e10vq

-----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, BFdIGALQEvkquKtKho6CvIkMyz8z8iqoc2dIIY5PebGPGWO9OOnd+J9V8FBupde2 hA9K0sz5n3dNZ+Gpv32QVw== 0000950134-08-017805.txt : 20081010 0000950134-08-017805.hdr.sgml : 20081010 20081010060113 ACCESSION NUMBER: 0000950134-08-017805 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20080831 FILED AS OF DATE: 20081010 DATE AS OF CHANGE: 20081010 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMMIS COMMUNICATIONS CORP CENTRAL INDEX KEY: 0000783005 STANDARD INDUSTRIAL CLASSIFICATION: RADIO BROADCASTING STATIONS [4832] IRS NUMBER: 351542018 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23264 FILM NUMBER: 081117142 BUSINESS ADDRESS: STREET 1: ONE EMMIS PLAZA STREET 2: 40 MONUMENT CIRCLE SUITE 700 CITY: INDIANAPOLIS STATE: IN ZIP: 46204 BUSINESS PHONE: 3172660100 MAIL ADDRESS: STREET 1: ONE EMMIS PLAZA STREET 2: 40 MONUMENT CIRCLE #700 CITY: INDIANAPOLIS STATE: IN ZIP: 46204 FORMER COMPANY: FORMER CONFORMED NAME: EMMIS BROADCASTING CORPORATION DATE OF NAME CHANGE: 19920703 10-Q 1 c46843e10vq.htm FORM 10-Q e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2008

EMMIS COMMUNICATIONS CORPORATION

(Exact name of registrant as specified in its charter)

INDIANA
(State of incorporation or organization)

0-23264
(Commission file number)

35-1542018
(I.R.S. Employer Identification No.)

ONE EMMIS PLAZA
40 MONUMENT CIRCLE, SUITE 700
INDIANAPOLIS, INDIANA 46204
(Address of principal executive offices)

(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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No þ

The number of shares outstanding of each of Emmis Communications Corporation’s classes of common stock, as of October 3, 2008, was:


31,415,259		Shares of Class A Common Stock, $.01 Par Value
4,956,305		Shares of Class B Common Stock, $.01 Par Value
0		Shares of Class C Common Stock, $.01 Par Value

INDEX


	Page
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements		3

Condensed Consolidated Statements of Operations for the three-month and six-month periods ended August 31, 2007 and 2008		3

Condensed Consolidated Balance Sheets as of February 29, 2008 and August 31, 2008		5

Condensed Consolidated Statements of Cash Flows for the six-month periods ended August 31, 2007 and 2008		7

Notes to Condensed Consolidated Financial Statements		9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		26

Item 3. Quantitative and Qualitative Disclosures about Market Risk		40

Item 4. Controls and Procedures		40

PART II — OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		41

Item 4. Submission of Matters to a Vote of Security Holders		41

Item 5. Other Information		42

Item 6. Exhibits		43

Signatures		44
EXHIBIT 10.1
EXHIBIT 12
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

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PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)


	Three Months Ended						Six Months Ended
	August 31,						August 31,
	2007			2008			2007			2008
NET REVENUES	$	95,704		$	94,227		$	182,149		$	180,250
OPERATING EXPENSES:
Station operating expenses excluding depreciation and amortization expense of $2,990, $3,474, $5,802 and $6,878, respectively		69,673			68,373			134,371			131,635
Corporate expenses excluding depreciation and amortization expense of $639, $577, $1,274 and $1,108, respectively		5,211			4,661			10,919			10,294
Depreciation and amortization		3,629			4,051			7,076			7,986
Loss on disposal of assets		94			22			94			15

Total operating expenses		78,607			77,107			152,460			149,930

OPERATING INCOME		17,097			17,120			29,689			30,320

OTHER EXPENSE:
Interest expense		(8,654	)		(6,564	)		(17,986	)		(13,621	)
Other income (expense), net		289			(1,224	)		225			(1,374	)

Total other expense		(8,365	)		(7,788	)		(17,761	)		(14,995	)

INCOME BEFORE INCOME TAXES, MINORITY
INTEREST AND DISCONTINUED OPERATIONS		8,732			9,332			11,928			15,325
PROVISION FOR INCOME TAXES		3,625			4,579			5,823			8,498
MINORITY INTEREST EXPENSE, NET OF TAX		1,328			1,918			2,521			3,325


INCOME FROM CONTINUING OPERATIONS		3,779			2,835			3,584			3,502

INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX		10,277			647			10,783			1,176


NET INCOME		14,056			3,482			14,367			4,678

PREFERRED STOCK DIVIDENDS		2,246			2,246			4,492			4,492


NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	11,810		$	1,236		$	9,875		$	186

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(Unaudited)
(In thousands, except per share data)


	Three Months Ended				Six Months Ended
	August 31,				August 31,
	2007		2008		2007			2008
Basic net income (loss) per share available to common shareholders:
Continuing operations	$	0.04	$	0.02	$	(0.02	)	$	(0.03	)
Discontinued operations, net of tax		0.27		0.01		0.28			0.04

Net income available to common shareholders	$	0.31	$	0.03	$	0.26		$	0.01


Basic weighted average common shares outstanding		37,546		36,313		37,536			36,220

Diluted net income (loss) per share available to common shareholders:
Continuing operations	$	0.04	$	0.02	$	(0.02	)	$	(0.03	)
Discontinued operations, net of tax		0.27		0.01		0.28			0.04

Net income available to common shareholders	$	0.31	$	0.03	$	0.26		$	0.01


Diluted weighted average common shares outstanding		37,821		36,547		37,536			36,220

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


			August 31,
	February 29,		2008
	2008		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	19,498	$	67,513
Accounts receivable, net		61,887		69,295
Prepaid expenses		17,010		20,621
Other current assets		8,976		7,060
Current assets — discontinued operations		7,169		2,429

Total current assets		114,540		166,918

PROPERTY AND EQUIPMENT, NET		58,945		57,507
INTANGIBLE ASSETS (Note 3):
Indefinite-lived intangibles		801,270		801,270
Goodwill		81,304		81,347
Other intangibles, net		26,010		24,108

Total intangible assets		908,584		906,725

OTHER ASSETS, NET		16,599		15,914

NONCURRENT ASSETS — DISCONTINUED OPERATIONS		41,072		17

Total assets	$	1,139,740	$	1,147,081

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands, except share data)


				August 31,
	February 29,			2008
	2008			(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	15,714		$	16,274
Current maturities of long-term debt		5,628			5,747
Accrued salaries and commissions		7,047			7,193
Accrued interest		5,478			4,174
Deferred revenue		17,610			18,093
Other current liabilities		6,849			6,381
Current liabilities — discontinued operations		3,441			753

Total current liabilities		61,767			58,615

LONG-TERM DEBT, NET OF CURRENT MATURITIES		434,306			432,138

OTHER LONG-TERM DEBT, NET OF CURRENT MATURITIES		1,896			2,334

OTHER NONCURRENT LIABILITIES		26,219			22,080

MINORITY INTEREST		53,758			53,540

DEFERRED INCOME TAXES		173,255			180,996

NONCURRENT LIABILITIES — DISCONTINUED OPERATIONS		1,161			—


Total liabilities		752,362			749,703


COMMITMENTS AND CONTINGENCIES

SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK, $0.01 PAR VALUE; $50.00 LIQUIDATION PREFERENCE; AUTHORIZED 10,000,000 SHARES; ISSUED AND OUTSTANDING 2,875,000 SHARES AT FEBRUARY 29, 2008 AND AUGUST 31, 2008		143,750			143,750

SHAREHOLDERS’ EQUITY:
Class A common stock, $.01 par value; authorized 170,000,000 shares; issued and outstanding 30,607,644 shares at February 29, 2008 and 31,386,089 shares at August 31, 2008		306			314
Class B common stock, $.01 par value; authorized 30,000,000 shares; issued and outstanding 4,956,305 shares at February 29, 2008 and August 31, 2008, respectively		50			50
Additional paid-in capital		515,341			518,949
Accumulated deficit		(270,454	)		(270,267	)
Accumulated other comprehensive income (loss)		(1,615	)		4,582

Total shareholders’ equity		243,628			253,628


Total liabilities and shareholders’ equity	$	1,139,740		$	1,147,081

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


	Six Months Ended August 31,
	2007			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	14,367		$	4,678
Adjustments to reconcile net income to net cash provided by operating activities -
Discontinued operations		(10,783	)		(1,176	)
Depreciation and amortization		7,391			8,301
Minority interest expense		2,521			3,325
Provision for bad debts		1,000			1,174
Provision for deferred income taxes		3,321			7,960
Noncash compensation		3,845			3,779
Loss on disposal of assets		94			15
Changes in assets and liabilities -
Accounts receivable		(12,297	)		(7,240	)
Prepaid expenses and other current assets		(1,069	)		(1,455	)
Other assets		744			1,842
Accounts payable and accrued liabilities		977			(338	)
Deferred revenue		(136	)		483
Other liabilities		(469	)		(3,171	)
Net cash provided by operating activities — discontinued operations		7,155			3,785


Net cash provided by operating activities		16,661			21,962


CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(2,886	)		(2,633	)
Cash paid for acquisitions		(6,439	)		—
Other		(784	)		(241	)
Net cash provided by investing activities — discontinued operations		45,927			38,917


Net cash provided by investing activities		35,818			36,043

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
(Dollars in thousands)


	Six Months Ended August 31,
	2007			2008
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt		(66,105	)		(8,191	)
Proceeds from long-term debt		30,000			6,000
Purchase of Class A Common Stock		(11,177	)		—
Proceeds from exercise of stock options and employee stock purchases		61			—
Payments of dividends and distributions to minority interest shareholders		(2,160	)		(4,910	)
Payments of preferred stock dividends		(4,492	)		(4,492	)
Settlement of tax withholding obligations on stock issued to employees		(605	)		(544	)
Other		—			(138	)


Net cash used in financing activities		(54,478	)		(12,275	)

Effect of exchange rates on cash and cash equivalents		615			2,285


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(1,384	)		48,015

CASH AND CASH EQUIVALENTS:
Beginning of period		20,747			19,498


End of period	$	19,363		$	67,513


SUPPLEMENTAL DISCLOSURES:
Cash paid for -
Interest	$	12,022		$	14,596
Income taxes, net of refunds		2,334			2,004

Noncash financing transactions-
Value of stock issued to employees under stock compensation program and to satisfy accrued incentives		5,125			3,746

ACQUISITION OF ORANGE COAST MAGAZINE
Fair value of assets acquired	$	7,762
Purchase price withheld		(335	)
Cash paid		(6,439	)

Liabilities recorded	$	988

The accompanying notes are an integral part of these unaudited condensed consolidated statements.

-8-

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS UNLESS INDICATED OTHERWISE, EXCEPT SHARE DATA)
August 31, 2008

(Unaudited)

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 29, 2008. 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, 2008, and the results of its operations for the three-month and six-month periods ended August 31, 2007 and 2008 and cash flows for the six-month periods ended August 31, 2007 and 2008.

Accounting Pronouncements

In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (SFAS No. 161), which requires additional disclosures about the objectives of the derivative instruments and hedging activities, the method of accounting for such instruments under SFAS No. 133 and its related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, operations, and cash flows. SFAS No. 161 is effective for us beginning December 1, 2008. We are currently assessing the potential impact that adoption of SFAS No. 161 may have on our financial statements.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS No. 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests, with all other requirements applied prospectively. SFAS No. 160 is effective for us beginning March 1, 2009. As of February 29, 2008, and August 31, 2008, minority interests characterized as liabilities in the accompanying consolidated balance sheets were $53,758 and $53,540, respectively. These amounts will be recharacterized as noncontrolling interests and classified as a component of shareholders’ equity when SFAS No. 160 is adopted on March 1, 2009.

-9-

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141R (as revised), Business Combinations (SFAS No. 141R), which will significantly change how business combinations are accounted for through the use of fair values in financial reporting and will impact financial statements both on the acquisition date and in subsequent periods. Some of the changes, such as the accounting for contingent consideration, will introduce more volatility into earnings, and could impact our acquisition strategy. SFAS No. 141R, which is effective for us as of March 1, 2009, will apply to all business combinations that will close on or after March 1, 2009.

