-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VkpZ/BS+zghVDnfgqXs2HIGGGXsIwYoGPQ1HC9GYDXOhgIXUakWLHcRceafuoQZX g0JAGKSFx3ls9SJaJvU0wQ== 0000783005-98-000002.txt : 19980115 0000783005-98-000002.hdr.sgml : 19980115 ACCESSION NUMBER: 0000783005-98-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971130 FILED AS OF DATE: 19980114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMMIS BROADCASTING CORPORATION CENTRAL INDEX KEY: 0000783005 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 351542018 STATE OF INCORPORATION: IN FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23264 FILM NUMBER: 98506526 BUSINESS ADDRESS: STREET 1: 950 NORTH MERIDIAN STREET STE 1200 CITY: INDIANAPOLIS STATE: IN ZIP: 46204 BUSINESS PHONE: 3172660100 MAIL ADDRESS: STREET 1: EMMIS BROADCASTING CORP STREET 2: 950 N MERIDAN STREET CITY: INDIAPOLIS STATE: IN ZIP: 46204 10-Q 1 As filed with the Securities and Exchange Commission on January 14, 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 November 30, 1997 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 January 13, 1998, was: 8,323,386 Shares of Class A Common Stock, $.01 Par Value 2,560,894 Shares of Class B Common Stock, $.01 Par Value INDEX Page PART I - FINANCIAL INFORMATION Item 1. Financial Statements. . . . . . . . . . . . . . . . .4 Condensed Consolidated Balance Sheets at November 30, 1997 and February 28, 1997 . . . . . . .4 Condensed Consolidated Statements of Operations for the three and nine months ended November 30, 1997 and 1996 . . . . . . . . . . . .6 Condensed Consolidated Statements of Cash Flows for the nine months ended November 30, 1997 and 1996. . . . . . . . . . . . . . .8 Notes to Condensed Consolidated Financial Statements. . . . . . . . . . . . . . . . . 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . 16 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . 19 -2- 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 ( and Indiana corporation) and Subsidiaries as of November 30, 1997, and the related condensed consolidated statements of operations for the three-month and nine-month periods ended November 30, 1997 and 1996 and the condensed consolidated statement of cash flows for the nine- month periods ended November 30, 1997 and 1996. 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, 1997, 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 April 2, 1997, 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, 1997, 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, December 19, 1997. -3- ITEM 1. FINANCIAL STATEMENTS EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES ----------------------------------------------- CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- (Dollars in thousands, except per share data)
February 28, November 30, 1997 1997 ------ ------ (Note 1) (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 1,191 $12,293 Accounts receivable, net 20,831 36,299 Current income tax receivable 2,482 344 Prepaid expenses and other 4,243 5,043 -------- -------- Total current assets 28,747 53,979 Property and equipment, net 12,991 24,274 Intangible assets, net 131,743 184,208 Other assets, net 16,235 12,830 -------- -------- Total assets $ 189,716 $ 275,291 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Current maturities of long-term debt $ 2,868 $ 54 Book cash overdraft 1,942 - Accounts payable 3,687 7,195 Accrued salaries and commissions 1,561 3,612 Accrued interest 174 820 Deferred revenue 1,593 2,622 Other 1,459 1,639 ------- ------- Total current liabilities 13,284 15,942 LONG-TERM DEBT, NET OF CURRENT MATURITIES 112,304 183,094 OTHER NONCURRENT LIABILITIES 436 2,858 DEFERRED INCOME TAXES 29,270 28,020 ------- ------- Total liabilities 155,294 229,914 ------- ------- -4- SHAREHOLDERS' EQUITY: Class A common stock, $.01 par value; authorized 34,000,000 shares; issued and outstanding 8,410,956 shares at February 28, 1997 and 8,300,252 shares at November 30, 1997 84 83 Class B common stock, $.01 par value; authorized 6,000,000 shares; issued and outstanding 2,574,470 shares at February 28, 1997 and November 30, 1997 26 26 Additional paid-in capital 70,949 69,787 Accumulated deficit (36,637) (24,519) ------- ------- Total shareholders' equity 34,422 45,377 ------- ------- Total liabilities and shareholders' equity $ 189,716 $ 275,291 ======= =======
