SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
Amendment to 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 (as restated - see note 2). 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 (except with respect to the matter discussed in Note 1b as to which
the date is April 30, 1999), 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 (except with respect to the matter
discussed in Note 2 as to which
the date is April 30, 1999).
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
As Restated
(Note 2)
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 27,559 27,655
------- ------
Total liabilities 289,478 331,368
------- ------
<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 69,353 72,090
Accumulated deficit (25,553) (23,765)
Cumulative translation adjustments - (171)
------- -------
Total shareholders' equity 43,910 48,265
------- -------
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)
--------------------------
As Restated
(Note 2)
1997 1998
------ ------
<S> <C> <C>
GROSS REVENUES $ 36,847 $ 52,848
LESS: AGENCY COMMISSIONS 5,517 8,229
------- -------
NET REVENUES 31,330 44,619
Operating expenses 18,748 27,795
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 827 955
------- ------
OPERATING INCOME 8,091 8,173
------- ------
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 3,984
PROVISION FOR INCOME TAXES 2,246 2,196
-------- -------
NET INCOME $ 3,368 $ 1,788
======== =======
Basic net income per share $ .31 $ .16
======== =======
Diluted net income per share $ .30 $ .16
======== =======
Weighted average common shares outstanding:
Basic 11,004,147 11,018,141
Diluted 11,372,963 11,449,254
</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)
-------------------
As Restated
(Note 2)
1997 1998
----- -----
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,368 $ 1,788
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) 96
Gain on sale of property and equipment - (533)
Compensation related to stock options
granted 661 768
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. RESTATEMENT OF FINANCIAL RESULTS
--------------------------------
The Company has restated its financial results for the year ended
February 28, 1998 and its results for the three-months ended May 31, 1998 and
August 31, 1998, and the six-months ended August 31, 1998 and the nine-months
ended November 30, 1998.
The restatement relates to a change in the timing of accounting for certain
stock options that ultimately were not granted to the CEO under his employment
contract for fiscal 1998. At February 28, 1998, Emmis had accrued for the
anticipated grant of these options. In fiscal 1999, Emmis had reversed the
accrual since they were ultimately not granted. Under generally accepted
accounting principles, such options should not be recorded until granted by
the Board of Directors.
For the year ended February 28, 1998, the adjustment decreased non-cash
compensation expense and additional paid in capital by $3.4 million and
increased net income and retained earnings by $2.1 million. In fiscal 1999,
the restatement adjustment increased non-cash compensation expense by $0.5
million and $2.9 million in the first and second quarters of
fiscal 1999, respectively, and decreased net income by $0.3 million and $1.8
million for the first and second quarters of fiscal 1999 respectively. The
restatement adjustment increased non-cash compensation expense by $3.4 million
and decreased net income by $2.1 million for the six months ended August 31,
1998 and the nine months ended November 30, 1998.
NOTE 3. 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 revenues $ 41,906
Operating expenses 26,304
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 4. 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 5. 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,
-------------------
As Restated
(Note 2)
1997 1998
---- ----
<S> <C> <C>
Net income $3,368 $1,788
Translation adjustment - (171)
----- -----
Total comprehensive income $3,368 $1,617
====== =====
</TABLE>
NOTE 6. 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.
<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, the seller, 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"), the seller, 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 Company evaluates performance of its operating entities based on
broadcast cash flow (BCF) and publishing cash flow (PBC). Management believes
that BCF and PCF are useful because they provide a meaningful comparison of
operating performance between companies in the industry and serve as an
indicator of the market value of a group of stations or publishing entities.
BCF and PCF are generally recognized by the broadcast and publishing industries
as a measure of performance and are used by analysts who report on the
performance of broadcasing and publishing groups. BCF and PCF do not take into
account Emmis' debt service requirements and other commitments and, accordingly,
BCF and PCF are not necessarily indicative of amounts that may be available
for dividends, reinvestment in Emmis' business or other discretionary uses.
