As filed with the Securities and Exchange Commission on July 1, 1998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended May 31, 1998 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 June 29, 1998, was:
13,086,001 Shares of Class A Common Stock, $.01 Par Value
2,560,894 Shares of Class B Common Stock, $.01 Par Value
<PAGE>
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . . .4
Condensed Consolidated Balance Sheets
at May 31, 1998 and February 28, 1998. . . . . . . . . .4
Condensed Consolidated Statements of
Operations for the three months
ended May 31, 1998 and 1997. . . . . . . . . . . . . . .6
Condensed Consolidated Statements of Cash
Flows for the three months ended
May 31, 1998 and 1997 . . . . . . . . . . . . . . . . .8
Notes to Condensed Consolidated
Financial Statements. . . . . . . . . . . . . . . . . 10
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . 14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . 18
<PAGE>
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, 1998, and the related condensed consolidated statements of
operations and cash flows for the three-month periods ended May 31, 1998 and
1997. 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 28, 1998, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for the year then
ended (not presented separately herein), and in our report dated March 31,
1998, 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 28, 1998 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 19, 1998.
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
February 28, May 31,
1998 1998
------- -------
(Note 1) (unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,785 $ 8,555
Accounts receivable, net 32,120 37,928
Income tax refunds receivable 4,968 3,722
Prepaid expenses and other 8,279 9,848
-------- --------
Total current assets 51,152 60,053
Property and equipment, net 33,446 39,373
Intangible assets, net 234,558 232,324
Other assets, net 14,232 47,883
-------- --------
Total assets $ 333,388 $ 379,633
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 51 $ 41
Accounts payable 13,140 14,191
Accrued salaries and commissions 2,893 2,876
Accrued interest 2,421 1,276
Deferred revenue 7,985 7,928
Other 1,579 1,514
------- -------
Total current liabilities 28,069 27,826
LONG-TERM DEBT, NET OF CURRENT MATURITIES 231,371 274,466
OTHER NONCURRENT LIABILITIES 604 553
MINORITY INTEREST 1,875 868
DEFERRED INCOME TAXES 26,259 26,559
------- ------
Total liabilities 288,178 330,272
------- ------
<PAGE>
SHAREHOLDERS' EQUITY:
Class A common stock, $.01 par value;
authorized 34,000,000 shares; issued
and outstanding 8,430,660 shares at
February 28, 1998 and 8,494,158 shares
at May 31, 1998 84 85
Class B common stock, $.01 par value;
authorized 6,000,000 shares; issued
and outstanding 2,560,894 shares at
February 28, 1998 and 2,560,894 at
May 31, 1998 26 26
Additional paid-in capital 72,753 74,959
Accumulated deficit (27,653) (25,538)
Cumulative translation adjustments - (171)
------- -------
Total shareholders' equity 45,210 49,361
------- -------
Total liabilities and shareholders'
equity $ 333,388 $ 379,633
======= =======
</TABLE>
The accompanying notes to condensed consolidated financial
statements are an integral part of these balance sheets.