The accompanying notes to condensed consolidated financial statements are an integral part of these balance sheets. -5- EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES ----------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ----------------------------------------------- (Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended November 30, November 30, (Unaudited) (Unaudited) --------------------- -------------------- 1996 1997 1996 1997 ------ ------ ------ ------ GROSS BROADCASTING REVENUES $ 32,631 $ 43,003 $ 96,064 $ 116,878 LESS: AGENCY COMMISSIONS 5,111 6,758 15,123 18,182 ------- ------- ------- ------- NET BROADCASTING REVENUES 27,520 36,245 80,941 98,696 Broadcasting operating expenses 13,978 19,200 39,286 50,739 Publication and other revenue, net of operating expenses 229 556 1,044 1,047 International business development expenses 277 327 810 932 Corporate expenses 1,489 1,966 4,329 5,338 Depreciation and amortization 1,405 1,902 4,070 5,407 Noncash compensation 520 1,120 2,782 3,532 Time brokerage fee - 2,126 - 3,542 ------- ------- ------- ------- OPERATING INCOME 10,080 10,160 30,708 30,253 ------- ------- ------- ------- OTHER INCOME (EXPENSE): Interest expense (2,329) (3,337) (7,348) (10,356) Other income (expense), net 19 116 255 322 ------- ------- ------- ------- Total Other Income (Expense) (2,310) (3,221) (7,093) (10,034) ------- ------- ------- ------- INCOME BEFORE INCOME TAXES 7,770 6,939 23,615 20,219 PROVISION FOR INCOME TAXES 3,115 2,860 9,415 8,100 ------- ------- ------- ------- NET INCOME $ 4,655 $ 4,079 $ 14,200 $ 12,119 ======== ======= ======= ======= -6- Net income per common and common equivalent share $ .41 $ .35 $ 1.24 $ 1.05 ======== ======= ======= ======= Net income per fully diluted common share $ .41 $ .35 $ 1.24 $ 1.05 ======== ======= ======= ======= Weighted average common shares outstanding: Before full dilution 11,387,357 11,559,908 11,463,307 11,555,890 Assuming full dilution 11,387,357 11,559,908 11,463,543 11,592,803
The accompanying notes to condensed consolidated financial statements are an integral part of these statements. -7- EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES ----------------------------------------------- CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- (Dollars in thousands)
Nine Months Ended November 30, (Unaudited) ------------------- 1996 1997 ---- ---- OPERATING ACTIVITIES: Net income $ 14,200 $ 12,119 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization of property and equipment 1,159 1,866 Amortization of debt issuance costs and cost of interest rate cap agreements 898 1,920 Amortization of intangible assets 2,911 3,541 Benefit from deferred income taxes - (1,250) Compensation related to stock options granted 2,246 2,929 Contribution of common stock to profit sharing plan 536 603 Gain on sale of 60% ownership in Duncan's American Radio, Inc. (195) - Provision for bad debts 632 894 (Increase) decrease in certain current assets - Accounts receivable (7,100) (16,362) Prepaid expenses and other (1,171) 1,338 Increase (decrease) in certain current liabilities - Accounts payable 660 1,566 Accrued salaries and commissions (740) 2,051 Accrued interest (79) 646 Deferred revenue 315 29 Other (1,335) 2,602 (Increase) decrease in other assets, net (257) (958) ----- ----- Net cash provided by operating activities 12,680 13,534 ----- ----- INVESTING ACTIVITIES: Purchases of property and equipment (6,666) (6,492) Acquisition of WALC-FM, WKBQ-AM, and WKKX-FM (6,060) (36,964) Net proceeds from sale of 60% ownership interest in Duncan's American Radio, Inc. 240 - Acquisition of WTLC-FM and WTLC-AM - (15,336) Acquisition of Cincinnati Magazine - (1,979) Acquisition of Network Indiana - (709) ----- ------- Net cash used by investment activities (12,486) (61,480) ------- ------- -8- FINANCING ACTIVITIES: Payments on long-term debt (1,063) (11,224) Proceeds from Long-term debt - 79,200 Purchase of interest rate cap agreements and other debt related costs - (4,230) Purchase of the Company's Class A Common Stock - (7,000) Proceeds from exercise of stock options and related income tax benefits 695 2,302 ------ ------ Net cash provided (used) by financing activities (368) 59,048 ------ ------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (174) 11,102 CASH AND CASH EQUIVALENTS: Beginning of period 1,218 1,191 ------ ------ End of period $ 1,044 $12,293 ====== ====== SUPPLEMENTAL DISCLOSURES: Cash paid for- Interest $ 6,529 $ 7,789 Income taxes 8,687 6,575 ACQUISITION OF WALC-FM, WKBQ-AM AND WKKX-FM: Fair value of assets acquired $ 44,642 Cash paid 43,642 ------ Liabilities assumed $1,000 ======