BCF and PCF are not a measure of liquidity or of performance in accordance
with generally accepted accounting principles, and should be viewed as a
supplement to and not a substitute for our results of operations presented
on the basis of generally accepted accounting principles. Moreover, BCF and
PCF are not a standardized measure and may be calculated in a number of ways.
Emmis defines BCF and PCF as revenues net of agency commissions and operating
expenses. The primary source of broadcasting advertising revenues is the sale
of advertising time to local and national advertisers. Publishing entities
derive revenue from subscriptions and sale of print advertising inventory.
The most significant broadcast operating expenses are employee salaries and
commissions, costs associated with programming, advertising and promotion,
and station general and administrative costs. Significant publishing
operating expenses are employee salaries and commissions, costs associated
with producing the magazine, and general and administrative costs.
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MAY 31, 1998 COMPARED TO MAY 31, 1997
Net revenues for the quarter ended May 31, 1998 were
$44.6 million compared to $31.3 million for the same quarter of the prior
year, an increase of $13.3 million or 42.4%. This increase is principally
due to the operation of WQCD under a time brokerage agreement and the
acquisition of WTLC FM and AM, and the acquisition of Texas Monthly, 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.
Operating expenses for the quarter ended May 31, 1998
were $27.8 million compared to $18.7 million for the same quarter of the
prior year, an increase of $9.1 million or 48.3%. Included in
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, and
the acquisition of Texas Monthly.
BCF and PCF for the fiscal quarter ended May 31, 1998 was
$16.8 million compared to $12.6 million for the same quarter of the prior
year, an increase of $4.2 million or 33.7%. This increase is principally
due to increased net revenues offset by increased 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>
Adjusted EBITDA is defined as broadcast/publishing cash flow less
corporate and international development expenses. Adjusted EBITDA 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 revenues offset by increased
operating expenses, as discussed above.
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 revenues for the quarter ended May 31, 1997 were
$31.3 million compared to $27.9 million for the same quarter of the prior
year, an increase of $3.4 million or 12.4%. 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.
Operating expenses for the quarter ended May 31, 1997
were $18.7 million compared to $15.4 million for the same quarter of the
prior year, an increase of $3.3 million or 21.9%. This increase is
principally attributable to the St. Louis acquisition and increased
promotional spending at the Company's broadcasting properties.
BCF and PCF for the fiscal quarter ended May 31, 1997 was
$12.6 million compared to $12.5 million for the same quarter of the prior
year, an increase of $.1 million or .7%. This increase is principally
due to increased net revenues offset by increased 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.
Adjusted EBITDA is defined as broadcast/publishing cash flow less
corporate and international development expenses. Adjusted EBITDA 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 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 COMMUNICATIONS CORPORATION
f/k/a EMMIS BROADCASTING CORPORATION
Date: April 30, 1999 By: /s/ Walter Z. Berger
-------------------------
Walter Z. Berger
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
------------
As Restated
(Note 2)
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 $ 1,788,000 11,018,141 $ .16
Options 431,113
----------- ---------- -----
Used in the determination of
diluted net income per share $ 1,788,000 11,449,254 $ .16
=========== ========== =====
</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>
April 30, 1999
Mr. Walter Z. Berger
Chief Financial Officer
Emmis Broadcasting Corporation
950 N. Meridian Street, Suite 1200
Indianapolis, Indiana 46204
Dear Mr. Berger:
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/A for the quarter ended May 31, 1998, which includes our report
dated June 19, 1998 (except with respect to the matter discussed in Note 2
as to which the date is April 30, 1999), 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> 52,848
<TOTAL-REVENUES> 52,848
<CGS> 8,229
<TOTAL-COSTS> 8,229
<OTHER-EXPENSES> 34,713
<LOSS-PROVISION> 414
<INTEREST-EXPENSE> 5,508
<INCOME-PRETAX> 3,984
<INCOME-TAX> 2,196
<INCOME-CONTINUING> 1,788
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,115
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