In June 2007, the Emerging Issues Task Force (EITF) reached a consensus on accounting for income tax benefits of dividends on share-based payment awards. Certain stock-based compensation arrangements contain provisions that entitle an employee to receive dividends or dividend equivalents on the unvested portion of the awards. Under the provisions of SFAS No. 123R, such dividend features are factored into the value of the award at the grant date, and to the extent that an award is expected to vest, the dividends are charged to retained earnings. For income tax purposes, however, such dividend payments are generally considered additional compensation expense when they are paid to employees and, therefore, are generally deductible by the employer on a current basis for tax purposes. Under EITF No. 06-11, a realized tax benefit from dividends or dividend equivalents that is charged to retained earnings and paid to employees for equity-classified nonvested equity shares, nonvested equity share units, and outstanding share options should be recognized as an increase to additional paid-in-capital. Those tax benefits are considered windfall tax benefits under SFAS No. 123R. EITF No. 06-11 was adopted by the Company on March 1, 2008 and did not have any effect on the Company’s financial position, results of operations or cash flows.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS No. 159), which permits companies to choose to measure certain financial instruments and other items at fair value that are not currently required to be measured at fair value. SFAS No. 159 was adopted by the Company on March 1, 2008. We have not elected to measure any financial assets or financial liabilities at fair value which were not previously required to be measured at fair value. The adoption of SFAS No. 159 did not have any effect on the Company’s financial position, results of operations or cash flows.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS No. 157), which provides guidance for using fair value to measure assets and liabilities. The standard also responds to investors’ requests for more information about: (1) the extent to which companies measure assets and liabilities at fair value; (2) the information used to measure fair value; and (3) the effect that fair value measurements have on earnings. SFAS No. 157 will apply whenever another standard requires (or permits) assets or liabilities to be measured at fair value. The standard does not expand the use of fair value to any new circumstances. SFAS No. 157 was adopted by the Company on March 1, 2008, though FASB Staff Position No. 157-2, Effective Date of SFAS No. 157, defers the effective date of SFAS No. 157 for most nonfinancial assets and nonfinancial liabilities to the Company’s fiscal year beginning March 1, 2009. The adoption of SFAS No. 157 did not have any effect on the Company’s financial position, results of operations or cash flows. For further discussion, see Note 5, Fair Value Measurements.

Advertising Costs

The Company defers the costs of major advertising campaigns for which future benefits are demonstrated. These costs are amortized over the shorter of the estimated period benefited (generally six months) or the remainder of the fiscal year. The Company had deferred $0.6 million and $0.2 million of these costs as of August 31, 2007 and 2008, respectively.

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Basic and Diluted Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) available 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, 2007 and 2008, consisted of stock options and the 6.25% Series A cumulative convertible preferred stock. The 6.25% Series A cumulative convertible preferred stock was excluded from the calculation of diluted net income (loss) per common share for the three-month and six-month periods ended August 31, 2007 and 2008, as the effect of its conversion to 7.0 million shares of our common stock would be antidilutive. Stock options were excluded from the calculation of diluted net income (loss) per common share for the six-month periods ended August 31, 2007 and 2008, as the effect of their conversion to 0.2 million shares of our common stock in both periods would be antidilutive to the net income available to common shareholders from continuing operations.

Discontinued Operations

Summary of Discontinued Operations Activity:


	Three Months Ended August 31,						Six Months Ended August 31,
	2007			2008			2007			2008
Income (loss) from operations:
Television	$	392		$	3,510		$	1,787		$	5,016
Tu Ciudad Los Angeles		(602	)		(1,328	)		(1,122	)		(1,883	)

Total		(210	)		2,182			665			3,133
Less: Provision (benefit) for income taxes		(92	)		968			277			1,390

Income (loss) from operations, net of tax		(118	)		1,214			388			1,743

Gain (loss) on sale of discontinued operations:
Television		18,237			(994	)		18,237			(994	)

Total		18,237			(994	)		18,237			(994	)
Less: Provision (benefit) for income taxes		7,842			(427	)		7,842			(427	)

Gain (loss) on sale of discontinued operations, net of tax		10,395			(567	)		10,395			(567	)


Income from discontinued operations, net of tax	$	10,277		$	647		$	10,783		$	1,176

A discussion of each component of discontinued operations follows.

Discontinued Operations – Television Division

On July 18, 2008, Emmis completed the sale of its sole remaining television station, WVUE-TV in New Orleans, LA, to Louisiana Media Company LLC for $41.0 million in cash. The Company recognized a loss on the sale of WVUE-TV of $0.6 million, net of tax benefits of $0.4 million, which is included in income from discontinued operations in the accompanying statements of operations. In connection with the sale, the Company paid discretionary bonuses to the employees of WVUE totaling $0.8 million, which is included in the calculation of the loss on sale. The sale of WVUE-TV completes the sale of our television division which began on May 10, 2005, when Emmis announced that it had engaged advisors to assist in evaluating strategic alternatives for its television assets. As previously disclosed, the Compensation Committee of the Board of Directors may evaluate a discretionary bonus to executive officers and certain other employees integral to the sale of the television division now that all sixteen of the Company’s television stations have been sold. However, the Compensation Committee has not addressed this issue to date. On June 4, 2007, the Company closed on its sale of KGMB-TV in Honolulu

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to HITV Operating Co., Inc. for $40.0 million in cash and recorded a gain on sale of $10.4 million, net of tax of $7.8 million.

The decision to explore strategic alternatives for the Company’s television assets stemmed from the Company’s desire to reduce its debt, coupled with the Company’s view that its television stations needed to be aligned with a company with more significant financial resources and a singular focus on the challenges of American television, including the growth of digital video recorders and the industry’s relationship with cable and satellite providers. The Company concluded its television assets were held for sale in accordance with SFAS No. 144 and the results of operations of the television division have been classified as discontinued operations in the accompanying condensed consolidated financial statements for all periods presented. The television division had historically been presented as a separate reporting segment of Emmis.

In August 2005, WVUE-TV was significantly affected by Hurricane Katrina and the subsequent flooding. During the three months ended August 31, 2008, the Company received $3.1 million as final settlement of all Katrina-related insurance claims. The insurance proceeds are classified as a reduction of station operating expenses in the summary of television operations presented below and as an increase to income from discontinued operations in the accompanying statements of operations.

The following table summarizes certain operating results for the television division for all periods presented:


	Three months ended August 31,					Six months ended August 31,
	2007		2008			2007		2008
Net revenues	$	4,149	$	2,392		$	12,094	$	7,364
Station operating expenses		3,757		(1,113	)		10,157		2,356
Gain on disposal of assets		—		5			—		8
Income before taxes		392		3,510			1,787		5,016
Provision for income taxes		162		1,509			737		2,159

Assets and liabilities related to our television division are classified as discontinued operations in the accompanying condensed consolidated balance sheets as follows:

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	February 29, 2008		August 31, 2008
Current assets:
Accounts receivable, net	$	4,579	$	1,830
Current portion of TV program rights		1,551		—
Prepaid expenses		239		—
Other		173		476

Total current assets		6,542		2,306


Noncurrent assets:
Property and equipment, net		20,447		—
Intangibles, net		19,544		—
Other noncurrent assets		894		—

Total noncurrent assets		40,885		—


Total assets	$	47,427	$	2,306


Current liabilities:
Accounts payable and accrued expenses	$	487	$	595
Current portion of TV program rights		2,196		—
Accrued salaries and commissions		397		—
Deferred revenue		14		—
Other		113		—

Total current liabilities		3,207		595


Noncurrent liabilities:
TV program rights payable, net of current portion		912		—
Other noncurrent liabilities		222		—

Total noncurrent liabilities		1,134		—


Total liabilities	$	4,341	$	595

In accordance with Emerging Issues Task Force Issue 87-24 “Allocation of Interest to Discontinued Operations,” as modified, the Company did not allocate any interest expense for the periods presented to the television division, as no debt would be required to be repaid as a result of the disposition of the Company’s remaining television asset.

Discontinued Operations – Tu Ciudad Los Angeles

On July 10, 2008, Emmis announced that it had indefinitely suspended publication of Tu Ciudad Los Angeles because the magazine’s financial performance did not meet the Company’s expectations. Operating expenses for the three-month period ended August 31, 2008 of $1.2 million include all shut-down related costs and are included in income from discontinued operations in the accompanying statements of operations. Tu Ciudad Los Angeles had historically been included in the publishing division. The following table summarizes certain operating results for Tu Ciudad Los Angeles for all periods presented:

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	Three months ended August 31,					Six months ended August 31,
	2007		2008			2007		2008
Net revenues	$	695	$	(6	)	$	1,513	$	818
Station operating expenses		1,285		1,233			2,612		2,599
Depreciation and amortization		12		10			23		22
Loss on disposal of assets		—		79			—		80
Loss before taxes		602		1,328			1,122		1,883
Benefit for income taxes		254		541			460		769

Assets and liabilities related to Tu Ciudad Los Angeles are classified as discontinued operations in the accompanying condensed consolidated balance sheets as follows:


	February 29, 2008		August 31, 2008
Current assets:
Accounts receivable, net	$	414	$	49
Prepaid expenses		205		68
Other		8		6

Total current assets		627		123


Noncurrent assets:
Property and equipment, net		169		—
Other noncurrent assets		18		17

Total noncurrent assets		187		17


Total assets	$	814	$	140


Current liabilities:
Accounts payable and accrued expenses	$	88	$	155
Accrued salaries and commissions		41		—
Deferred revenue		87		—
Other		18		3

Total current liabilities		234		158


Noncurrent liabilities:
Other noncurrent liabilities		27		—

Total noncurrent liabilities		27		—


Total liabilities	$	261	$	158

Reclassifications

Certain reclassifications have been made to the prior year’s financial statements to be consistent with the August 31, 2008 presentation. The reclassifications have no impact on net income previously reported.

Note 2. Share Based Payments

Stock Option Awards

The Company has granted options to purchase its common stock to employees and directors of the

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Company under various stock option plans at no less than the fair market value of the underlying stock on the date of grant. These options are granted for a term not exceeding 10 years and are forfeited, except in certain circumstances, in the event the employee or director terminates his or her employment or relationship with the Company. All options granted since March 1, 2000, vest annually over three years (one-third each year for three years). The Company issues new shares upon the exercise of stock options.

The Company adopted the fair value recognition provisions of SFAS No. 123R on March 1, 2006, using the modified-prospective-transition method. The amounts recorded as share based compensation expense under SFAS No. 123R primarily relate to restricted common stock issued under employment agreements, common stock issued to employees in lieu of cash bonuses, Company matches of common stock in our 401(k) plans, and annual stock option and restricted stock grants.

The fair value of each option awarded is estimated on the date of grant using a Black-Scholes option-pricing model and expensed on a straight-line basis over the vesting period. Expected volatilities are based on historical volatility of the Company’s stock. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. The Company includes estimated forfeitures in its compensation cost and updates the estimated forfeiture rate through the final vesting date of awards. The Company uses the simplified method to estimate the expected term for all options granted. Although the Company has granted options for many years, the historical exercise activity of our options was impacted by the way the Company processed the equitable adjustment of our November 2006 special dividend. Consequently, the Company believes that reliable data regarding exercise behavior only exists for the period subsequent to November 2006, which is insufficient experience upon which to estimate the expected term. The risk-free interest rate for periods within the life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The following assumptions were used to calculate the fair value of the Company’s options on the date of grant during the six months ended August 31, 2007 and 2008:


	Six Months Ended August 31,
	2007			2008
Risk-Free Interest Rate:		4.5	%		2.8	%
Expected Dividend Yield:		0	%		0	%
Expected Life (Years):		6.0			6.0
Expected Volatility:		47.5	%		48.8	%

The following table presents a summary of the Company’s stock options outstanding at August 31, 2008, and stock option activity during the six months ended August 31, 2008 (“Price” reflects the weighted average exercise price per share):


					Weighted Average		Aggregate
					Remaining		Intrinsic
	Options		Price		Contractual Term		Value
Outstanding, beginning of period		7,600,063	$	16.08
Granted		657,839		2.88
Exercised (1)		—		—
Forfeited		13,360		5.45
Expired		54,234		17.06

Outstanding, end of period		8,190,308		15.04
Exercisable, end of period		6,864,499		16.76		3.9	$	—


(1)		The Company did not receive cash from option exercises in the six-month period ended August 31, 2008. The Company did not record an income tax benefit related to option exercises during the six-month period ended August 31, 2008.