The accompanying notes to condensed consolidated financial statements are an integral part of these statements. -9- EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES ----------------------------------------------- NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ----------------------------------------------------- (Unaudited) NOVEMBER 30, 1997 ------------------ 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 28, 1997. 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 November 30, 1997 and the results of its operations for the nine months ended November 30, 1997 and 1996 and its cash flows for the nine months ended November 30, 1997 and 1996. 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, WKBQ-AM, and WKKX-FM in St. Louis from Zimco, Inc. for approximately $43.1 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 existing Credit Facility. The acquisition was accounted for as a purchase. 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 commencing December 1, 1996. -10- On May 15, 1997, the Company entered into an agreement involving radio station WQCD-FM in New York City whereby the current owner of the station has the option to require the Company to purchase the station at any date through May 2000. The current owner may extend the option for an additional one-year period. The Company has an option to acquire the radio station during the two month period subsequent to the current owner's option. In connection therewith, the Company has issued an irrevocable letter of credit totaling $50 million as security to the current owner of the Company's obligations under this agreement. The purchase price agreed to ranges from approximately $145 million to $160 million based on certain events and conditions as specified in the agreement. In connection with the above agreement, the Company entered into a time brokerage agreement which permitted it to begin operating the station effective July 1, 1997. This agreement expires upon the purchase of the station by the Company or by agreement by the parties to terminate. In consideration for the time brokerage agreement, the Company will pay a monthly fee of approximately $700,000. If the current owner elects to extend the option beyond May 2000, the monthly fee to operate the station will be waived during the extension period. Operating results of WQCD-FM are reflected in the condensed consolidated statement of operations for the period from July 1, 1997 through November 30, 1997. On October 1, 1997, the Company acquired the assets of Network Indiana and AgriAmerica from Wabash Valley Broadcast Corporation for $.7 million in cash. Emmis financed the acquisition through additional borrowings under its existing Credit Facility. The acquisition was accounted for as a purchase. 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 $15.1 million in cash. Emmis financed the acquisition through additional borrowings under its existing Credit Facility. The acquisition was accounted for as a purchase. On November 1, 1997, the Company acquired CINCINNATI MAGAZINE from CM Media, Inc. for approximately $2.0 million in cash. Emmis financed the acquisition through additional borrowings under its existing Credit Facility. The acquisition was accounted for as a purchase. A pro forma condensed consolidated statement of operations is presented below for the three and nine months ended November 30, 1996, assuming the acquisition of WALC-FM, WKBQ-AM, WKKX-FM, WTLC-FM and AM, and CINCINNATI MAGAZINE and the operation of WQCD-FM, under the Time Brokerage Agreement, all had occurred on the first day of the nine month period ended November 30, 1996. Pro forma results for the three and nine month periods ended November 30, 1997, include pro forma adjustments for March and actual results for April through November for the acquisition of WALC-FM, WKBQ-FM and WKKX-FM, pro forma results for March through June and actual results for July through November for the operation of WQCD-FM under the Time Brokerage Agreement, and pro forma results for March through October and actual results for November for the acquistion of WTLC-FM and AM. Pro forma results for CINCINNATI MAGAZINE and Network Indiana have been excluded as they are not significant to the operations of the Company. 