<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)
--------------------------
1997 1998
------ ------
<S> <C> <C>
GROSS BROADCASTING REVENUES $ 33,820 $ 42,362
LESS: AGENCY COMMISSIONS 5,258 6,933
------- -------
NET BROADCASTING REVENUES 28,562 35,429
Broadcasting operating expenses 16,225 20,068
Publication and other revenue, net
of operating expenses 245 1,463
International business development expenses 338 207
Corporate expenses 1,644 1,957
Time brokerage fees - 2,125
Depreciation and amortization 1,682 3,407
Noncash compensation 827 424
------- ------
OPERATING INCOME 8,091 8,704
------- ------
OTHER INCOME (EXPENSE):
Interest expense (2,649) (5,508)
Minority interest - 1,007
Other income (expense), net 172 312
------- ------
Total Other Income (Expense) (2,477) (4,189)
------- ------
<PAGE>
INCOME BEFORE INCOME TAXES 5,614 4,515
PROVISION FOR INCOME TAXES 2,246 2,400
-------- -------
NET INCOME $ 3,368 $ 2,115
======== =======
Basic net income per share $ .31 $ .19
======== =======
Diluted net income per share $ .30 $ .18
======== =======
Weighted average common shares outstanding:
Basic 11,004,147 11,018,141
Diluted 11,372,963 11,490,116
</TABLE>
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
<PAGE>
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended May 31,
(Unaudited)
-------------------
1997 1998
----- -----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,368 $ 2,115
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization of
property and equipment 582 1,305
Amortization of debt issuance costs
and cost of interest rate cap agreements 191 281
Amortization of intangible assets 1,100 2,102
Provision for bad debts - 413
Provision (benefit) from deferred income taxes (215) 300
Gain on sale of property and equipment - (533)
Compensation related to stock options
granted 661 237
Contribution to profit sharing plan paid
with common stock 166 187
Minority Interest - (1,007)
(Increase) decrease in certain current
assets -
Accounts receivable (5,409) (6,221)
Prepaid expenses and other 1,496 (323)
Increase (decrease) in certain current
liabilities -
Accounts payable (1,245) 1,051
Accrued salaries and commissions 968 (17)
Accrued interest 184 (1,145)
Deferred revenue (48) (57)
Other 2 (65)
Increase (decrease) in other assets, net (143) 326
Decrease in other liabilities - (51)
------- -------
Net cash provided by (used in) operating
activities 1,658 (1,102)
------- -------
<PAGE>
INVESTING ACTIVITIES:
Purchases of property and equipment (941) (7,375)
Proceeds from sale of property and equipment - 607
Acquisition of WALC-FM, WKBQ-AM, and WKKX-FM (36,964) -
Deposit on acquisition of SF Broadcasting - (25,000)
Deposit on acquisition of Wabash Valley Broadcasting - (9,000)
-------- -------
Net cash used by investment
activities (37,905) (40,768)
------- -------
FINANCING ACTIVITIES:
Payments on long-term debt (2,022) (1,000)
Proceeds from long-term debt 38,000 44,085
Purchase of interest rate cap agreements and
other debt related costs (181) (68)
Proceeds from exercise of stock options and
related income taxes benefits 613 1,783
------ ------
Net cash provided by
financing activities 36,410 44,800
------ ------
EFFECT OF EXCHANGE RATES ON CASH - (160)
INCREASE IN CASH AND CASH EQUIVALENTS 163 2,770
CASH AND CASH EQUIVALENTS:
Beginning of period 1,191 5,785
------ ------
End of period $1,354 $8,555
====== ======
SUPPLEMENTAL DISCLOSURES:
Cash paid for-
Interest $ 2,274 $ 5,753
Income taxes 589 265
ACQUISITION OF WALC-FM, WKBQ-AM AND WKKX-FM:
Fair value of assets acquired $ 44,564
Cash paid 43,564
------
Liabilities assumed $1,000
======
</TABLE>
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
<PAGE>
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------
(Unaudited)
MAY 31, 1998
-------------
NOTE 1. GENERAL
--------
Pursuant to the rules and regulations of the Securities and Exchange
Commission, the condensed consolidated interim financial statements
included herein have been prepared, without audit, by Emmis Broadcasting
Corporation, and Subsidiaries ("Emmis" or the "Company"). In June 1998,
the Company changed its name to Emmis Communications Corporation.
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 28, 1998.
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, 1998 and the results of its
operations for the three months ended May 31, 1998 and 1997 and its cash
flows for the three months ended May 31, 1998 and 1997.
NOTE 2. PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
-------------
On March 31, 1997, Emmis completed its acquisition of substantially
all of the assets of radio stations WALC-FM and WKKX-FM in St. Louis from
Zimco, Inc., for approximately $43.6 million in cash, plus an agreement
to broadcast approximately $1 million in trade spots, for Zimco, Inc.
over a period of several years. Emmis financed the acquisition through
additional borrowings under its bank credit facility (Credit Facility).
The acquisition was accounted for as a purchase.
<PAGE>
Concurrent with the signing of the asset purchase agreement, Emmis
entered into a time brokerage agreement that permitted Emmis to operate
the acquired stations effective December 1, 1996 through the date of
closing. Operating results of these stations are reflected in the
consolidated statements of operations beginning December 1, 1996.