The weighted average grant date fair value of options granted during the six months ended August 31, 2007 and 2008, was $4.24 and $1.42, respectively. The total intrinsic value of options exercised during the six months ended August 31, 2007 and 2008, was $0 and $0, respectively.

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A summary of the Company’s nonvested options at August 31, 2008, and changes during the six months ended August 31, 2008, is presented below:


			Weighted Average
			Grant Date
	Options		Fair Value
Nonvested, beginning of period		1,114,164	$	5.16
Granted		657,839		1.42
Vested		432,834		5.41
Forfeited		13,360		2.82

Nonvested, end of period		1,325,809		3.25

There were 2.8 million shares available for future grants under the various option plans at August 31, 2008. The vesting date of outstanding options at August 31, 2008 range from September 2008 to July 2011, and expiration dates range from October 2009 to July 2018.

Restricted Stock Awards

The Company began granting restricted stock awards to employees and directors of the Company in lieu of certain stock option grants in 2005. These awards generally vest at the end of the second or third year after grant and are forfeited, except in certain circumstances, in the event the employee terminates his or her employment or relationship with the Company prior to vesting. The restricted stock awards were granted out of the Company’s 2004 Equity Incentive Plan. The Company also awards, out of the Company’s 2004 Equity Compensation Plan, stock to settle certain bonuses and other compensation that otherwise would be paid in cash. Any restrictions on these shares are immediately lapsed on the grant date.

The following table presents a summary of the Company’s restricted stock grants outstanding at August 31, 2008, and restricted stock activity during the six months ended August 31, 2008 (“Price” reflects the weighted average share price at the date of grant):


	Awards		Price
Grants outstanding, beginning of period		626,049	$	12.62
Granted		870,572		3.08
Vested (restriction lapsed)		803,530		7.15
Forfeited		26,295		5.64

Grants outstanding, end of period		666,796		7.04

The total grant date fair value of shares vested during the six months ended August 31, 2007 and 2008 was $3.0 million and $5.7 million, respectively.

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Recognized Non-Cash Compensation Expense

The following table summarizes stock-based compensation expense and related tax benefits recognized by the Company in the three months and six months ended August 31, 2007 and 2008:


	Three Months						Six Months
	Ended August 31,						Ended August 31,
	2007			2008			2007			2008
Station operating expenses	$	475		$	557		$	1,741		$	1,610
Corporate expenses		1,002			613			2,104			2,169

Stock-based compensation expense included in operating expenses		1,477			1,170			3,845			3,779
Tax benefit		(606	)		(480	)		(1,576	)		(1,549	)

Recognized stock-based compensation expense, net of tax	$	871		$	690		$	2,269		$	2,230

As of August 31, 2008, there was $5.0 million of unrecognized compensation cost, net of estimated forfeitures, related to nonvested share-based compensation arrangements. The cost is expected to be recognized over a weighted average period of approximately 1.3 years.

Note 3. Intangible Assets and Goodwill

Indefinite-lived Intangibles

Under the guidance in Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”), the Company’s Federal Communications Commission (“FCC”) licenses are considered indefinite-lived intangibles. These assets, which the Company determined were its only indefinite-lived intangibles, are not subject to amortization, but are tested for impairment at least annually. The carrying amounts of the Company’s FCC licenses were $801.3 million as of February 29, 2008 and August 31, 2008. This amount is entirely attributable to our radio division.

The Company uses a direct-method valuation approach known as the greenfield income valuation method when it performs its annual impairment tests. Under this method, the Company projects the cash flows that would be generated by each of its units of accounting if the unit of accounting were commencing operations in each of its markets at the beginning of the valuation period. This cash flow stream is discounted to arrive at a value for the FCC license. The Company assumes the competitive situation that exists in each market remains unchanged, with the exception that its unit of accounting was beginning operations. In doing so, the Company extracts the value of going concern and any other assets acquired, and strictly values the FCC license. Major assumptions involved in this analysis include market revenue, market revenue growth rates, unit of accounting audience share, unit of accounting revenue share and discount rate. For its radio stations, the Company has determined the unit of accounting to be all of its stations in a local market. The required annual impairment tests may result in impairment charges in future periods.

Goodwill

SFAS No. 142 requires the Company to test goodwill for impairment at least annually using a two-step process. The first step is a screen for potential impairment, while the second step measures the amount of impairment. The Company conducts the two-step impairment test on December 1 of each fiscal year. When assessing its goodwill for impairment, the Company uses an enterprise valuation approach to determine the fair value of each of the Company’s reporting units (radio stations grouped by market and magazines on an individual basis). Management determines enterprise value for each of its reporting units by multiplying the two-year average station operating income generated by each reporting unit (current year based on actual results and the next year based on budgeted results) by an estimated market multiple. The Company uses a blended station

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operating income trading multiple of publicly traded radio operators as a benchmark for the multiple it applies to its radio reporting units. The multiple applied to each reporting unit is then adjusted up or down from this benchmark based upon characteristics of the reporting unit’s specific market, such as market size, market growth rate, and recently completed or announced transactions within the market. There are no publicly traded publishing companies that are focused predominantly on city and regional magazines as is our publishing segment. Therefore, the market multiple used as a benchmark for our publishing reporting units is based on recently completed transactions within the city and regional magazine industry.

This enterprise valuation is compared to the carrying value of the reporting unit for the first step of the goodwill impairment test. If the reporting unit exhibits impairment, the Company proceeds to the second step of the goodwill impairment test. For its step-two testing, the enterprise value is allocated among the tangible assets, indefinite-lived intangible assets (FCC licenses valued using a direct-method valuation approach) and unrecognized intangible assets, such as customer lists, with the residual amount representing the implied fair value of the goodwill. To the extent the carrying amount of the goodwill exceeds the implied fair value of the goodwill, the difference is recorded as an impairment charge in the statement of operations.

As of February 29, 2008 and August 31, 2008, the carrying amount of the Company’s goodwill was $81.3 million. As of February 29, 2008 and August 31, 2008, approximately $26.2 million and $55.1 million of our goodwill was attributable to our radio and publishing divisions, respectively. The required annual impairment tests may result in impairment charges in future periods.

Definite-lived intangibles

The Company’s definite-lived intangible assets consist primarily of foreign broadcasting licenses, trademarks and customer list, all of which are amortized over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The following table presents the weighted-average useful life, gross carrying amount and accumulated amortization for each major class of definite-lived intangible asset at February 29, 2008 and August 31, 2008:


			February 29, 2008						August 31, 2008
	Weighted Average		Gross				Net		Gross				Net
	Useful Life		Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	(in years)		Amount		Amortization		Amount		Amount		Amortization		Amount
Foreign Broadcasting Licenses		6.9	$	43,475	$	22,052	$	21,423	$	44,617	$	24,745	$	19,872
Trademarks		19.6		3,687		531		3,156		3,687		643		3,044
Customer List		4.0		1,162		169		993		1,162		315		847
Favorable Office Leases		6.4		688		501		187		688		542		146
Noncompete and Other		3.0		312		61		251		312		113		199

TOTAL			$	49,324	$	23,314	$	26,010	$	50,466	$	26,358	$	24,108

Total amortization expense from definite-lived intangibles for the three-month periods ended August 31, 2007 and 2008, was $1.0 million and $1.5 million, respectively. Total amortization expense from definite-lived intangibles for the six-month periods ended August 31, 2007 and 2008, was $2.0 million and $3.0 million, respectively. The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangibles:


YEAR ENDED FEBRUARY 28 (29),
2009	$	6,336
2010		6,271
2011		4,295
2012		4,078
2013		3,953

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Note 4. Derivative Instruments and Hedging Activities

Under the terms of its senior credit facility, the Company is required to fix or cap the interest rate on at least 30% of its debt outstanding (as defined in the credit facility) for a period of at least three years. In March 2007, the Company fulfilled this requirement by entering into a three-year interest rate exchange agreement (“Swap”), whereby the Company pays a fixed rate of 4.795% on $165 million of notional principal to Bank of America, and Bank of America pays to the Company a variable rate on the same amount of notional principal based on the three-month London Interbank Offered Rate (“LIBOR”). In March 2008, the Company entered into an additional three-year Swap, whereby the Company pays a fixed rate of 2.964% on $100 million of notional principal to Deutsche Bank, and Deutsche Bank pays to the Company a variable rate on the same amount of notional principal based on the three-month LIBOR. The Company is exposed to credit loss in the event of nonperformance by the counterparties to the agreements. However, the Company considers this risk to be low.

Under the provisions of Statement of Financial Accounting Standards No. 133, as amended and interpreted (“SFAS No. 133”), the Company recognizes at fair value all derivatives, whether designated as hedging relationships or not, in the balance sheet as either an asset or liability. The accounting for changes in the fair value of a derivative, including certain derivative instruments embedded in other contracts, depends on the intended use of the derivative and the resulting designation. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and the hedged item are recognized in the statement of operations. If the derivative is designated as a cash flow hedge, changes in the fair value of the derivative are recorded in other comprehensive income and are recognized in the statement of operations when the hedged item affects net income. If a derivative does not qualify as a hedge, it is marked to fair value through the statement of operations. Any fees associated with these derivatives are amortized over their term. Under these derivatives, the differentials to be received or paid are recognized as an adjustment to interest expense over the life of the contract. Gains and losses on termination of these instruments are recognized as interest expense when terminated.

SFAS No. 133 defines requirements for designation and documentation of hedging relationships, as well as on-going effectiveness assessments, in order to use hedge accounting under this standard. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes relating all derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company’s derivative activities, all of which are for purposes other than trading, are initiated within the guidelines of corporate risk-management policies. The Company formally assesses, both at inception and at least quarterly thereafter, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in either the fair value or cash flows of the hedged item. If a derivative ceases to be a highly effective hedge, the Company discontinues hedge accounting.

The Company estimates the fair value of the $165 million notional Swap and the $100 million notional Swap identified above to be a liability of $4.3 million and an asset of $1.2 million, respectively, as of August 31, 2008. The fair values of the Swaps are estimated by obtaining quotations from the financial institutions that are counterparties to the Company’s Swap agreements. The fair value is an estimate of the net amount that the Company would be required to pay (in the case of the $165 million notional Swap) or would receive (in the case of the $100 million notional Swap) on August 31, 2008, if the agreements were transferred to other parties or cancelled by the Company.

Note 5. Fair Value Measurements

As discussed in Note 1, in September 2006, the FASB issued SFAS No. 157 and in February 2007, issued SFAS No. 159. Both standards address aspects of the expanding application of fair value accounting. Effective

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March 1, 2008, we adopted SFAS No. 157 and SFAS No. 159. Pursuant to the provisions of FSP No. 157-2, we have decided to defer adoption of SFAS No. 157 for one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. There was no adjustment to accumulated deficit as a result of our adoption of SFAS No. 157. SFAS No. 159 permits an entity to measure certain financial assets and financial liabilities at fair value that were not previously required to be measured at fair value. We have not elected to measure any financial assets or financial liabilities at fair value that were not previously required to be measured at fair value.

SFAS No. 157 provides for the following:

	-		Defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and establishes a framework for measuring fair value;

	-		Establishes a three-level hierarchy for fair value measurements based upon the observability of inputs to the valuation of an asset or liability as of the measurement date;

	-		Requires consideration of our nonperformance risk when valuing liabilities; and

	-		Expands disclosures about instruments measured at fair value.

SFAS No. 157 also establishes a three-level valuation hierarchy for fair value measurements. These valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs create the following fair value hierarchy:

	-		Level 1 — Quoted prices for identical instruments in active markets;

	-		Level 2 — Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose significant inputs are observable; and

	-		Level 3 — Instruments whose significant inputs are unobservable.