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. -11- PRO FORMA CONDENSED CONSOLIDATED -------------------------------- STATEMENT OF OPERATIONS ---------------------- (Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended November 30, November 30, ------------------ ----------------- 1996 1997 1996 1997 ---- ---- ---- ---- Pro forma Pro forma Pro forma Pro forma --------- --------- --------- --------- Net broadcasting revenues $ 33,943 $ 36,726 $ 99,272 $ 107,444 Broadcasting operating expenses 17,696 19,594 50,997 55,641 Publication and other revenue, net of operating expenses 229 556 1,043 1,047 International business development expenses 277 327 810 932 Corporate expenses 1,489 1,966 4,328 5,338 Depreciation and amortization 1,946 1,995 5,292 5,912 Noncash compensation 520 1,120 2,782 3,532 Time Brokerage Fee 2,126 2,126 6,375 6,375 ------ ------ ------ ------ Operating income 10,118 10,154 29,731 30,761 Interest expense (3,355) (3,538) (10,426) (11,341) Other income (expense), net 22 115 263 321 ------ ------ ------ ------ Income before income taxes 6,785 6,731 19,568 19,741 Provision for income taxes 2,715 2,690 7,825 7,895 ------ ------ ------ ------ Net income $ 4,070 $ 4,041 $ 11,743 $ 11,846 ====== ====== ====== ====== Net income per common and common equivalent share $ .36 $ .35 $ 1.02 $ 1.03 ====== ====== ====== ====== Net income per fully diluted common share $ .36 $ .35 $ 1.02 $ 1.02 ====== ====== ====== ====== Weighted average shares outstanding Before full dilution 11,387,357 11,559,908 11,463,307 11,555,890 Assuming full dilution 11,387,357 11,559,908 11,463,543 11,592,803
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 transactions had been effective at the beginning of the three and nine month periods ended November 30, 1996 and 1997, and is not intended to be a projection of future results or trends. -12- 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. ACCOUNTING PRONOUNCEMENTS ------------------------- In February 1997, Statement of Financial Accounting Standards No. 128, "Earnings Per Share", was issued. This new statement supersedes APB Opinion No. 15, "Earnings Per Share", and supersedes or amends other related accounting pronouncements. SFAS No. 128 must be adopted by the Company in the fourth quarter of fiscal 1998. All prior period earnings per share (EPS) data will be restated when the new statement is adopted. SFAS No. 128 replaces the presentation of net income per common and common equivalent share with a presentation of basic EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures such as the Company's. Basic EPS 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 EPS 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. Pro forma EPS, assuming the Company had adopted SFAS No. 128 as of March 1, 1996 is as follows:
Nine Month Period Ended November 30, 1996 1997 - ------------------------------------ ---- ---- Weighted Average Common Shares 10,918,554 11,034,856 Weighted Average Common Shares and Potential Common Shares 11,319,611 11,450,283 Net income per common share $ 1.30 $ 1.10 Net income per common share- Assuming dilution $ 1.25 $ 1.06
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. -13- 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. NOTE 6. OTHER SIGNIFICANT EVENTS ------------------------ In June 1997, Emmis acquired 194,444 shares of its common stock from Morgan Stanley Dean Witter Discover and Co. at $36 per share. The aggregate purchase price of $7.0 million was financed through additional borrowings under the Company's existing Credit Facility. On July 1, 1997, the Company entered into an amended and restated Credit Facility. As a result of the early payoff of the refinanced debt, the Company recorded a loss of approximately $ 1.3 million in the quarter ending August 31, 1997 related to unamortized deferred debt issuance costs which is recorded as interest expense in the accompanying condensed consolidated statement of operations. The amended and restated Credit Facility matures on February 28, 2005 and consists of the following: Credit Facility Amount - --------------- ------ Revolving Credit Facility