ACQUISITIONS AND DISPOSITIONS

Completed subsequent to February 28, 2018

On April 30, 2018, Emmis closed on its sale of substantially all of the assets of its radio stations in St. Louis in two separate transactions. See Note 16 for more discussion of the sale of our St. Louis radio stations.

For the year ended February 28, 2018

Sale of KPWR-FM

On August 1, 2017, Emmis closed on its sale of substantially all of the assets of KPWR-FM for gross proceeds of approximately $80.1 million to affiliates of the Meruelo Group. Under the terms of the Fourth Amendment to Emmis’ senior credit facility, Emmis was required to enter into definitive agreements to sell assets that generated at least $80 million of proceeds by January 18, 2018 and to close on such transactions following receipt of required regulatory approvals. The sale of KPWR-FM satisfied these requirements. Emmis found it more advantageous to sell its standalone radio station in Los Angeles than to sell other assets to meet this requirement. After payment of transaction costs and withholding for estimated tax obligations, net proceeds totaled approximately $73.6 million and were used to repay term loan indebtedness under Emmis’ senior credit facility. Emmis recorded a $76.7 million gain on the sale of KPWR-FM.

KPWR-FM was operated pursuant to an LMA from July 1, 2017 through the closing of the sale on August 1, 2017. Affiliates of the Meruelo Group paid an LMA fee to Emmis totaling $0.4 million during this period, which is included in net revenues in the accompanying condensed consolidated statements of operations and in the summary of KPWR-FM results included below.

KPWR-FM had historically been included in our Radio segment. The following table summarizes certain operating results of KPWR-FM for all periods presented. Pursuant to Accounting Standards Codification 205-20-45-6, interest expense associated with the required term loan repayment associated with the sale of KPWR-FM is included in the results below. The sale of KPWR-FM did not qualify for reporting as a discontinued operation as it did not represent a strategic shift for the Company as described in Accounting Standards Codification 205-20-45. The following table summarizes certain operating results of KPWR-FM for all periods presented. Pursuant to Accounting Standards Codification 205-20-45-6, interest expense associated with the required term loan repayment associated with the sale of KPWR-FM is included in the stations’ results below.



	For the year ended February 28 (29),
	2016		2017		2018
Net revenues	$	28,183	$	24,379	$	7,819
Station operating expenses, excluding depreciation and amortization expense	16,392		16,933		6,651
Depreciation and amortization	422		401		63
Gain on sale of assets, net of disposition costs	—		—		(76,745		)
Operating income	11,369		7,045		77,850
Interest expense	5,115		5,223		2,479
Income before income taxes	6,254		1,822		75,371

For the year ended February 28, 2017

Sale of Los Angeles Magazine, Atlanta Magazine, Cincinnati Magazine and Orange Coast Magazine

On February 28, 2017, Emmis closed on its sale of substantially all of the assets of Los Angeles Magazine, Atlanta Magazine, Cincinnati Magazine and Orange Coast Magazine (the “Hour Magazines”) for gross proceeds of $6.5 million to Hour Media Group, LLC. The Company previously announced that it was exploring strategic alternatives for its publishing division, excluding Indianapolis Monthly. Emmis decided to sell most of its publishing assets to reduce debt outstanding. Emmis received net proceeds of $2.9 million, consisting of the stated purchase price of $6.5 million, less $0.7 million held in escrow and disposition costs totaling $2.9 million. The $2.9 million of disposition costs primarily relate to $1.6 million of employee-related costs, including severance, and transaction advisory fees of $1.0 million. The funds held in escrow secure Emmis’ post closing indemnification obligations in the purchase agreement and were scheduled to be released six months after the closing of the transaction. The release of these funds from escrow is currently being litigated. See Note 11 for further discussion. These funds are classified as restricted cash in our accompanying consolidated balance sheets. After settling retention bonuses to affected employees, substantially all of the net proceeds were used to repay term loan indebtedness under Emmis’ senior credit facility. Emmis recorded a $2.7 million gain on the sale of the Hour Magazines. The Hour Magazines had historically been included in our Publishing segment. This disposal did not qualify for reporting as a discontinued operation as it did not represent a strategic shift for the Company as described in Accounting Standards Codification 205-20-45. The following table summarizes certain operating results of the Hour Magazines for all periods presented. Pursuant to Accounting Standards Codification 205-20-45-6, interest expense associated with the required term loan repayment associated with the sale of the Hour Magazines is included in the magazines’ results below.