The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of August 31, 2008. The financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

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	As of August 31, 2008
	Level 1		Level 2		Level 3
	Quoted Prices
	in Active		Significant
	Markets for		Other		Significant
	Identical Assets		Observable		Unobservable
	or Liabilities		Inputs		Inputs		Total
Cash equivalents	$	—	$	44,199	$	—	$	44,199
Interest rate cash flow hedge		—		1,241		—		1,241

Total assets measured at fair value on a recurring basis	$	—	$	45,440	$	—	$	45,440


Interest rate cash flow hedge		—		4,309		—		4,309

Total liabilities measured at fair value on a recurring basis	$	—	$	4,309	$	—	$	4,309

Cash Equivalents — A majority of Emmis’ domestic cash equivalents are invested in an institutional money market fund. The fund is not publicly traded, but third-party quotes for the fund are available and is therefore considered a Level 2 input. Derivative Instruments — Emmis’ derivative financial instruments consist solely of interest rate cash flow hedges in which the Company pays a fixed rate and receives a variable interest rate that is observable based upon a forward interest rate curve and is therefore considered a Level 2 input.

Available for sale securities —During the three months ended August 31, 2008, Emmis determined that its available for sale securities, consisting entirely of an investment in preferred stock and warrants of a company that specializes in the development and distribution of mobile and on-line games, was impaired and the impairment was other-than-temporary and recorded an impairment loss of $1.3 million, which is included in other expenses in the accompanying statements of operations.

As of August 31, 2008, Emmis had no financial assets or liabilities whose fair value was measured using significant unobservable inputs. The following table shows a reconciliation of the beginning and ending balances for fair value measurements using significant unobservable inputs:


	Available
	For Sale
	Securities
Balance as of February 29, 2008	$	1,000
Purchases		250
Other than temporary impairment loss		(1,250	)

Balance as of August 31, 2008	$	—

Note 6. Pro Forma Financial Information

Unaudited pro forma summary information is presented below for the three-month and six-month periods ended August 31, 2007, assuming the acquisition (and related net borrowings) of Orange Coast Kommunications, Inc. (publisher of Orange Coast) and Infopress & Company OOD (operator of Inforadio, a Bulgarian national radio network) had occurred on the first day of the pro forma periods presented below.

Preparation of the pro forma financial information was based upon assumptions deemed appropriate by the Company’s management. The pro forma financial information presented below is not necessarily indicative of the results that actually would have occurred if the transaction indicated above had been consummated at the

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beginning of the periods presented, and is not intended to be a projection of future results.


	Three months		Six months
	Ended August 31,		Ended August 31,
	2007		2007
	(Pro Forma)		(Pro Forma)
Net revenues	$	96,995	$	185,216


Net income from continuing operations	$	3,049	$	2,343


Net income (loss) available to common shareholders from continuing operations	$	803	$	(2,149	)


Net income (loss) per share available to common shareholders from continuing operations:

Basic	$	0.02	$	(0.06	)

Diluted	$	0.02	$	(0.06	)


Weighted average shares outstanding:

Basic		37,546		37,536
Diluted		37,821		37,536

Note 7. Comprehensive Income

Comprehensive income was comprised of the following for the three-month and six-month periods ended August 31, 2007 and 2008:


	Three Months						Six Months
	Ended August 31,						Ended August 31,
	2007			2008			2007			2008
Net income	$	14,056		$	3,482		$	14,367		$	4,678
Change in fair value of derivatives		(1,112	)		(393	)		(52	)		2,662
Translation adjustment		54			1,135			900			3,536


Total comprehensive income	$	12,998		$	4,224		$	15,215		$	10,876

Note 8. Shareholders’ Equity

On August 8, 2007, Emmis’ Board of Directors authorized a share repurchase program pursuant to which Emmis is authorized to purchase up to an aggregate value of $50 million of its outstanding Class A common stock within the parameters of SEC Rule 10b-18. Common stock repurchase transactions may occur from time to time at our discretion, either on the open market or in privately negotiated purchases, subject to prevailing market conditions and other considerations. On May 22, 2008, Emmis’ Board of Directors revised the share repurchase program to allow for the repurchase of both Class A common stock and Series A cumulative convertible preferred stock.

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Since August 8, 2007, the Company has repurchased 2.2 million Class A common shares for $13.9 million (average price of $6.23 per share). During the six months ended August 31, 2007, the Company repurchased 1.8 million Class A common shares for $11.2 million (an average price of $6.17 per share). The Company did not make any share repurchases during the six months ended August 31, 2008.

Note 9. Segment Information

The Company’s operations are aligned into two business segments: (i) Radio and (ii) Publishing and Other. These business segments are consistent with the Company’s management of these businesses and its financial reporting structure. Corporate expenses are not allocated to reportable segments. The results of operations of our television division and Tu Ciudad Los Angeles have been classified as discontinued operations and have been excluded from the segment disclosures below. See Note 1 for more discussion of our discontinued operations.

The Company’s segments operate primarily in the United States, but we also operate radio stations located in Hungary, Slovakia, Bulgaria and Belgium. The following table summarizes the net revenues and long-lived assets of our international properties included in our condensed consolidated financial statements.


	Net Revenues				Net Revenues				Long-lived Assets
	Three Months Ended August 31,				Six Months Ended August 31,				As of August 31,
	2007		2008		2007		2008		2007		2008
Hungary	$	5,545	$	7,778	$	10,074	$	12,013	$	4,885	$	3,928

Slovakia		3,730		5,289		6,431		8,863		10,832		10,628

Bulgaria		943		1,273		1,686		2,189		3,356		14,892

Belgium		437		535		690		1,149		3,356		534

The accounting policies as described in the summary of significant accounting policies included in the Company’s Annual Report filed on Form 10-K for the year ended February 29, 2008, and in Note 1 to these condensed consolidated financial statements, are applied consistently across segments.


Three Months Ended			Publishing
August 31, 2007 (unaudited)	Radio		and Other		Corporate			Consolidated
Net revenues	$	74,416	$	21,288	$	—		$	95,704
Station operating expenses, excluding depreciation and amortization		51,152		18,521		—			69,673
Corporate expenses, excluding depreciation and amortization		—		—		5,211			5,211
Depreciation and amortization		2,779		211		639			3,629
Loss on disposal of assets		94		—		—			94

Operating income (loss)	$	20,391	$	2,556	$	(5,850	)	$	17,097

Assets — continuing operations	$	992,001	$	84,155	$	44,188		$	1,120,344
Assets — discontinued operations		—		986		44,928			45,914

Total assets	$	992,001	$	85,141	$	89,116		$	1,166,258

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Three Months Ended			Publishing
August 31, 2008 (unaudited)	Radio		and Other		Corporate			Consolidated
Net revenues	$	73,278	$	20,949	$	—		$	94,227
Station operating expenses, excluding depreciation and amortization		48,882		19,491		—			68,373
Corporate expenses, excluding depreciation and amortization		—		—		4,661			4,661
Depreciation and amortization		3,177		297		577			4,051
Loss on disposal of assets		14		8		—			22

Operating income (loss)	$	21,205	$	1,153	$	(5,238	)	$	17,120

Assets — continuing operations	$	978,051	$	86,250	$	80,334		$	1,144,635
Assets — discontinued operations		—		140		2,306			2,446

Total assets	$	978,051	$	86,390	$	82,640		$	1,147,081


Six Months Ended			Publishing
August 31, 2007 (unaudited)	Radio		and Other		Corporate			Consolidated
Net revenues	$	139,416	$	42,733	$	—		$	182,149
Station operating expenses, excluding depreciation and amortization		97,490		36,881		—			134,371
Corporate expenses, excluding depreciation and amortization		—		—		10,919			10,919
Depreciation and amortization		5,430		372		1,274			7,076
Loss on disposal of assets		94		—		—			94

Operating income (loss)	$	36,402	$	5,480	$	(12,193	)	$	29,689

Assets — continuing operations	$	992,001	$	84,155	$	44,188		$	1,120,344
Assets — discontinued operations		—		986		44,928			45,914

Total assets	$	992,001	$	85,141	$	89,116		$	1,166,258


Six Months Ended			Publishing
August 31, 2008 (unaudited)	Radio		and Other		Corporate			Consolidated
Net revenues	$	137,469	$	42,781	$	—		$	180,250
Station operating expenses, excluding depreciation and amortization		92,040		39,595		—			131,635
Corporate expenses, excluding depreciation and amortization		—		—		10,294			10,294
Depreciation and amortization		6,281		597		1,108			7,986
Loss on disposal of assets		5		10		—			15

Operating income (loss)	$	39,143	$	2,579	$	(11,402	)	$	30,320

Assets — continuing operations	$	978,051	$	86,250	$	80,334		$	1,144,635
Assets — discontinued operations		—		140		2,306			2,446

Total assets	$	978,051	$	86,390	$	82,640		$	1,147,081

Note 10. Regulatory, Legal and Other Matters

The Company is a party to various legal and regulatory proceedings arising in the ordinary course of business. In the opinion of management of the Company, there are no legal or regulatory proceedings pending against the Company that are likely to have a material adverse effect on the Company.

Certain individuals and groups have challenged applications for renewal of the FCC licenses of certain of the Company’s stations. The challenges to the license renewal applications are currently pending before the Commission. Emmis does not expect the challenges to result in the denial of any license renewals.

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In 2006, the FCC commenced an industry-wide inquiry into possible violations of sponsorship identification requirements and “payola” in the radio industry. Its initial inquiries were directed to four radio groups, and in April 2007, those groups entered into Consent Decrees with the FCC to resolve outstanding investigations and allegations. The Company has received similar inquiries from the FCC and has submitted responses; additional responses may be submitted in the future. The Company has not yet determined what effect the inquiry will have, if any, on its financial position, results of operations or cash flows.

Note 11. Subsequent Events

On September 26, 2008, Emmis gave written notice to AVN Air, LLC, the lessor of the Gulfstream aircraft leased by the Company, that it was exercising its early purchase option on the aircraft. Emmis is exercising the option in order to sell the aircraft and has engaged a broker to facilitate the sale. The option price of $14.4 million (plus applicable sales tax) is expected to be funded on December 1, 2008. The Company’s lease deposit of $4.2 million will be refunded upon completion of the early purchase option.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Note: Certain statements included in this report or in the financial statements contained herein which are not statements of historical fact, including but not limited to those identified with the words “expect,” “should,” “will” or “look” are intended to be, and are, by this Note, identified as “forward-looking statements,” as defined in the Securities and Exchange Act of 1934, as amended. Such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future result, performance or achievement expressed or implied by such forward-looking statement. Such factors include, among others:

	•		general economic and business conditions;

	•		fluctuations in the demand for advertising and demand for different types of advertising media;

	•		our ability to service our outstanding debt;

	•		loss of key personnel;

	•		increased competition in our markets and the broadcasting industry;

	•		our ability to attract and secure programming, on-air talent, writers and photographers;

	•		inability to obtain (or to obtain timely) necessary approvals for purchase or sale transactions or to complete the transactions for other reasons generally beyond our control;

	•		increases in the costs of programming, including on-air talent;

	•		inability to grow through suitable acquisitions;

	•		new or changing regulations of the Federal Communications Commission or other governmental agencies;

	•		changes in radio audience measurement methodologies;

	•		competition from new or different technologies;

	•		war, terrorist acts or political instability; and

	•		other factors mentioned in other documents filed by the Company with the Securities and Exchange Commission.

Emmis does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.

GENERAL

We are a diversified media company. We own and operate radio and publishing properties located primarily in the United States. Our revenues are mostly affected by the advertising rates our entities charge, as advertising sales represent more than 80% of our consolidated revenues. These rates are in large part based on our entities’ ability to attract audiences/subscribers in demographic groups targeted by their advertisers. Radio station ratings have historically been measured principally four times a year by Arbitron, Inc. Because audience ratings in a station’s local market are critical to the station’s financial success, our strategy is to use market research and advertising and promotion to attract and retain audiences in each station’s chosen demographic target group.

Our revenues vary throughout the year. As is typical in the broadcasting industry, our revenues and operating income are usually lowest in our fourth fiscal quarter.

