Summary of Significant Accounting Policies

6 Months Ended

Aug. 31, 2011

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 1. Summary of Significant Accounting Policies

Preparation of Interim Financial Statements

Pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), the condensed consolidated interim financial statements included herein have been prepared, without audit, by Emmis Communications Corporation (“ECC”) and its subsidiaries (collectively, “our,” “us,” “we,” “Emmis” or the “Company”). As permitted under the applicable rules and regulations of the SEC, certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America 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 Annual Report for Emmis filed on Form 10-K for the year ended February 28, 2011. The Company’s results are subject to seasonal fluctuations. Therefore, results shown on an interim basis are not necessarily indicative of results for a full year.

In the opinion of Emmis, the accompanying condensed consolidated interim financial statements contain all material adjustments (consisting only of normal recurring adjustments) necessary to present fairly the consolidated financial position of Emmis at August 31, 2011, and the results of its operations and cash flows for the three-month and six-month periods ended August 31, 2010 and 2011.

Basic and Diluted Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted net income (loss) per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted. Potentially dilutive securities at August 31, 2010 and 2011, consisted of stock options, restricted stock awards and the 6.25% Series A cumulative convertible preferred stock. We currently have 2.8 million shares of preferred stock outstanding and each share converts into 2.44 shares of common stock. Shares excluded from the calculation as the effect of their conversion into shares of our common stock would be antidilutive were as follows:

	Three Months Ended August 31,				Six Months Ended August 31,
	2010		2011		2010		2011
	(shares in 000’s)				(shares in 000’s)
6.25% Series A cumulative convertible preferred stock		6,854		6,854		6,854		6,854
Stock options and restricted stock awards		7,597		7,565		7,445		7,522
Antidilutive common share equivalents		14,451		14,419		14,299		14,376

Discontinued Operation — Slager

On October 28, 2009, the Hungarian National Radio and Television Board (ORTT) announced that it was awarding to another bidder the national radio license then held by our majority-owned subsidiary, Slager. Slager ceased broadcasting effective November 19, 2009.

Slager had historically been included in the radio segment. The following table summarizes certain operating results for Slager for all periods presented:

	Three months ended August 31,						Six months ended August 31,
	2010			2011			2010			2011
Net revenues	$	13		$	—		$	20		$	7
Station operating expenses, excluding depreciation and amortization expense		149			155			576			245
Other income		96			53			259			148
Loss before income taxes		(40	)		(102	)		(297	)		(90	)
Loss attributable to minority interests		32			28			277			49

Discontinued Operation — Flint Peak Tower Site

On April 6, 2011, Emmis sold land, towers and other equipment at its Glendale, CA tower site (the “Flint Peak Tower Site”) to Richland Towers Management Flint, Inc. for $6.0 million in cash. In connection with the sale, Emmis recorded a gain on sale of assets of approximately $4.9 million. Net proceeds from the sale were used to repay amounts outstanding under the credit facility.

The operations of the Flint Peak Tower Site had historically been included in the radio segment. The following table summarizes certain operating results for the Flint Peak Tower Site for all periods presented:

	Three months ended August 31,					Six months ended August 31,
	2010		2011			2010		2011
Net revenues	$	137	$	—		$	268	$	59
Station operating expenses, excluding depreciation and amortization expense		36		2			62		51
Depreciation and amortization		17		—			34		7
Gain on sale of assets		—		—			—		4,882
Income (loss) before income taxes		84		(2	)		172		4,883
Provision for income taxes		34		—			70		2,003

Summary of Assets and Liabilities of Discontinued Operations:

	As of February 28, 2011				As of August 31, 2011
			Flint Peak Tower				Flint Peak Tower
	Slager		Site and Other		Slager		Site and Other
Current assets:
Cash and cash equivalents	$	1,658	$	—	$	1,455	$	—
Accounts receivable, net		63		—		—		—
Other		342		—		417		—
Total current assets		2,063		—		1,872		—
Noncurrent assets:
Property and equipment, net		—		925		—		—
Other noncurrent assets		20		—		21		—
Total noncurrent assets		20		925		21		—
Total assets	$	2,083	$	925	$	1,893	$	—
Current liabilities:
Accounts payable and accrued expenses	$	723	$	111	$	581	$	94
Deferred revenue		—		20		—		—
Total current liabilities	$	723	$	131	$	581	$	94

Local Programming and Marketing Agreement Fees

The Company from time to time enters into local programming and marketing agreements (“LMAs”) in connection with acquisitions or dispositions of radio stations, pending regulatory approval of transfer of the FCC licenses. In such cases where the Company enters into an LMA in connection with a disposition, the Company generally receives specified periodic payments in exchange for the counterparty receiving the right to program and sell advertising for a specified portion of the station’s inventory of broadcast time. Nevertheless, as the holder of the FCC license, the Company retains control and responsibility for the operation of the station, including responsibility over all programming broadcast on the station.

On June 20, 2011, Emmis entered into an LMA for WRXP-FM in New York, WKQX-FM in Chicago and WLUP-FM in Chicago with LMA Merlin Media LLC. The LMA for these stations started on July 15, 2011 and terminated upon the sale of these stations on September 1, 2011 (see Note 11 for more discussion of the sale of the stations). Emmis continues to operate KXOS-FM pursuant to an LMA with Grupo Radio Centro, S.A.B. de C.V, a Mexican broadcasting company.

LMA fees, recorded as net revenues in the accompanying condensed consolidated statements of operations, for the three-month and six-month periods ended August 31, 2011 were as follows:

	Three months ended August 31,				Six months ended August 31,
	2010		2011		2010		2011
Grupo Radio Centro LMA	$	1,750	$	1,750	$	3,500	$	3,500
Merlin Media LMA		—		310		—		310
Total		1,750		2,060		3,500		3,810