On November 1, 1997, the Company completed its acquisition of
substantially all of the assets of WTLC-FM and AM in Indianapolis from
Panache Broadcasting, L.P. for approximately $15.3 million in cash.
Emmis financed the acquisition through additional bank borrowings. The
acquisition was accounted for as a purchase.
On February 1, 1998, the Company acquired all of the outstanding
capital stock of Mediatex Communications Corporation for approximately
$37 million in cash. Mediatex Communications Corporation owns and
operates Texas Monthly, a regional magazine. The acquisition was
accounted for as a purchase and was financed through additional bank
borrowings.
On June 5, 1998, the Company completed its acquisition of radio
station WQCD-FM in New York City for approximately $141 million in cash.
The acquisition was financed through additional bank borrowings under its
Credit Facility and was accounted for as a purchase.
In connection with the above agreement, the Company entered into a
time brokerage agreement which permitted Emmis to operate the station
effective July 1, 1997 through the date of closing. In consideration for
the time brokerage agreement, the Company paid a monthly fee of
approximately $700,000. Operating results of WQCD-FM are reflected in
the consolidated statements of operations beginning July 1, 1997.
A pro forma condensed consolidated statement of operations is
presented below for the three months ended May 31, 1997, assuming the
acquisitions of WALC-FM, WKKX-FM, WTLC-FM and AM, and Texas Monthly and
the operation of WQCD-FM, under the time brokerage agreement, all had
occurred on the first day of the year ended February 28, 1998. Pro forma
results for the three months ended May 31, 1997, include actual revenue
and operating expenses, operating under the time brokerage agreement, and
certain pro forma expense adjustments for the acquisition of WALC-FM and
WKKX-FM. In addition, pro forma adjustments for March through May for
the operation of WQCD-FM under the time brokerage agreement, and the
acquisition of WTLC-FM and AM and Texas Monthly are included in pro forma
results for the three months ended May 31, 1997. Pro forma interest
expense, depreciation of property and equipment and amortization expense
related to the intangibles resulting from the allocation of the purchase
price for the above acquisitions and pro forma time brokerage fees for
the operation of WQCD-FM have been included in the pro forma statements
presented below (in thousands, except per share data).
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED
--------------------------------
STATEMENT OF OPERATIONS
----------------------
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
May 31, 1997
------------------
Pro forma
----------
<S> <C>
Net broadcasting revenues $ 34,053
Broadcasting operating expenses 19,195
Publication and other revenue,
net of operating expenses 744
International business development
expenses 338
Corporate expenses 1,644
Time brokerage agreement fees 2,125
Depreciation and amortization 2,834
Noncash compensation 827
------
Operating income 7,834
Interest expense (3,874)
Other income (expense), net 244
------
Income before income taxes 4,204
Provision for income taxes 1,681
------
Net income $ 2,523
======
Basic net income per share $ .23
======
Diluted net income per share $ .22
======
Weighted average shares outstanding
Basic 11,004,147
Diluted 11,372,963
</TABLE>
The pro forma condensed consolidated statements of operations
presented above do not purport to be indicative of the results that
actually would have been obtained if the indicated transaction had been
effective at the beginning of the three month period ended May 31, 1997
and is not intended to be projection of future results or trends.
<PAGE>
NOTE 3. BASIC AND DILUTED NET INCOME PER SHARE
---------------------------------------
Basic net income per share excludes dilution and is computed by
dividing net income available to common shareholders by the weighted-average
number of common shares outstanding for the period. Diluted net
income per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock
that then shared in the earnings of the entity.
NOTE 4. ACCOUNTING PRONOUNCEMENTS
-------------------------
Effective March 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income", which
established standards for reporting and displaying comprehensive income
and its components in financial statements. Comprehensive income is
defined as net income and all nonowner changes in shareholders' equity.
Comprehensive income was comprised of the following for the three month
periods ended May 31, 1998 and 1997 (dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended
May 31,
-------------------
1997 1998
---- ----
<S> <C> <C>
Net income $3,368 $2,115
Translation adjustment - (171)
----- -----
Total comprehensive income $3,368 $1,944
====== =====
</TABLE>
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 generally reported during interim periods on the
basis of the estimated annual effective tax rate for the taxable
jurisdictions in which the Company operates.