In addition to the sale of advertising time for cash, stations typically exchange advertising time for goods or services, which can be used by the station in its business operations. These barter transactions are recorded at the estimated fair value of the product or service received. We generally confine the use of such trade transactions to promotional items or services for which we would otherwise have paid cash. In addition, it is our general policy not to pre-empt advertising spots paid for in cash with advertising spots paid for in trade.

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The following table summarizes the sources of our revenues for the three-month and six-month periods ended August 31, 2007 and 2008. All revenues generated by our international radio properties are included in the “Local” category. The category “Non Traditional” principally consists of ticket sales and sponsorships of events our stations and magazines conduct in their local markets. The category “Other” includes, among other items, revenues generated by the websites of our entities and barter.


	Three Months Ended August 31,										Six Months Ended August 31,
	2007		% of Total			2008		% of Total			2007		% of Total			2008		% of Total
	(Dollars in thousands)										(Dollars in thousands)
Net revenues:
Local	$	61,336		64.1	%	$	59,176		62.8	%	$	119,932		65.8	%	$	115,605		64.1	%
National		15,388		16.1	%		15,286		16.2	%		29,728		16.3	%		30,110		16.7	%
Publication Sales		3,018		3.2	%		2,909		3.1	%		6,958		3.8	%		6,725		3.7	%
Non Traditional		9,314		9.7	%		8,895		9.4	%		12,583		6.9	%		12,016		6.7	%
Other		6,648		6.9	%		7,961		8.5	%		12,948		7.2	%		15,794		8.8	%


Total net revenues	$	95,704				$	94,227				$	182,149				$	180,250

As previously mentioned, we derive more than 80% of our net revenues from advertising sales. Our radio stations derive a higher percentage of their advertising revenues from local and regional sales than our publishing entities. In the six-month period ended August 31, 2008, local and regional sales, excluding political revenues, represented approximately 84% and 61% of our advertising revenues for our radio and publishing divisions, respectively. In the six-month period ended August 31, 2007, local and regional sales, excluding political revenues, represented approximately 86% and 59% of our advertising revenues for our radio and publishing divisions, respectively.

No customer represents more than 10% of our consolidated net revenues. Our top ten categories for radio represent approximately 63% of the total advertising net revenues. The automotive industry is the largest category for radio, representing approximately 12% of the radio segment’s advertising net revenues in the six-month period ended August 31, 2008.

The majority of our expenses are fixed in nature, principally consisting of salaries and related employee benefit costs, office and tower rent, utilities, property and casualty insurance and programming-related expenses. However, approximately 20% of our expenses vary in connection with changes in revenues. These variable expenses primarily relate to sales commissions and bad debt reserves. In addition, costs related to our marketing and promotions department are highly discretionary and incurred primarily to maintain and/or increase our audience and market share.

KNOWN TRENDS AND UNCERTAINTIES

Domestic radio revenue growth has been anemic for several years. Management believes this is principally the result of four factors: (1) the emergence of new media, such as various media content distributed via the Internet and cable interconnects, which are gaining advertising share against radio and other traditional media, (2) the perception of investors and advertisers that satellite radio and portable media players diminish the effectiveness of radio advertising, (3) advertisers’ lack of confidence in the ratings of radio stations due to dated ratings-gathering methods, and (4) a lack of inventory and pricing discipline by radio operators. In addition to the factors mentioned above, the slowing United States economy has negatively impacted revenue growth in both our domestic radio stations and our publishing division.

The radio industry has begun several initiatives to address these issues, most notable of which is the rollout of HD Radio^®. HD Radio offers listeners advantages over standard analog broadcasts, including improved sound quality and additional channels. To make the rollout of HD Radio more efficient, a consortium of broadcasters representing a majority of the radio stations in nearly all of our markets have agreed to work together to coordinate the programming on secondary channels in each radio market to ensure a more diverse consumer

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offering and to accelerate the rollout of HD Radio receivers, particularly in automobiles. In addition to offering secondary channels, the HD Radio spectrum allows broadcasters to transmit other forms of data. We recently announced our participation in a joint venture with seven other member broadcasters to provide the bandwidth that a third party will use to transmit location-based data to hand-held and in-car navigational devices. We currently utilize HD Radio digital technology on most of our FM stations. It is unclear what impact HD Radio will have on the markets in which we operate.

Arbitron Inc., the supplier of ratings data for United States radio markets, has developed technology to passively collect data for its ratings service. The Portable People Meter^TM(PPM^TM) is a small, pager-sized device that does not require any active manipulation by the end user and is capable of automatically measuring radio, television, Internet, satellite radio and satellite television signals that are encoded for the service by the broadcaster. The PPM offers a number of advantages over the traditional diary ratings collection system including ease of use, more reliable ratings data and shorter time periods between when advertising runs and when audience listening or viewing habits can be reported. This service is scheduled to begin in the New York, Los Angeles and Chicago markets in October 2008. It is unclear what impact the introduction of the PPM will have on our revenues in these markets.

As discussed below, our reformatted stations in Los Angeles and New York continue to negatively impact their radio cluster’s performance in their respective markets. Our Los Angeles and New York markets collectively account for approximately 50% of our domestic radio revenues.

Although our radio cluster in Los Angeles (consisting of two stations) exceeded the performance of the overall Los Angeles radio market during the six-month period ended August 31, 2008, reformatted station KMVN-FM tempered our results for the period. For the six-month period ended August 31, 2008, our Los Angeles radio stations’ revenues were down 8.5% versus the same period in the prior year, whereas the independent accounting firm Miller, Kaplan, Arase & Co., LLP (“Miller Kaplan”) reported that Los Angeles radio market total revenues were down 8.6%. KMVN-FM lagged the market and its revenues were down 24.1%.

Our radio cluster in New York trailed the performance of the overall New York radio market during the six-month period ended August 31, 2008. For the six-month period ended August 31, 2008, our New York radio stations’ revenues were down 11.5%, whereas the independent accounting firm Miller Kaplan reported that New York radio market total revenues were down 4.4% versus the same period of the prior year. The results of our New York radio stations were negatively impacted by WRXP-FM, which was reformatted in February 2008. Excluding the results of WRXP-FM, revenue from our New York radio stations were down 3.5%.

As part of our business strategy, we continually evaluate potential acquisitions of international radio stations, publishing properties and other businesses that we believe hold promise for long-term appreciation in value and leverage our strengths. We also regularly review our portfolio of assets and may opportunistically dispose of assets when we believe it is appropriate to do so.

ACCOUNTING PRONOUNCEMENTS

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In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS No. 160). SFAS No. 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS No. 160 requires retroactive adoption of the presentation and disclosure requirements for existing minority interests, with all other requirements applied prospectively. SFAS No. 160 is effective for us as of March 1, 2009. As of February 29, 2008, and August 31, 2008, minority interests characterized as liabilities in the accompanying consolidated balance sheets were $53,758 and $53,540, respectively. These amounts will be recharacterized as noncontrolling interests and classified as a component of shareholders’ equity when SFAS No. 160 is adopted on March 1, 2009.

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CRITICAL ACCOUNTING POLICIES

Critical accounting policies are defined as those that encompass significant judgments and uncertainties, and potentially lead to materially different results under different assumptions and conditions. We believe that our critical accounting policies are those described below.

Impairment of Goodwill and Indefinite-lived Intangibles

The annual impairment tests for goodwill and indefinite-lived intangibles under SFAS No. 142 require us to make certain assumptions in determining fair value, including assumptions about the cash flow growth rates of our businesses. Additionally, the fair values are significantly impacted by macro-economic factors, including market multiples at the time the impairment tests are performed. Accordingly, we may incur additional impairment charges in future periods under SFAS No. 142 to the extent we do not achieve our expected cash flow growth rates, or to the extent that market values decrease.

Allocations for Purchased Assets

We have made acquisitions in the past for which a significant amount of the purchase price was allocated to broadcasting licenses and goodwill assets. As of August 31, 2008, we have recorded approximately $882.6 million in FCC licenses and goodwill, which represents 76.9% of our total assets. In assessing the recoverability of these assets, we conduct annual impairment testing required by SFAS No. 142 and charge to operations an impairment expense if the recorded value of these assets is more than their fair value. We believe our estimate of the value of our radio broadcasting licenses and goodwill assets is a critical accounting estimate as the value is significant in relation to our total assets, and our estimate of the value uses assumptions that incorporate variables based on past experiences and judgments about future performance of our stations. These variables include but are not limited to: (1) the forecasted growth rate of each radio market, including population, household income, retail sales and other expenditures that would influence advertising expenditures; (2) market share and profit margin of an average station within a market; (3) estimated capital start-up costs and losses incurred during the early years; (4) risk-adjusted discount rate; (5) the likely media competition within the market area; and (6) terminal values. Changes in our estimates of the fair value of these assets could result in material future period write-downs in the carrying value of our broadcasting licenses and goodwill assets.

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Deferred Taxes and Effective Tax Rates

We estimate the effective tax rates and associated liabilities or assets for each legal entity within Emmis in accordance with SFAS No. 109, Accounting for Income Taxes and FIN 48, Accounting for Uncertainty in Income Taxes. These estimates are based upon our interpretation of United States and local tax laws as they apply to our legal entities and our overall tax structure. Audits by local tax jurisdictions, including the United States Government, could yield different interpretations from our own and cause the Company to owe more taxes than originally recorded. We utilize advisors in the various tax jurisdictions to evaluate our position and to assist in our calculation of our tax expense and related liabilities.

Insurance Claims and Loss Reserves

The Company is self-insured for most healthcare claims, subject to stop-loss limits. Claims incurred but not reported are recorded based on historical experience and industry trends, and accruals are adjusted when warranted by changes in facts and circumstances. The Company had $1.4 million and $1.0 million accrued for employee healthcare claims as of February 29, 2008, and August 31, 2008, respectively. The Company also maintains large deductible programs (ranging from $250 thousand to $500 thousand per occurrence) for workers’ compensation claims, automotive liability losses and media liability claims.

Valuation of Stock Options

The Company determines the fair value of its employee stock options at the date of grant using a Black-Scholes option-pricing model. The Black-Scholes option pricing model was developed for use in estimating the value of exchange-traded options that have no vesting restrictions and are fully transferable. The Company’s employee stock options have characteristics significantly different than these traded options. In addition, option pricing models require the input of highly subjective assumptions, including the expected stock price volatility and expected term of the options granted. The Company relies heavily upon historical data of its stock price when determining expected volatility, but each year the Company reassesses whether or not historical data is representative of expected results.

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Results of Operations for the Three-month and Six-month Periods Ended August 31, 2008, Compared to August 31, 2007

Net revenue pro forma reconciliation:

Since March 1, 2007, we have acquired Orange Coast Kommunications, Inc. (publisher of Orange Coast) and Infopress & Company OOD (operator of Inforadio, a Bulgarian national radio network). The results of our television division and Tu Ciudad Los Angeles have been included in discontinued operations and are not included in reported results below. The following table reconciles reported net revenues to pro forma net revenues.


	Three Months Ended August 31,										Six Months Ended August 31,
	2007		2008		$ Change			% Change			2007		2008		$ Change			% Change
	(Dollars in thousands)										(Dollars in thousands)
Reported net revenues
Radio	$	74,416	$	73,278	$	(1,138	)		-1.5	%	$	139,416	$	137,469	$	(1,947	)		-1.4	%
Publishing		21,288		20,949		(339	)		-1.6	%		42,733		42,781		48			0.1	%

Total		95,704		94,227		(1,477	)		-1.5	%		182,149		180,250		(1,899	)		-1.0	%

Plus: Net revenues from businesses acquired
Radio		149		—								293		—
Publishing		1,142		—								2,774		—

Total		1,291		—								3,067		—

Pro forma net revenues
Radio		74,565		73,278		(1,287	)		-1.7	%		139,709		137,469		(2,240	)		-1.6	%
Publishing		22,430		20,949		(1,481	)		-6.6	%		45,507		42,781		(2,726	)		-6.0	%

Total	$	96,995	$	94,227	$	(2,768	)		-2.9	%	$	185,216	$	180,250	$	(4,966	)		-2.7	%

For further disclosure of segment results, see Note 9 to the accompanying condensed consolidated financial statements. For additional pro forma financial information, see Note 6 to the accompanying condensed consolidated financial statements.