Up to $250,000,000; subject to certain adjustments as defined in the Credit Facility; An additional commitment for $100,000,000 may be requested by Emmis prior to May 31, 1999. Term Note $100,000,000 Revolving Credit Facility/Term Note $150,000,000 The Credit Facility provides for Letters of Credit to be made available to the Company not to exceed $50,000,000. The aggregate amount of outstanding Letters of Credit and amounts borrowed under the Revolving Credit Facility cannot exceed the Revolving Credit Facility commitment. All outstanding amounts under the Credit Facility bear interest, at the option of Emmis, at a rate equal to the Eurodollar Rate or an alternative base rate (as defined in the Credit Facility) plus a margin. The margin over the Eurodollar Rate or the alternative base rate varies from time to time, depending on Emmis' ratio of debt to earnings before interest, taxes, depreciation and amortization (EBITDA), as defined in the agreement. Interest is due on a calendar quarter basis under the alternative base rate and at least every three months under the Eurodollar Rate. -14- The Credit Facility requires the Company to maintain interest rate protection agreements through July 2000. The notional amount required varies based upon Emmis' ratio of adjusted debt to EBITDA, as defined in the Credit Facility. The aggregate amount of the Revolving Credit Facility reduces quarterly beginning May 31, 2000. Amortization of the outstanding principal amount under the Term Note and Revolving Credit Facility/Term Note is payable in quarterly installments beginning May 31, 2000. The annual amortization and reduction schedules as of February 28, 1998, assuming the entire $500 million Credit Facility were outstanding prior to the scheduled amortization payments are as follows: SCHEDULED AMORTIZATION/REDUCTION OF ---------------------------------- CREDIT FACILITY AVAILABILITY ---------------------------- (In thousands)
Revolving Revolving Credit Facility/ Year ended Credit Facility Term Note Term Note February 28(29) Amortization Amortization Amortization Total - -------------- ------------- ------------ ------------ ------ 2001 $ 37,500 $ 15,000 $15,000 $67,500 2002 50,000 20,000 22,500 92,500 2003 50,000 20,000 22,500 92,500 2004 50,000 20,000 37,500 107,500 2005 62,500 25,000 52,500 140,000 ------- ------- ------- ------- Total $250,000 $100,000 $150,000 $500,000 ======= ======= ======= =======
Commencing with the fiscal year ending February 28, 2001 and continuing through February 29, 2004, in addition to the scheduled amortization/reduction of the Credit Facility, within 60 days after the end of each fiscal year, the Credit Facility is permanently reduced by 50% of the Company's excess cash flow if the ratio of adjusted debt (as defined in the Credit Facility) to EBITDA exceeds 5 to 1. Excess cash flow is generally defined as EBITDA reduced by cash taxes, capital expenditures, required debt service, increases in working capital (net of cash or cash equivalents), the fixed fees paid under the WQCD-FM time brokerage agreement, and $3,000,000. The net proceeds of any sale of certain assets must also be used to permanently reduce borrowings under the Credit Facility. If the ratio of adjusted debt to EBITDA is less than 5.5 to 1 and certain other conditions are met, the Company will be permitted in certain circumstances to reborrow the amount of the net proceeds within nine months solely for the purpose of funding an acquisition. -15- The Credit Facility contains various financial and operating covenants and other restrictions with which Emmis must comply, including, among others, restrictions on additional indebtedness, engaging in businesses other than radio broadcasting and publishing, paying cash dividends, redeeming or repurchasing capital stock of Emmis and use of borrowings, as well as requirements to maintain certain financial ratios. The Credit Facility also prohibits Emmis, under certain circumstances, from making acquisitions and disposing of certain assets without the prior consent of the lenders, and provides that an event of default will occur if Jeffrey H. Smulyan ceases to maintain (i) a significant equity investment in Emmis (as specified in the Credit Facility), (ii) the ability to elect a majority of Emmis' directors or (iii) control of a majority of shareholder voting