	For the year ended February 28 (29),
	2016		2017			2018
Net revenues	$	31,819	$	29,112		$	—
Station operating expenses, excluding depreciation and amortization expense	31,385		31,076			172
Depreciation and amortization	125		122			—
(Gain) loss on sale of publishing assets, net of disposition costs	—		(2,677		)	141
Operating income (loss)	309		591			(313		)
Interest expense	173		179			—
Income (loss) before income taxes	136		412			(313		)

Sale of Terre Haute, Indiana radio stations

On January 30, 2017, Emmis closed on its sale of substantially all of the assets of its radio stations in Terre Haute, Indiana, in two contemporaneous transactions. In one transaction, Emmis sold the assets of WTHI-FM and the intellectual property of WWVR-FM to Midwest Communications, Inc. In the other transaction, Emmis sold the assets of WFNF-AM, WFNB-FM, WWVR-FM (other than the intellectual property for that station) and an FM translator to DLC Media, Inc. The Company previously announced that it was exploring strategic alternatives for these radio stations. Emmis believed that operating stations in Terre Haute, Indiana was not a core part of its radio strategy and its strong market position in the Terre Haute market would be attractive to potential buyers. At closing, Emmis received gross proceeds of approximately $5.2 million for both transactions. After payment of brokerage and other transaction costs, net proceeds totaled $4.8 million and were used to repay term loan indebtedness under Emmis’ senior credit facility. Emmis recorded a $3.5 million gain on the sale of its Terre Haute radio stations. The Terre Haute radio stations had historically been included in our Radio segment. This disposal did not qualify for reporting as a discontinued operation as it did not represent a strategic shift for the Company as described in Accounting Standards Codification 205-20-45. The following table summarizes certain operating results of the our Terre Haute radio stations for all periods presented. Pursuant to Accounting Standards Codification 205-20-45-6, interest expense associated with the required term loan repayment associated with the sale of the Terre Haute radio stations is included in the stations’ results below.



	For the year ended February 28 (29),
	2016			2017			2018
Net revenues	$	2,418		$	2,298		$	(6	)
Station operating expenses, excluding depreciation and amortization expense	2,395			2,258			24
Depreciation and amortization	163			117			—
Impairment loss	39			79			—
Gain on sale of radio assets, net of disposition costs	—			(3,478		)	—
Operating (loss) income	(179		)	3,322			(30		)
Interest expense	324			307			—
(Loss) income before income taxes	(503		)	3,015			(30		)

Sale of Texas Monthly

On November 1, 2016, Emmis closed on its sale of Texas Monthly for gross proceeds of $25.0 million in cash to a subsidiary of Genesis Park, LP. The Company previously announced that it was exploring strategic alternatives for its publishing division, excluding Indianapolis Monthly. Emmis believed that its publishing portfolio had significant brand value and planned to use proceeds from the sale of its publishing properties to repay debt. Emmis received net proceeds of $23.4 million, consisting of the stated purchase price of $25.0 million, net of estimated purchase price adjustments totaling $0.7 million and disposition costs totaling $0.9 million. The $0.9 million of disposition costs primarily related to severance costs. Proceeds were used to repay term and revolving loan indebtedness under Emmis’ senior credit facility. Emmis recorded a $17.4 million gain on the sale of Texas Monthly. Texas Monthly had historically been included in our Publishing segment. This disposal did not qualify for reporting as a discontinued operation as it did not represent a strategic shift for the Company as described in Accounting Standards Codification 205-20-45. The following table summarizes certain operating results of Texas Monthly for all periods presented. Pursuant to Accounting Standards Codification 205-20-45-6, interest expense associated with the required term loan repayment associated with the sale of Texas Monthly is included in the magazine’s results below.



	For the year ended February 28 (29),
	2016			2017			2018
Net revenues	$	23,561		$	14,685		$	(2	)
Station operating expenses, excluding depreciation and amortization expense	21,527			14,465			(78		)
Depreciation and amortization	118			84			—
Gain on sale of publishing assets, net of disposition costs	—			(17,402		)	—
Operating income	1,916			17,538			76
Interest expense	1,384			1,067			—
Other income	(370		)	(37		)	—
Income before income taxes	902			16,508			76

Unaudited pro forma summary information is presented below for the years ended February 28, 2017 and 2018, assuming the dispositions discussed above and related mandatory debt repayments had occurred on the first day of the pro forma periods presented below.



	For the year ended February 28,
	2017			2018
	(unaudited)			(unaudited)
Net revenues	$	120,243		$	116,438
Station operating expenses, excluding depreciation and amortization	96,889			92,918
Consolidated net (loss) income	(5,066		)	502
Net loss attributable to the Company	(5,167		)	(2,128		)
Net income per share - basic	$	(0.43	)	$	(0.17	)
Net income per share - diluted	$	(0.43	)	$	(0.17	)

For the year ended February 29, 2016

There were no acquisitions or dispositions during this period.