Net revenues:

Radio net revenues decreased principally as a result of declining revenues in our domestic radio markets. We typically monitor the performance of our stations against the aggregate performance of the markets in which we operate based on reports for the periods prepared by the independent accounting firm Miller Kaplan. For the three-month period ended August 31, 2008, net revenues of our domestic radio stations were down 8.4%, whereas Miller Kaplan reported that revenues of our domestic radio markets were down 7.1%. For the six-month period ended August 31, 2008, net revenues of our domestic radio stations were down 6.0%, whereas Miller Kaplan reported that revenues of our domestic radio markets were down 5.6%. The Company’s national representation firm guaranteed a minimum amount of national sales for the year ended February 28, 2009. As of August 31, 2008, Emmis determined that it was probable that the guaranteed minimum amount of national sales for the year ended February 28, 2009 would not be attained. As such, the Company has accrued $3.2 million for the shortfall as a reduction of agency commissions during the six-month period ended August 31, 2008. Market weakness and our stations’ weaknesses have led us to discount our rates charged to advertisers. For the six-month period ended August 31, 2008, our average unit rate for our domestic radio stations was down 9.6% and our number of units sold was up 2.6%. Revenue growth at our international radio stations has helped to offset weakness domestically. For the three-month and six-month periods ended August 31, 2008, pro forma international radio revenues were up 37.7% and 26.3%, respectively.

On a pro forma basis (assuming Orange Coast had been purchased on March 1, 2007), publishing net revenues for the three-month and six-month periods ended August 31, 2008, decreased $1.5 million, or 6.6%, and $2.7 million, or 6.0%. The decrease in publishing pro forma net revenue in both periods is principally attributable

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to the slowing economy that has diminished demand for advertising inventory at most of our city/regional publications.

On a consolidated basis, pro forma net revenues for the three-month and six-month periods ended August 31, 2008, decreased $2.8 million, or 2.9%, and $5.0 million, or 2.7%, due to the effect of the items described above.

Station operating expenses, excluding depreciation and amortization expense pro forma reconciliation:


	Three Months Ended August 31,										Six Months Ended August 31,
	2007		2008		$ Change			% Change			2007		2008		$ Change			% Change
	(Dollars in thousands)										(Dollars in thousands)
Reported station operating expenses
Radio	$	51,152	$	48,882	$	(2,270	)		-4.4	%	$	97,490	$	92,040	$	(5,450	)		-5.6	%
Publishing		18,521		19,491		970			5.2	%		36,881		39,595		2,714			7.4	%

Total		69,673		68,373		(1,300	)		-1.9	%		134,371		131,635		(2,736	)		-2.0	%

Plus: Station operating expenses from acquisitions
Radio		74		—								145		—
Publishing		1,432		—								2,894		—

Total		1,506		—								3,039		—

Pro forma station operating expenses
Radio		51,226		48,882		(2,344	)		-4.6	%		97,635		92,040		(5,595	)		-5.7	%
Publishing		19,953		19,491		(462	)		-2.3	%		39,775		39,595		(180	)		-0.5	%

Total	$	71,179	$	68,373	$	(2,806	)		-3.9	%	$	137,410	$	131,635	$	(5,775	)		-4.2	%

Station operating expenses, excluding depreciation and amortization expense:

On a pro forma basis (assuming Inforadio had been purchased on March 1, 2007), radio station operating expenses, excluding depreciation and amortization expense for the three-month and six-month periods ended August 31, 2008 decreased $2.3 million, or 4.6%, and $5.6 million, or 5.7%. Radio station operating expenses, excluding depreciation and amortization expense decreased in the three-month and six-month periods ended August 31, 2008, principally due to lower expenses at KMVN-FM in Los Angeles. KMVN-FM’s station operating expenses, excluding depreciation and amortization expense decreased $2.8 million and $5.4 million during the three-month and six-month periods ended August 31, 2008, respectively, as the station was engaged in an extensive marketing campaign in the prior year, which was not replicated in the current year.

On a pro forma basis (assuming Orange Coast had been purchased on March 1, 2007), publishing operating expenses, excluding depreciation and amortization expense for the three-month and six-month periods ended August 31, 2008 decreased $0.5 million, or 2.3%, and $0.2 million, or 0.5%. Publishing operating expenses, excluding depreciation and amortization expense decreased in both periods primarily due to lower sales-related costs and production costs due to revenue declines.

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On a consolidated basis, pro forma station operating expenses for the three–month and six-month periods ended August 31, 2008, decreased $2.8 million, or 3.9%, and decreased $5.8 million, or 4.2% due to the effect of the items described above.

Corporate expenses, excluding depreciation and amortization expense:


	Three Months Ended August 31,										Six Months Ended August 31,
	2007		2008		$ Change			% Change			2007		2008		$ Change			% Change
	(As reported, amounts in thousands)										(As reported, amounts in thousands)
Corporate expenses	$	5,211	$	4,661	$	(550	)		(10.6	)%	$	10,919	$	10,294	$	(625	)		(5.7	)%

Corporate expenses decreased due to lower health insurance and general insurance costs as compared to the same period of the prior year, coupled with continuing efforts to streamline our corporate services . These cost savings are partially offset by the resumption of regular salary payments to our CEO. Our CEO had voluntarily reduced his salary from $0.9 million to $1.00 for the year ended February 29, 2008.

Depreciation and amortization:


	Three Months Ended August 31,										Six Months Ended August 31,
	2007		2008		$ Change			% Change			2007		2008		$ Change			% Change
	(As reported, amounts in thousands)										(As reported, amounts in thousands)
Depreciation and amortization:
Radio	$	2,779	$	3,177	$	398			14.3	%	$	5,430	$	6,281	$	851			15.7	%
Publishing		211		297		86			40.8	%		372		597		225			60.5	%
Corporate		639		577		(62	)		(9.7	)%		1,274		1,108		(166	)		(13.0	)%


Total depreciation and amortization	$	3,629	$	4,051	$	422			11.6	%	$	7,076	$	7,986	$	910			12.9	%

Substantially all of the increase in radio depreciation and amortization expense for the three–month and six-month periods ended August 31, 2008, is due to the depreciation of property and equipment and the amortization of intangibles of Inforadio, which was acquired in December 2007.

Substantially all of the increase in publishing depreciation and amortization expense for the three-month and six-month periods ended August 31, 2008, is due to amortization of intangibles of Orange Coast, which was acquired in July 2007.

Operating income:


	Three Months Ended August 31,												Six Months Ended August 31,
	2007			2008			$ Change			% Change			2007			2008			$ Change			% Change
	(As reported, amounts in thousands)												(As reported, amounts in thousands)
Operating income:
Radio	$	20,391		$	21,205		$	814			4.0	%	$	36,402		$	39,143		$	2,741			7.5	%
Publishing		2,556			1,153			(1,403	)		(54.9	)%		5,480			2,579			(2,901	)		(52.9	)%
Corporate		(5,850	)		(5,238	)		612			(10.5	)%		(12,193	)		(11,402	)		791			(6.5	)%


Total operating income	$	17,097		$	17,120		$	23			0.1	%	$	29,689		$	30,320		$	631			2.1	%

In the three-month and six-month periods ended August 31, 2008, radio operating income increased due to reduced promotional spending at KMVN-FM in Los Angeles and revenue growth of our international radio properties which were partially offset by declining revenues in our domestic radio markets, as discussed above.

In the three-month and six-month periods ended August 31, 2008, publishing operating income decreased due to weak demand of advertising inventory at most of our city/regional publications.

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In the three-month and six-month periods ended August 31, 2008, corporate operating loss decreased due to lower general insurance and health insurance expense coupled with a continued focus on streamlining our corporate services. These savings are partially offset by the increase in our CEO’s salary as discussed above.

Interest expense:


	Three Months Ended August 31,										Six Months Ended August 31,
	2007		2008		$ Change			% Change			2007		2008		$ Change			% Change
	(As reported, amounts in thousands)										(As reported, amounts in thousands)
Interest expense	$	8,654	$	6,564	$	(2,090	)		(24.2	)%	$	17,986	$	13,621	$	(4,365	)		(24.3	)%

The decrease in interest expense is principally due to lower interest rates on our senior credit facility. The weighted average borrowing rate under our senior credit facility, including our interest rate exchange agreements, at August 31, 2007 and 2008 was 7.2% and 5.6%, respectively.

Other income (expense), net:


	Three Months Ended August 31,											Six Months Ended August 31,
	2007		2008			$ Change			% Change			2007		2008			$ Change			% Change
	(As reported, amounts in thousands)											(As reported, amounts in thousands)
Other income (expense), net	$	289	$	(1,224	)	$	(1,513	)		(523.5	)%	$	225	$	(1,374	)	$	(1,599	)		(710.7	)%

The change in other income (expense), net, mostly relates to a $1.3 million impairment loss recognized during the three months ended August 31, 2008 on an investment that was deemed to be other-than-temporary.

Income before income taxes, minority interest and discontinued operations:


	Three Months Ended August 31,									Six Months Ended August 31,
	2007		2008		$ Change		% Change			2007		2008		$ Change		% Change
	(As reported, amounts in thousands)									(As reported, amounts in thousands)
Income before income taxes, minority interest and discontinued operations	$	8,732	$	9,332	$	600		6.9	%	$	11,928	$	15,325	$	3,397		28.5	%

The increase in the three-month and six-month periods ended August 31, 2008, is principally due to lower interest expense and lower operating expenses of our radio and corporate divisions. These increases in income before income taxes, minority interest and discontinued operations were partially offset by lower net revenues.

Provision for income taxes:


	Three Months Ended August 31,									Six Months Ended August 31,
	2007		2008		$ Change		% Change			2007		2008		$ Change		% Change
	(As reported, amounts in thousands)									(As reported, amounts in thousands)
Provision for income taxes	$	3,625	$	4,579	$	954		26.3	%	$	5,823	$	8,498	$	2,675		45.9	%

The effective tax rate for the six-month periods ended August 31, 2007 and 2008 was 48.8% and 55.5%, respectively. Our effective tax rates differed from our statutory rate of 41% due to our low income before income taxes in relation to other non-deductible items. Included in our provision for income taxes for the six-month period ended August 31, 2008, is a discrete $1.2 million tax item, resulting from the vesting of restricted stock in which the book expense exceeded the related tax deduction. Excluding this discrete item, our effective tax rate for the six-month period ended August 31, 2008 would have been 47.4%. Including the effect of the discrete item, we expect our effective tax rate for the year ending February 28, 2009, to be approximately 56%.

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Minority interest expense, net of tax:


	Three Months Ended August 31,									Six Months Ended August 31,
	2007		2008		$ Change		% Change			2007		2008		$ Change		% Change
	(As reported, amounts in thousands)									(As reported, amounts in thousands)
Minority interest expense, net of tax	$	1,328	$	1,918	$	590		44.4	%	$	2,521	$	3,325	$	804		31.9	%

Our minority interest expense principally relates to the minority shareholders’ proportionate shares of income generated by our radio partnership in Austin, Texas (we own 50.1%), our radio station in Hungary (we own 59.5%), and our radio operations in Bulgaria (we own approximately 60%). Minority interest expense increased in both the three-month and six-month periods ended August 31, 2008 over the same period of the prior year due to higher income generated by our radio station in Hungary.

Income from discontinued operations, net of tax:


	Three Months Ended August 31,										Six Months Ended August 31,
	2007		2008		$ Change			% Change			2007		2008		$ Change			% Change
	(As reported, amounts in thousands)										(As reported, amounts in thousands)
Income from discontinued operations, net of tax	$	10,277	$	647	$	(9,630	)		(93.7	)%	$	10,783	$	1,176	$	(9,607	)		(89.1	)%

Our television division and Tu Ciudad Los Angeles has been classified as discontinued operations in the accompanying condensed consolidated statements. The financial results of the television division and Tu Ciudad Los Angeles and related discussions are fully described in Note 1 to the accompanying condensed consolidated financial statements.

On June 4, 2007, the Company closed on its sale of KGMB-TV in Honolulu to HITV Operating Co., Inc. for $40.0 million in cash and recorded a gain on sale of $10.4 million, net of tax of $7.8 million. On July 18, 2008, the Company closed on its sale of WVUE-TV in New Orleans to Louisiana Media Company, LLC for $41.0 million in cash and recorded a loss on sale of $0.6 million, net of tax benefits of $0.4 million. The sale of WVUE-TV completed the Company’s divestiture of its television division.