power. Substantially all of Emmis' assets, including the stock of Emmis' subsidiaries, are pledged to secure the Credit Facility. In August 1997, Emmis formed a wholly owned Hungarian subsidiary to acquire a radio broadcasting license. In September 1997, Emmis sold a 46 percent interest in this subsidiary to third parties. In November 1997, this subsidiary was awarded, in connection with a competitive bidding process, the right to purchase a radio broadcasting license from the Hungarian government for approximately $20 million. This subsidiary is included in the consolidated financial statements of Emmis. NOTE 7. SUBSEQUENT EVENT ---------------- On January 13, 1998, Emmis received FCC approval to contribute radio station WKBQ-AM in St. Louis to Northside Seventh Day Adventist Church near St. Louis. In connection with this contribution, Emmis will recognize as contribution expense the carrying value of the assets of this station totalling approximately $5 million in the quarter ended February 28, 1998. NOTE 8. RECLASSIFICATIONS ----------------- Certain reclassifications have been made to the November 30, 1996 financial statements to be consistent with the November 30, 1997 presentation. 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 and time brokerage fees. Broadcast Cash Flow is defined as net broadcasting revenues less broadcasting operating 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. -16- RESULTS OF OPERATIONS Net broadcasting revenues for the quarter ended November 30, 1997 were $36.2 million compared to $27.5 million for the same quarter of the prior year, an increase of $8.7 million or 31.7%. Net broadcasting revenues for the nine month period ended November 30, 1997 were $98.7 million compared to $80.9 million for the same period of the prior year, an increase of $17.8 million or 21.9%. This increase is principally due to the St. Louis acquisition, the operation of WQCD-FM under a time brokerage agreement, 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. On a pro forma basis, as defined in Note 2, net broadcasting revenues would have increased $2.8 million or 8.2% for the quarter and $8.1 million or 8.2% for the nine month period. Broadcasting operating expenses for the quarter ended November 30, 1997 were $19.2 million compared to $14.0 million for the same quarter of the prior year, an increase of $5.2 million or 37.4%. Broadcasting operating expenses for the nine month period ended November 30, 1997 were $50.7 million compared to $39.3 million for the same period of the prior year, an increase of $11.4 million or 29.2%. This increase is principally attributable to the St. Louis acquisition, the operation of WQCD-FM under a time brokerage agreement and increased promotional spending at the Company's broadcasting properties. On a pro forma basis, broadcasting operating expenses would have increased $1.9 million or 10.7% for the quarter and $4.6 million or 9.1% for the nine month period. Broadcast Cash Flow for the fiscal quarter ended November 30, 1997 was $17.0 million compared to $13.5 million for the same quarter of the prior year, an increase of $3.5 million or 25.9%. Broadcast Cash Flow for the nine month period ended November 30, 1997 was $48.0 million compared to $41.7 million for the same period of the prior year, an increase of $6.3 million or 15.1%. This increase is due to increased net broadcasting revenues partially offset by increased broadcasting operating expenses as discussed above. On a pro forma basis, broadcast cash flow would have increased $.9 million or 5.4% for the quarter and $3.5 million or 7.3% for the nine month period. Corporate expenses for the quarter ended November 30, 1997 were $2.0 million compared to $1.5 million for the same quarter of the prior year, an increase of $0.5 million or 32.0%. Corporate expenses for the nine month period ended November 30, 1997 were $5.3 million compared to $4.3 millioni for the same period of the prior year, an increase of $1.0 million or 23.3%. This increase was primarily due to increased travel expenses and other expenses related to potential acquisitions and increased professional fees related to a corporate tax restructuring. -17- International business development expenses for the quarters ended November 30, 1997 and 1996 were $.3 million. International business development expenses for the nine month period ended November 30, 1997 were $.9 million compared to $.8 million for the same period of the prior year, an increase of $.1 million or 15.1%. 