Control, unless Executive consents otherwise in writing, the
headquarters for performance of his services hereunder shall be the principal
corporate offices of Employer or its successor. If, following the occurrence
of a Change in Control, Employer or its successor requires Executive to
relocate his office outside Indianapolis, Indiana, Employer or its successor,
as the case may be, shall be required to pay or reimburse Executive for
reasonable relocation expenses actually incurred or paid by Executive in
connection with such relocation, including, but not limited to, those types
of expenses paid by Employer in connection with Executive's relocation from
North Carolina to Indiana in 1991.
14.3 Change in Control. As used herein, "Change in Control"
means the acquisition by any person or group of affiliated persons of the
ability, by contract or otherwise, to elect a majority of the members of the
Board or the power, by contact or otherwise, to vote fifty percent (50%) or
more of all classes of stock of Employer.
15. Adjustments for Changes in Capitalization of the Employer. In the
event of any change in the outstanding shares of Employer stock during the
Term by reason of any reorganization, recapitalization, stock split, reverse
stock split, stock dividend, share combination, consolidation, or similar
event, the number and class of shares awarded under Section 5.2.1 or covered
by any Executive Option shall be appropriately adjusted by the Compensation
Committee of the Board, whose determination shall be conclusive.
16. Indemnification. Executive shall be entitled in connection with
his employment hereunder to the benefit of the indemnification provisions
contained in Employer's Amended and Restated Articles of Incorporation, as
the same may be amended from time to time (not including any amendments or
additions that limit or narrow, but including any that add to or broaden, the
protection afforded to Executive), to the fullest extent permitted by
applicable law. Employer shall in addition cause Executive to be indemnified
in accordance with Chapter 37 of the Indiana Business Corporation Law, as the
same may be amended from time to time, to the fullest extent permitted by
such chapter, to the extent required to make Executive whole in connection
with any loss, cost or expense indemnifiable thereunder.
-8-
<PAGE>
17. Notices. All notices, requests, consents and other
communications, required or permitted to be given hereunder, shall be in
writing and shall be deemed to have been duly given if delivered personally
or sent by prepaid telegram, or mailed first-class, postage prepaid, by
registered or certified mail, as follows (or to such other or additional
address as either party shall designate by notice in writing to the other in
accordance herewith):
(a) If to Employer:
Emmis Broadcasting Corporation
950 North Meridian Street
Suite 1200
Indianapolis, Indiana 46204
Attn.: Board of Directors
(b) If to Executive, to him at his address on the personnel
records of Employer.
18. General.
18.1 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Indiana..
18.2 Captions. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
18.3 Entire Agreement. This Agreement sets forth the entire
agreement and understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements and understandings,
written or oral, between the parties.
18.4 Successors and Assigns. This Agreement, and Executive's
rights and obligations hereunder, may not be assigned by Executive, except
that Executive may designate pursuant to Section 18.6 one or more
beneficiaries to receive any amounts that would otherwise be payable
hereunder to Executive's estate.
18.5 Amendments; Waivers. This Agreement cannot be changed,
modified or amended, and no provision or requirement hereof may be waived,
without the consent in writing of Executive and Employer. The failure of a
party at any time or times to require performance of any provision hereof
shall in no manner affect the right of such party at a later time to enforce
such provision. No waiver by a party of the breach of any term or covenant
contained in this Agreement, whether by conduct or otherwise, in any one or
more instances, shall be deemed to be, or construed as, a further or
continuing waiver of any such breach or a waiver of the breach of any other
term or covenant contained in this Agreement.
18.6 Beneficiaries. Whenever this Agreement provides for any
payment to Executive's estate, such payment may be made instead to such
beneficiary or beneficiaries as Executive may have designated in a writing
filed with Employer. Executive shall have the right to revoke any such
designation and to redesignate a beneficiary or beneficiaries by written
notice to Employer (and to any applicable insurance company).
-9-
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
EMMIS BROADCASTING CORPORATION
By: /s/ Jeffrey H. Smulyan
---------------------------------------
"Employer"
/s/ Howard L. Schrott
---------------------------------------
Howard L. Schrott
"Executive"
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
SCHEDULE OF CALCULATION OF PER SHARE NET INCOME
<TABLE>
<CAPTION>
For the Three Months Ended
May 31, 1996
Weighted Calculated
Net Average Per
Income Shares Share
<S> <C> <C> <C>
Shares outstanding and net income used in the
determination of basic net income per share $3,505,000 10,924,740 $0.32
---------- ---------- -----
Options 572,365
---------- ---------- -----
Used in the determination of primary net
income per share 3,505,000 11,497,105 0.30
---------- ---------- -----
Options 19,789
---------- ---------- -----
Used in the determination of fully diluted
net income per share $3,505,000 11,516,894 $0.30
========== ========== =====
<CAPTION>
For the Three Months Ended
May 31, 1995
Weighted Calculated
Net Average Per
Income Shares Share
<S> <C> <C> <C>
Shares outstanding and net income used in the
determination of basic net income per share $1,737,000 10,655,775 $0.16
---------- ---------- -----
Options 372,742
---------- ---------- -----
Used in the determination of primary net
income per share 1,737,000 11,028,517 0.16
---------- ---------- -----
Options (A)
---------- ---------- -----
Used in the determination of fully diluted
net income per share $1,737,000 11,028,517 $0.16
========== ========== =====
(A) Excluded due to anti-dilutive effect
</TABLE>
July 10, 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
May 31, 1996, which includes our report dated June 25, 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> MAR-01-1996
<PERIOD-END> MAY-31-1996
<CASH> 1,234
<SECURITIES> 0
<RECEIVABLES> 24,312
<ALLOWANCES> 1,010
<INVENTORY> 0
<CURRENT-ASSETS> 27,842
<PP&E> 23,160
<DEPRECIATION> 15,541
<TOTAL-ASSETS> 179,424
<CURRENT-LIABILITIES> 9,216
<BONDS> 122,158
0
0
<COMMON> 109
<OTHER-SE> 18,900
<TOTAL-LIABILITY-AND-EQUITY> 179,424
<SALES> 29,948
<TOTAL-REVENUES> 29,948
<CGS> 4,598
<TOTAL-COSTS> 4,598
<OTHER-EXPENSES> 16,756
<LOSS-PROVISION> 287
<INTEREST-EXPENSE> 2,502
<INCOME-PRETAX> 5,805
<INCOME-TAX> 2,300
<INCOME-CONTINUING> 3,505
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,505
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