In June 2008, Emmis and its private insurer agreed to a full and final settlement of its insurance claim related to Hurricane Katrina. As a result, Emmis received $3.1 million during the quarter ended August 31, 2008, which is reflected as an increase to income from discontinued operations in our condensed consolidated statements of operations.

Net income:


	Three Months Ended August 31,										Six Months Ended August 31,
	2007		2008		$ Change			% Change			2007		2008		$ Change			% Change
	(As reported, amounts in thousands)										(As reported, amounts in thousands)
Net income:	$	14,056	$	3,482	$	(10,574	)		(75.2	)%	$	14,367	$	4,678	$	(9,689	)		(67.4	)%

The decrease in net income in the three-month and six-month periods ended August 31, 2008 is principally attributable to lower income from discontinued operations, higher provision for income taxes and the other-than-temporary impairment loss on an investment, partially offset by lower interest expense.

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Liquidity and Capital Resources

Our primary sources of liquidity are cash provided by operations and cash available through revolver borrowings under our credit facility. Our primary uses of capital have been historically, and are expected to continue to be, funding acquisitions, capital expenditures, working capital, debt service and preferred stock dividend requirements. We also have used capital to repurchase our common stock. On August 8, 2007, Emmis’ Board of Directors authorized a share repurchase program pursuant to which Emmis is authorized to purchase up to an aggregate value of $50 million of its outstanding Class A common stock within the parameters of SEC Rule 10b-18. Common stock repurchase transactions may occur from time to time at our discretion, either on the open market or in privately negotiated purchases, subject to prevailing market conditions and other considerations. On May 22, 2008, Emmis’ Board of Directors revised the share repurchase program to allow for the repurchase of both Class A common stock and Series A cumulative convertible preferred stock. We did not repurchase any Class A common stock or Series A cumulative convertible preferred stock during the six-month period ended August 31, 2008. Since we manage cash on a consolidated basis, any cash needs of a particular segment or operating entity are met by intercompany transactions. See Investing Activities below for a discussion of specific segment needs.

At August 31, 2008, we had cash and cash equivalents of $67.5 million and net working capital of $108.3 million. At February 29, 2008, we had cash and cash equivalents of $19.5 million and net working capital of $52.8 million. Cash and cash equivalents held at various European banking institutions at August 31, 2008, and February 29, 2008 was $19.7 million and $14.5 million, respectively. Our ability to access our share of these international cash balances (net of minority interests) is limited by country-specific statutory requirements. As of August 31, 2008 and February 29, 2008, we had $44.2 million and $3.3 million, respectively, of our domestic cash invested in an institutional money market fund. During the six-month period ended August 31, 2008, working capital increased $55.5 million. The increase in net working capital primarily relates to higher cash on hand as the result of the sale of WVUE-TV, the receipt of $3.1 million of WVUE-TV insurance proceeds and minimal use of cash for investing and financing purposes.

The Company has entered into two separate three-year interest rate exchange agreements, whereby the Company pays a fixed rate of notional principal in exchange for a variable rate on the same amount of notional principal based on the three-month LIBOR. The counterparties to these agreements are global financial institutions.

Emmis has instituted a TV Proceeds Quarterly Bonus Program (the “Program”) under which the Company will pay quarterly bonuses to certain employees to offset salary reductions by the Company’s wholly-owned, direct subsidiary, Emmis Operating Company, and certain of its subsidiaries (collectively, “OpCo”). All of our executive officers are participating in the Program. Effective September 1, 2008, OpCo reduced to approximately $15,000 the salaries of certain of its most highly compensated employees in order to increase defined consolidated operating cash flow under OpCo’s Amended and Restated Revolving Credit and Term Loan Agreement dated as of November 2, 2006 (the “Credit Agreement”). Under the Program, the Company will pay the employees affected by the salary reduction quarterly bonuses in amounts equivalent to the forgone salary. The bonus will be paid at the beginning of each fiscal quarter either (i) in cash out of the net proceeds from the sale of WVUE-TV if certain performance targets from a prior quarter are met, or (ii) in shares of the Company’s Class A Common Stock under the Company’s 2004 Equity Compensation Plan if the performance targets are not met. The bonuses will likely be paid in cash because the quarterly performance target will be met if the Company’s actual station operating income exceeds 50% of projected station operating income for such quarter, as established during the beginning of the quarter. The Program is distinct from the previously disclosed discretionary television sale bonuses to executive officers and certain other employees that the Compensation Committee may address now that all of sixteen of our television stations have been sold.

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Operating Activities

Cash flows provided by operating activities were $22.0 million for the six-month period ended August 31, 2008 versus $16.7 million in the same period of the prior year. The increase in cash flows provided by operating activities was mainly attributable to a net decrease in working capital requirements, primarily due to a $5.1 million decrease in working capital requirements for accounts receivable. Cash flows provided by operating activities are historically the highest in our third and fourth fiscal quarters as a significant portion of our accounts receivable collections is derived from revenues recognized in our second and third fiscal quarters, which are our highest revenue quarters.

Investing Activities

Cash flows provided by investing activities were $36.0 million for the six-month period ended August 31, 2008, versus $35.8 million in the same period of the prior year. During the six-month period ended August 31, 2007, the Company completed the sale of KGMB-TV and KMTV-TV for $50.0 million in cash and completed its acquisition of Orange Coast for $6.4 million in cash. During the six-month period ended August 31, 2008, the Company completed the sale of WVUE-TV for $41.0 million in cash. Investing activities generally include capital expenditures and business acquisitions and dispositions.

In the six-month periods ended August 31, 2007 and 2008, we had capital expenditures of $2.9 million and $2.6 million, respectively. We expect capital expenditures related to continuing operations to be approximately $7.4 million in the current fiscal year, compared to $6.8 million in fiscal 2008. We expect that future requirements for capital expenditures will include capital expenditures incurred during the ordinary course of business. We expect to fund such capital expenditures with cash generated from operating activities and borrowings under our credit facility.

Financing Activities

Cash flows used in financing activities were $12.3 million for the six-month period ended August 31, 2008, versus $54.5 million in the same period of the prior year. Cash flows used in financing activities in the six-month period ended August 31, 2008, primarily relate to the $2.2 million of net repayments of debt under our senior credit facility, $4.5 million used to pay preferred stock dividends and $4.9 million used to pay cash dividends and distributions to minority interest shareholders. Cash used in financing activities for the six-month period ended August 31, 2007, primarily relate to the $36.1 million of net repayments of debt under our senior credit facility, $11.2 million used to repurchase shares of our Class A common stock, $4.5 million used to pay preferred stock dividends and $2.2 million used to pay cash distributions to minority interest shareholders. Our financing activities for the six-month period ended August 31, 2008, were funded by cash generated by operating activities. Our financing activities for the six-month period ended August 31, 2007 were funded by cash generated by operating activities as well the receipt of $50.0 million of proceeds resulting from the consummation of our sales of KGMB-TV and KMTV-TV.

As of August 31, 2008, Emmis had $436.5 million of borrowings under its senior credit facility ($4.4 million current and $432.1 million long-term), $3.6 million of other indebtedness ($1.3 million current and $2.3

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million long-term) and $143.8 million of convertible preferred stock outstanding. All outstanding amounts under our credit facility bear interest, at our option, at a rate equal to the Eurodollar rate or an alternative Base Rate plus a margin. As of August 31, 2008, our weighted average borrowing rate under our credit facility including our interest rate exchange agreements was approximately 5.6%.

The debt service requirements of Emmis over the next 12 month period (excluding interest under our credit facility) are expected to be $14.7 million. This amount is comprised of $4.4 million for repayment of term notes under our credit facility, $9.0 million in preferred stock dividend requirements and $1.3 million related to foreign broadcasting license obligations. Although interest will be paid under the credit facility at least every three months, the amount of interest is not presently determinable given that the credit facility bears interest at variable rates. The terms of Emmis’ preferred stock provide for a quarterly dividend payment of $.78125 per share on each January 15, April 15, July 15 and October 15.

At October 3, 2008, we had $142.8 million available for additional borrowing under our credit facility, which is net of $2.2 million in outstanding letters of credit. Availability under the credit facility depends upon our continued compliance with certain operating covenants and financial ratios, including leverage, interest coverage and fixed charge coverage as specifically defined. Emmis was in compliance with these covenants at August 31, 2008. As part of our business strategy, we continually evaluate potential acquisitions, dispositions and swaps of radio stations, publishing properties and other businesses, striving to maintain a portfolio that we believe leverages our strengths and holds promise for long-term appreciation in value. If we elect to take advantage of future acquisition opportunities, we may incur additional debt or issue additional equity or debt securities, depending on market conditions and other factors. In addition, Emmis currently has the option, but not the obligation, to purchase our 49.9% partner’s entire interest in the Austin radio partnership based on an 18-multiple of trailing 12-month cash flow. The option, which does not expire, has not been exercised.

Intangibles

Approximately 79% of our total assets consisted of intangible assets, such as FCC broadcast licenses, goodwill, trademarks and similar assets, the value of which depends significantly upon the operational results of our businesses. In the case of our U.S. radio stations, we would not be able to operate the properties without the related FCC license for each property. FCC licenses are renewed every eight years; consequently, we continually monitor our stations’ compliance with the various regulatory requirements. Historically, all of our FCC licenses have been renewed at the end of their respective periods, and we expect that all FCC licenses will continue to be renewed in the future. Our foreign broadcasting licenses expire during periods ranging from November 2009 to February 2013. We will need to submit applications to extend our foreign licenses upon their expiration to continue our broadcast operations in these countries. While we expect our foreign licenses to be renewed, most of the countries in which we operate do not have the regulatory framework or history that we have with respect to license renewals in the United States. This makes the risk of non-renewal (or of renewal on less favorable terms) of foreign licenses greater than for United States’ licenses.

Regulatory, Legal and Other Matters

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Quantitative and Qualitative Disclosures About Market Risk

On March 28, 2007, Emmis entered into an interest rate exchange agreement that fixed the underlying three-month LIBOR at 4.795%. The notional amount of the interest rate exchange agreement totaled $165.0 million, and the agreement expires on March 27, 2010. On March 28, 2008, Emmis entered into an additional interest rate exchange agreement that fixed the underlying three-month LIBOR at 2.964%. The notional amount of the additional interest rate exchange agreement totaled $100.0 million, and the agreement expires on March 27, 2011. Based on amounts outstanding at August 31, 2008, (including the interest rate exchange agreements in place) if the interest rate on our variable debt were to increase by 1.0%, our annual interest expense would increase by approximately $1.7 million.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Discussion regarding these items is included in management’s discussion and analysis of financial condition and results of operations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report, the Company evaluated the effectiveness of the design and operation of its “disclosure controls and procedures” (“Disclosure Controls”). This evaluation (the “Controls Evaluation”) was performed under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).