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 November 30, 1997 was $15.3 million compared to $12.0 million for the same quarter of the prior year, an increase of $3.3 million or 27.5%. Operating Cash Flow for the nine month period ended November 30, 1997 was $42.7 million compared to $37.6 million for the same period of the prior year, an increase of $5.1 million or 13.8%. This increase is principally due to an increase in broadcast cash flow partially offset by an increase in corporate expenses. On a pro forma basis, operating cash flow would have increased $.7 million or 4.7% for the quarter and $2.4 million or 5.4% for the nine month period. Interest expense was $3.3 million for the quarter ended November 30, 1997 compared to $2.3 million for the same quarter of the prior year, an increase of $1.0 million or 43.3%. Interest expense was $10.4 million for the nine month period ended November 30, 1997 compared to $7.3 million for the same period of the prior year, an increase of $3.1 million or 40.9%. This increase reflects higher outstanding debt due to the St. Louis acquisition and the write off of deferred financing costs associated with the refinancing of the Company's Credit Facility offset by voluntary repayments made under the Company's Credit Facility and a rate decrease under the new Credit Facility. On a pro forma basis, interest expense would have increased $.1 million or 5.5% for the quarter and $.9 million or 8.8% for the nine month period. LIQUIDITY AND CAPITAL RESOURCES The increase in accounts receivable from February 28, 1997 to November 30, 1997 is due to the increase of net broadcasting revenues in the quarter ended November 30, 1997 compared to the quarter ended February 28, 1997. The increase of net broadcasting revenues in the quarter ended November 30, 1997 is due to the Indianapolis acquisition and operation of WQCD-FM under the Time Brokerage Agreement. In the fiscal quarter ended November 30, 1997, the Company made voluntary payments of $5.5 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 $25 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, WTLC-AM and Network Indiana. 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 plans to fund this project through additional borrowings under the Credit Facility. -18- In the fiscal quarter ended November 30, 1997, the Company had capital expenditures of $4.5 million. These capital expenditures consist primarily of progress payments in connection with the Indianapolis building project. 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: 11 Statements re: Calculations of per share net income 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 April 15, 1997, to report the closing under the Asset Purchase Agreement dated as of October 31, 1996, by and between Zimco, Inc. and Emmis Broadcasting Corporation, as amended by first and second amendments to the Asset Purchase Agreement. Additionally, the Company filed Form 8-K/A on June 16, 1997, to include the financial statements of Zimco, Inc. as of December 31, 1996 and pro forma financial information. -19- 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: January 14, 1998 By: /s/ Howard L.Schrott ------------------------- Howard L. Schrott Vice President(Authorized Corporate Officer), Chief Financial Officer and Treasurer -20- EX-11 2 EXHIBIT 11 EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES ----------------------------------------------- SCHEDULE OF CALCULATION OF PER SHARE NET INCOME -----------------------------------------------
For the Three Months Ended For the Nine Months Ended November 30, 1997 November 30, 1997 ----------------- ----------------- Net Weighted Net Weighted Income Average Per Income Average Per (Unaudited) Shares Share (Unaudited) Shares Share -------- -------- ------ ------- ------ ------ Shares outstanding and net income used in the determination of basic net income per share $ 4,079,000 11,119,573 $ .37 $ 12,119,000 11,150,511 $ 1.09 Options 440,335 405,379 ----------- ---------- ----- ---------- ---------- ----- Used in the determination of net income per common and common equivalent share $ 4,079,000 11,559,908 $ .35 $ 12,119,000 11,555,890 $ 1.05 Options (A) 36,913 ----------- ---------- ----- ---------- ---------- ----- Used in the determination of fully diluted net income per share $ 4,079,000 11,559,908 $ .35 $ 12,119,000 11,592,803 $ 1.05 =========== ========== ===== =========== ========== ===== (A) Excluded due to anti-dilutive effect