NOTE 6. CONTINGENCIES
-------------
It is anticipated that options to acquire 100,000 shares of stock will
be granted to the CEO for the year ended February 28, 1998. Accordingly,
the Company has previously reflected in the financial statements non-cash
compensation expense totaling $2.9 million and a corresponding increase
to additional paid in capital. The granting of these options requires
board of director approval, and thus, there can be no assurance that such
options will ultimately be granted.
<PAGE>
NOTE 7. OTHER SIGNIFICANT EVENTS
------------------------
Effective March 20, 1998, the Company entered into an agreement to
purchase the majority of the assets of Wabash Valley Broadcasting
Corporation for approximately $90 million in cash. The acquisition
consists of WTHI-TV, a CBS network affiliated television station, WTHI-FM
and AM and WWVR-FM, radio stations located in the Terre Haute, Indiana
area, and WFTX-TV, a Fox network affiliated television station in Ft.
Myers, Florida. This acquisition is awaiting approval by the FCC.
Effective March 30, 1998, the Company entered into an agreement to
purchase substantially all of the assets of SF Broadcasting of Wisconsin,
Inc. and SF Multistations, Inc. and Subsidiaries (collectively the "SF
Acquisition") for approximately $307 million. A portion of the purchase
price ($25 million) was paid in escrow upon execution of the purchase
agreement, another portion ($257 million) will be paid in cash at the
closing, and the balance ($25 million) of the purchase price will be
payable pursuant to a promissory note bearing interest at 8% with
principle and interest due on the first anniversary of the closing date.
At Emmis' option, the promissory note may be paid in cash or with Emmis'
Class A Common Stock. The Company currently anticipates that it will pay
all of the purchase price in cash. The SF Acquisition consists of four
Fox network affiliated television stations: WLUK-TV in Green Bay,
Wisconsin, WVUE-TV in New Orleans, Louisiana, WALA-TV in Mobile, Alabama,
and KHON-TV in Honolulu, Hawaii (including McHale Videofilm and satellite
stations KAII-TV, Wailuku, Hawaii, and KHAW-TV, Hilo, Hawaii). This
acquisition has been approved by the FCC and is awaiting closing.
The Company will account for these acquisitions under the purchase
method of accounting.
In June 1998, Emmis completed the sale of 4.6 million of its Class A
Common Stock at $42.00 per share resulting in total proceeds of $193
million. Net proceeds from the offering were used to repay outstanding
obligations under the Credit Facility.
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. Emmis defines Broadcast Cash Flow as advertising
revenues net of agency commissions, less broadcast operating expenses.
Operating Cash Flow is defined by the Company as operating income before
depreciation, amortization, time brokerage fees and noncash compensation
expenses. Broadcast Cash Flow and Operating Cash Flow are not measures
of liquidity or 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 measures of performance and are used by analysts who report on the
performance of broadcast companies.
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MAY 31, 1998 COMPARED TO MAY 31, 1997
Net broadcasting revenues for the quarter ended May 31, 1998 were
$35.4 million compared to $28.6 million for the same quarter of the prior
year, an increase of $6.8 million or 24.0%. This increase is principally
due to the operation of WQCD under a time brokerage agreement and the
acquisition of WTLC FM and AM, as well as the ability to realize higher
advertising rates at the Company's broadcasting properties, resulting
from higher ratings at certain broadcasting properties, as well as
increases in general radio spending in the markets in which the Company
operates.
Broadcasting operating expenses for the quarter ended May 31, 1998
were $20.1 million compared to $16.2 million for the same quarter of the
prior year, an increase of $3.9 million or 23.7%. Included in broadcast
operating expense for the three months ended May 31, 1998 is $.5 million
of expense from the operations of Slager Radio for which revenue was
nominal due to the commencement of broadcasting during the first quarter.
The remaining increase is primarily attributable to the operation of WQCD
under a time brokerage agreement and the acquisition of WTLC FM and AM.
Broadcast Cash Flow for the fiscal quarter ended May 31, 1998 was
$15.4 million compared to $12.3 million for the same quarter of the prior
year, an increase of $3.1 million or 25.2%. This increase is principally
due to increased net broadcasting revenues offset by increased
broadcasting operating expenses as discussed above.