EXHIBIT 11 EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES ----------------------------------------------- SCHEDULE OF CALCULATION OF PER SHARE NET INCOME -----------------------------------------------
For the Three Months Ended For the Nine Months Ended November 30, 1996 November 30, 1996 ----------------- ----------------- Net Weighted Net Weighted Income Average Per Income Average Per (Unaudited) Shares Share (Unaudited) Shares Share -------- -------- ------ ------- ------ ------ Shares outstanding and net income used in the determination of basic net income per share $ 4,655,000 10,897,017 $ .43 $ 14,200,000 10,961,460 $ 1.30 Options 490,340 501,847 ----------- ---------- ----- ---------- ---------- ----- Used in the determination of net income per common and common equivalent share $ 4,655,000 11,387,357 $ .41 $ 14,200,000 11,463,307 $ 1.24 Options (A) 236 ----------- ---------- ----- ---------- ---------- ----- Used in the determination of fully diluted net income per share $ 4,655,000 11,387,357 $ .41 $ 14,200,000 11,463,543 $ 1.24 =========== ========== ===== ========== ========== ===== (A) Excluded due to anti-dilutive effect
EXHIBIT 11 EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES ----------------------------------------------- SCHEDULE OF CALCULATION OF PRO FORMA PER SHARE NET INCOME ---------------------------------------------------------
For the Three Months Ended For the Nine Months Ended November 30, 1997 November 30, 1997 ----------------- ----------------- Pro Forma Weighted Pro Forma Weighted Net Average Per Net Average Per Income Shares Share Income Shares Share -------- -------- ------ ------- ------ ------ Shares outstanding and net income used in the determination of basic net income per share $ 4,041,000 11,119,573 $ .36 $ 11,846,000 11,150,511 $ 1.06 Options 440,335 405,379 ----------- ---------- ----- ---------- ---------- ----- Used in the determination of net income per common and common equivalent share $ 4,041,000 11,559,908 $ .35 $ 11,846,000 11,555,890 $ 1.03 Options (A) 36,913 ----------- ---------- ----- ---------- ---------- ----- Used in the determination of fully diluted net income per share $ 4,041,000 11,559,908 $ .35 $ 11,846,000 11,592,803 $ 1.02 =========== ========== ===== ========== ========== ===== (A) Excluded due to anti-dilutive effect
EXHIBIT 11 EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES ----------------------------------------------- SCHEDULE OF CALCULATION OF PRO FORMA PER SHARE NET INCOME ---------------------------------------------------------
For the Three Months Ended For the Nine Months Ended November 30, 1996 November 30, 1996 ----------------- ----------------- Pro Forma Weighted Pro Forma Weighted Net Average Per Net Average Per Income Shares Share Income Shares Share -------- -------- ------ ------- ------ ------ Shares outstanding and net income used in the determination of basic net income per share $ 4,070,000 10,897,017 $ .37 $ 11,743,000 10,961,460 $ 1.07 Options 490,340 501,847 ----------- ---------- ----- ---------- ---------- ----- Used in the determination of net income per common and common equivalent share $ 4,070,000 11,387,357 $ .36 $ 11,743,000 11,463,307 $ 1.02 Options (A) 236 ----------- ---------- ----- ---------- ---------- ----- Used in the determination of fully diluted net income per share $ 4,070,000 11,387,357 $ .36 $ 11,743,000 11,463,543 $ 1.02 =========== ========== ===== ========== ========== ===== (A) Excluded due to anti-dilutive effect
EX-15 3 January 14, 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 No. 33-83890 its Form 10-Q for the quarter ended November 30, 1997, which includes our report dated December 19, 1997, 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 EX-27 4
5 0000783005 EMMIS BROADCASTING CORPORATION 3-MOS FEB-28-1998 SEP-01-1997 NOV-30-1997 12,293 0 38,029 1,730 0 53,979 42,343 18,069 275,291 15,942 183,094 0 0 109 45,268 275,291 43,003 43,003 6,758 6,758 25,555 414 3,337 6,939 2,860 4,079 0 0 0 4,079 .35 .35
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