Corporate expenses for the quarter ended May 31, 1998 were $2.0
million compared to $1.6 million for the same quarter of the prior year,
an increase of $0.4 million or 19%. This increase was primarily due to
the establishment of a corporate division for publishing.
International business development expenses for the quarter ended May
31, 1998 were $.2 million compared to $.3 million for the same quarter
of the prior year. These expenses reflect costs associated with Emmis
International Corporation. The purpose of this wholly owned subsidiary
is to identify, investigate and develop international broadcast
investments or other international business opportunities. Expenses
consist primarily of salaries, travel and various administrative costs.
<PAGE>
Operating Cash Flow for the quarter ended May 31, 1998 was $14.7
million compared to $10.6 million for the same quarter of the prior year,
an increase of $4.1 million or 38.3%. This increase is principally due
to increased net broadcasting revenues offset by increased broadcasting
operating expenses, as discussed above, and an increase in publication
and other revenue, net of operating expenses resulting from the
acquisition of Texas Monthly.
Interest expense was $5.5 million for the quarter ended May 31, 1998
compared to $2.6 million for the same quarter of the prior year, an
increase of $2.9 million or 108%. This increase reflects higher
outstanding debt due to the St. Louis, WTLC FM and AM and Texas Monthly
acquisitions and deposits related to the SF and Wabash Valley
acquisitions.
RESULTS OF OPERATIONS MAY 31, 1997 COMPARED TO MAY 31, 1996
Net broadcasting revenues for the quarter ended May 31, 1997 were
$28.6 million compared to $25.4 million for the same quarter of the prior
year, an increase of $3.2 million or 12.7%. This increase is principally
due to the St. Louis acquisition and the ability to realize higher
advertising rates at the Company's broadcasting properties, resulting
from higher ratings at certain broadcasting properties, as well as
increases in general radio spending in the markets in which the Company
operates.
Broadcasting operating expenses for the quarter ended May 31, 1997
were $16.2 million compared to $13.1 million for the same quarter of the
prior year, an increase of $3.1 million or 23.6%. This increase is
principally attributable to the St. Louis acquisition and increased
promotional spending at the Company's broadcasting properties.
Broadcast Cash Flow for the fiscal quarter ended May 31, 1997 was
$12.3 million compared to $12.2 million for the same quarter of the prior
year, an increase of $.1 million or 1.0%. This increase is principally
due to increased net broadcasting revenues offset by increased
broadcasting operating expenses as discussed above.
Corporate expenses for the quarter ended May 31, 1997 were $1.6
million compared to $1.5 million for the same quarter of the prior year,
an increase of $0.1 million or 12%. This increase was primarily due to
increased travel expenses and other expenses related to potential
acquisitions.
<PAGE>
International business development expenses for the quarters ended May
31, 1997 and 1996 were $.3 million. These expenses reflect costs
associated with Emmis International Corporation. The purpose of this
wholly owned subsidiary is to identify, investigate and develop
international broadcast investments or other international business
opportunities. Expenses consist primarily of salaries, travel and
various administrative costs.
Operating Cash Flow for the quarter ended May 31, 1997 was $10.6
million compared to $10.8 million for the same quarter of the prior year,
a decrease of $.2 million or 1.5%. This decrease is principally due to
increased corporate and international expenses.
Interest expense was $2.6 million for the quarter ended May 31, 1997
compared to $2.5 million for the same quarter of the prior year, an
increase of $.1 million or 5.9%. This increase reflects higher
outstanding debt due to the St. Louis acquisition offset by voluntary
repayments made under the Company's Credit Facility.
LIQUIDITY AND CAPITAL RESOURCES
The increase in accounts receivable from February 28, 1998 to May 31,
1998 is due to the increase of net broadcasting revenues in the quarter
ended May 31, 1998 compared to the quarter ended February 28, 1998.
In the fiscal quarter ended May 31, 1998, the Company made voluntary
payments of $1.0 million under its Credit Facility.
In August 1996, Emmis announced its plan to build an office building
in downtown Indianapolis for its corporate office and its Indianapolis
operations. The project is expected to be completed in 1999 for an
estimated cost of $30 million, net of reimbursable construction costs of
$2 million. This amount reflects an increase over the original amount
due to the acquisition of WTLC FM and AM and network acquisitions, as
well as an increase in overall staffing. Certain factors such as
additional studio costs related to digital technology and historical
landmark requirements may cause the cost of this project to increase.
The Company is funding this project through cash flow from operating
activities and bank borrowings.
In the fiscal quarter ended May 31, 1998, the Company had capital
expenditures of $7.4 million. These capital expenditures consist
primarily of progress payments in connection with the Indianapolis
building project.
<PAGE>
In June 1998, Emmis completed the sale of 4.6 million shares of its
Class A Common Stock at $42.00 per share resulting in total proceeds of
$193 million. Net proceeds from the offering were used to repay
outstanding obligations under the Credit Facility.
The Company expects that cash flow from operating activities will be
sufficient to fund all debt service for debt existing at May 31, 1998,
working capital and capital expenditure requirements, and the acquisition
of WQCD-FM. To complete the acquisition of assets from Wabash Valley
Broadcasting and SF Broadcasting, the Company will increase its bank
borrowings under a new Credit Facility. 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:
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
The Company filed Form 8-K on May 7, 1998, to file audited financial
statements for Tribune New York Radio, Inc. and SF Broadcasting of Wisconsin,
Inc. and SF Multistations, Inc. and Subsidiaries.
<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 1, 1998 By: /s/ Howard L. Schrott
-------------------------
Howard L. Schrott
Vice President(Authorized
Corporate Officer), Chief
Financial Officer and
Treasurer
EXHIBIT 11
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
SCHEDULE OF CALCULATION OF PER SHARE NET INCOME
-----------------------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended
May 31, 1998
------------
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 $ 2,115,000 11,018,141 $ .19
Options 471,975
----------- ---------- -----
Used in the determination of
diluted net income per share $ 2,115,000 11,490,116 $ .18
=========== ========== =====
</TABLE>
EXHIBIT 11
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
SCHEDULE OF CALCULATION OF PER SHARE NET INCOME
-----------------------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended
May 31, 1997
------------
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 $ 3,368,000 11,004,147 $ .31
Options 368,816
----------- ---------- -----
Used in the determination of
diluted net income per share $ 3,368,000 11,372,963 $ .30
=========== ========== =====
</TABLE>
EXHIBIT 11
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
SCHEDULE OF CALCULATION OF PRO FORMA PER SHARE NET INCOME
---------------------------------------------------------
<TABLE>
<CAPTION>
For the Three Months Ended
May 31, 1997
------------
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 $ 2,523,000 11,004,147 $ .23
Options 368,816
----------- ---------- -----
Used in the determination of
diluted net income per share $ 2,523,000 11,372,963 $ .22
=========== ========== =====
</TABLE>
June 29, 1998
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 Nos.333-83890 and 333-14657 its
Form 10-Q for the quarter ended May 31, 1998, which includes our report
dated June 19, 1998, 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,
/s/ ARTHUR ANDERSEN LLP
- -----------------------
ARTHUR ANDERSEN LLP
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000783005
<NAME> EMMIS BROADCASTING CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> MAY-31-1998
<CASH> 8,555
<SECURITIES> 0
<RECEIVABLES> 39,508
<ALLOWANCES> 1,580
<INVENTORY> 0
<CURRENT-ASSETS> 60,053
<PP&E> 60,973
<DEPRECIATION> 21,600
<TOTAL-ASSETS> 379,633
<CURRENT-LIABILITIES> 27,826
<BONDS> 274,466
0
0
<COMMON> 111
<OTHER-SE> 49,250
<TOTAL-LIABILITY-AND-EQUITY> 379,633
<SALES> 42,362
<TOTAL-REVENUES> 42,362
<CGS> 6,933
<TOTAL-COSTS> 6,933
<OTHER-EXPENSES> 24,992
<LOSS-PROVISION> 414
<INTEREST-EXPENSE> 5,508
<INCOME-PRETAX> 4,515
<INCOME-TAX> 2,400
<INCOME-CONTINUING> 2,115
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,115
<EPS-PRIMARY> .19
<EPS-DILUTED> .18
</TABLE>