Based upon the Controls Evaluation, our CEO and CFO concluded that as of August 31, 2008, our Disclosure Controls are effective to provide reasonable assurance that information relating to Emmis Communications Corporation and Subsidiaries that is required to be disclosed by us in the reports that we file or submit, is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the period covered by this quarterly report, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

It should be noted that any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

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PART II — OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three-month period ended August 31, 2008, there were no repurchases of our Class A common stock or Series A cumulative convertible preferred stock pursuant to a previously announced share repurchase program by the Company’s Board of Directors. There were, however, elections by employees to withhold shares of stock upon vesting of restricted stock units to cover withholding tax obligations. The following table provides information on our repurchases related to elections by employees to withhold shares of stock upon vesting of restricted stock during the three months ended August 31, 2008:


					(c)		(d)
					Total Number of		Maximum
					Shares		Approximate
					Purchased as		Dollar Value of
	(a)		(b)		Part of Publicly		Shares That May
	Total Number		Average Price		Announced		Yet Be Purchased
	of Shares		Paid Per		Plans or		Under the Plans
Period	Purchased		Share		Programs		or Programs
June 1, 2008 – June 30, 2008		945	$	2.67		—	$	36,150,565
July 1, 2008 – July 31, 2008		904	$	1.86		—	$	36,150,565
August 1, 2008 – August 31, 2008		797	$	2.13		—	$	36,150,565

		2,646				—

Item 4. Submission of Matters to a Vote of Security Holders

On July 15, 2008, we held our annual meeting of shareholders. At our annual meeting of shareholders, Richard A. Leventhal, Peter A. Lund and Lawrence B. Sorrel were elected directors for three-year terms expiring at the 2011 annual meeting of shareholders and shareholders ratified the selection of Ernst & Young LLP as our independent registered public accountants for the fiscal year ending February 28, 2009. The results of voting at our annual meeting were as follows:

Election of Directors


Nominee	For		Withheld
Peter A. Lund*		14,389,255		12,645,948
Richard A. Leventhal**		64,005,913		12,592,340
Lawrence B. Sorrel**		64,009,627		12,588,626

Ratification of Ernst & Young LLP


For		Against
	75,151,916		1,415,852


*		Elected by Class A common shareholders voting as a class

**		Elected by Class A and Class B common shareholders voting as a single class

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Item 5. Other Information

On October 8, 2008, we entered into a one-year employment agreement with Paul Fiddick, to be effective March 1, 2009. Mr. Fiddick’s employment agreement will automatically renew each year following the initial one-year term for additional one-year terms unless either the Company or Mr. Fiddick provides the other with written notice of non-renewal prior to December 31 of the initial or subsequent term, as applicable. Mr. Fiddick’s base salary of $360,000 will increase upon any annual renewal at a rate equal to the greater of 3%, the annual percentage increase in the CPI [All Urban Consumers-U.S Cities Average, all items (1982/84 = 100) as published by the Bureau of Labor Statistics, U.S. Department of Labor] or such other amount as approved by our Compensation Committee. Mr. Fiddick’s annual incentive compensation target is 58.33% of his base salary and will be paid, if at all, based upon achievement of certain performance goals to be determined by our Compensation Committee. The Company retains the right to pay any annual incentive compensation in cash or shares of our Class A common stock. Each year the agreement remains in effect, Mr. Fiddick is entitled to receive an option to acquire 21,952 shares of our Class A common stock and a grant of 6,585 restricted shares of Class A common stock. Mr. Fiddick is also eligible for a completion bonus in an amount equal to Mr. Fiddick’s average annual base salary over such three-year period that is payable upon his continued employment for a period through February 29, 2012. In the event that, prior to expiration of such three-year term, Mr. Fiddick dies or becomes disabled, the Company terminates Mr. Fiddick’s employment other than for Cause (as defined in the agreement) or the Company elects not to renew the employment agreement, Mr. Fiddick will be entitled to a pro-rata portion of such completion bonus. Mr. Fiddick will continue to receive an annual automobile allowance of $12,000 and will continue to be reimbursed for up to $5,000 per year in premiums for life and disability insurance and retains the right to participate in all of our employee benefit plans for which he is otherwise eligible.

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Item 6. Exhibits

(a) Exhibits.

The following exhibits are filed or incorporated by reference as a part of this report:

	3.1		Second Amended and Restated Articles of Incorporation of Emmis Communications Corporation, as amended effective June 13, 2005 incorporated by reference from Exhibit 3.1 to the Company’s Form 10-K for the fiscal year ended February 28, 2006.

	3.2		Amended and Restated Bylaws of Emmis Communications Corporation, incorporated by reference from Exhibit 3.2 to the Company’s Form 10-K filed on May 12, 2008.

	4.1		Form of stock certificate for Class A common stock, incorporated by reference from Exhibit 3.5 to the 1994 Emmis Registration Statement on Form S-1, File No. 33-73218 (the “1994 Registration Statement”).

	10.1		Employment Agreement, effective as of March 1, 2009, by and between Emmis Operating Company and Paul W. Fiddick.*++

	12		Statement re: Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.*

	31.1		Certification of Principal Executive Officer of Emmis Communications Corporation pursuant to Rule 13a-14(a) under the Exchange Act.*

	31.2		Certification of Principal Financial Officer of Emmis Communications Corporation pursuant to Rule 13a-14(a) under the Exchange Act.*

	32.1		Section 1350 Certification of Principal Executive Officer of Emmis Communications Corporation.*

	32.2		Section 1350 Certification of Principal Financial Officer of Emmis Communications Corporation.*


*		Filed with this report.

++		Management contract or compensatory plan or arrangement.

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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

Date: October 10, 2008	By:	/s/ PATRICK M. WALSH
	Patrick M. Walsh
	Executive Vice President, Chief Financial
	Officer and Treasurer

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EX-10.1 2 c46843exv10w1.htm EXHIBIT 10.1 exv10w1

Exhibit 10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (“Agreement”) is effective as of March 1, 2009, by and between EMMIS OPERATING COMPANY, an Indiana company (“Employer”), and PAUL W. FIDDICK, a Virginia resident (“Executive”).

RECITALS

WHEREAS, Employer and its affiliates are engaged in the ownership and operation of certain radio stations, magazines, and related operations (together, the “Emmis Group”); and

WHEREAS, Employer desires to employ Executive and Executive desires to be so employed.

NOW, THEREFORE, in consideration of the foregoing, the mutual promises and covenants set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:

AGREEMENT

1. Employment Status and Duties. Upon the terms and subject to the conditions set forth in this Agreement, Employer hereby employs Executive, and Executive hereby accepts exclusive employment with Employer. During the Term (as defined herein), Executive shall serve as President – International Division. Executive shall have such duties, functions, authority and responsibilities as are commensurate with such position. Executive’s services hereunder shall be performed on an exclusive, full-time basis in a professional, diligent and competent manner to the best of Executive’s abilities. Executive shall not undertake any outside employment or business activities without the prior written consent of Employer. Executive shall be permitted to serve on the board of charitable or civic organizations so long as such services: (i) are approved in writing in advance by Employer; and (ii) do not interfere with Executive’s duties and obligations under this Agreement. It is understood and agreed that the location for the performance of Executive’s duties and services pursuant to this Agreement shall be at Executive’s home office located in Arlington, Virginia; provided, however, that in the event Employer establishes an office in or near the Washington, D.C. metropolitan area at any time during the Term, Executive shall be required to work from such office as requested by Employer. If Executive is elected as a Director of Emmis Communications Corporation, he shall serve in such position without additional remuneration (unless Employer elects to remunerate “inside directors”) but shall be entitled to the benefit of indemnification pursuant to the terms of Section 15.12. Executive shall also serve without additional remuneration as a director and/or officer of one (1) or more of Employer’s subsidiaries or affiliates if appointed to such position(s) by Employer and shall also be entitled to the benefit of indemnification pursuant to the terms of Section 15.12.

2. Term. The term of this Agreement shall be for a period of one (1) year commencing on March 1, 2009, and continuing until February 28, 2010, unless earlier terminated or extended in accordance with the provisions set forth in this Agreement (the “Term”). Unless Executive or Employer provides the other written notice prior to December 31 of the then-current Contract Year (as defined below) of such party’s election not to allow the Agreement to automatically renew, the Agreement shall automatically renew for successive one year periods. Each year commencing on March 1 and ending on the last day of February during the Term shall be a “Contract Year.” Upon failure of either party to make the foregoing election by December 31, the Term of this Agreement shall be deemed renewed for the Contract Year commencing the following March 1 and, as used throughout this Agreement, “Term” shall include such additional Contract Year.

3. Base Salary; Auto Allowance. Upon the terms and subject to the conditions set forth in this Agreement, Employer shall pay or cause to be paid to Executive an annualized base salary (the “Base Salary”), payable pursuant to Employer’s customary payroll practices and subject to applicable taxes and withholdings as required by law, for each Contract Year, as set forth below:

Contract Year commencing
March 1, 2009: $360,000

Each additional Contract Year: Executive’s Base Salary for the previous Contract Year, plus an amount that is equal to the greater of: (a) three percent (3%) of the Executive’s Base Salary for the previous Contract Year; (b) the percentage increase in the Revised Consumer Price Index for All Urban Consumers—U.S. Cities Average, all items (base 1982/84 = 100) as published by the Bureau of Labor Statistics, U.S. Department of Labor (the “CPI”) which shall be determined by comparing the CPI for October in the calendar year prior to the year in which the Base Salary is to be adjusted to the calendar year preceding the latter-described year; or (c) the percentage increase in the Executive’s Base Salary as specified in writing by the Compensation Committee of the Board of Directors of Emmis Communications Corporation (the “Compensation Committee”). For example and by way of illustration of subsection (b) above, in regard to the adjustment to be made for the Contract Year commencing March 1, 2010, the parties would calculate the percentage increase in the CPI from October of 2008 to October 2009. In the event the CPI shall be discontinued, changed, or otherwise becomes unavailable, the parties will convert to the then-published index of the Bureau of Labor Statistics so as to continue to calculate adjustments on the same basis as described above.

Except as otherwise set forth herein, Employer shall have no obligation to pay Executive the Base Salary for any periods during which Executive fails or refuses to render services pursuant to this Agreement or for any period following the expiration or termination of this Agreement. In addition, it is understood and agreed that Employer may, at its sole election, pay up to ten percent (10%) of Executive’s Base Salary in Shares (as defined below in Section 4.3); provided that: (i) Executive is able to sell those Shares

on substantially the same terms and conditions applicable to Employer’s stock compensation plan in effect through 2005; and (ii) the percentage of Executive’s Base Salary payable in Shares shall be consistent with, and the exact number of Shares to be awarded to Executive shall be determined in the same manner as that utilized for other senior management level employees.

During the Term, Executive shall receive a monthly auto allowance in the amount of One Thousand Dollars ($1,000) (subject to withholding and applicable taxes as required by law) consistent with Employer’s policy or practices regarding such allowances, as such policy or practices may be amended from time to time during the Term in Employer’s sole and absolute discretion; provided, however, that in no event shall the auto allowance amount paid to Executive pursuant to this provision be reduced.

4. Incentive Compensation.

4.1 Bonus Amounts. Upon the terms and subject to the conditions set forth in this Section 4, each Contract Year Executive shall be eligible to receive one (1) performance bonus in a target amount equivalent to Fifty-Eight and 33/100 percent (58.33%) of Executive’s Base Salary, and the exact amount of such performance bonus, if any, shall be determined on the basis of Executive’s attainment of certain performance and financial goals to be determined by Employer, from time to time, in its sole and absolute discretion.

4.2 Payment of Bonus Amounts. Employer shall pay or cause to be paid to Executive the foregoing bonus amounts if earned according to the terms and conditions set forth in Section 4.1; provided, that, at the end of each applicable Contract Year: (i) this Agreement is in full force and effect and has not been terminated for any reason (other than due to a material breach of this Agreement by Employer); and (ii) Executive is fully performing all of Executive’s duties and obligations pursuant to this Agreement and is not in breach of any of the material terms and conditions of this Agreement. In addition, it is understood and agreed that Employer may, at its sole election, pay any bonus amounts earned by Executive pursuant to this Section 4 in cash or Shares; provided that the Shares evidencing any portion thereof shall be freely transferable when delivered to Executive, subject to Employer’s securities trading policy and applicable federal and state law. In the event that Employer elects pursuant to this Section 4.2 to pay any bonus amounts in Shares, the percentage of bonus amounts payable in Shares shall be consistent with, and the exact number of Shares to be awarded to Executive shall be determined in the same manner as that utilized for senior management level employees. Any bonus amounts earned by Executive pursuant to the terms and conditions of this Section 4 shall be paid after the end of the Contract Year for which the bonus is paid (but in no event later than ninety (90) days after the end of such Contract Year). Any and all bonus amounts payable by Employer to Executive pursuant to this Section 4 shall be subject to applicable taxes and withholdings as required by law.

4.3 Equity Incentive Compensation. At such time or times each Contract Year when Employer grants equity incentive compensation to its senior management level employees (but in no event later than ninety (90) days after February 28, 2009 or, if this Agreement is renewed, in no event later than ninety (90) days after the expiration of the previous Contract Year), Executive shall be granted options and restricted shares as follows:

(i) an option (“Option”) to acquire Twenty-One Thousand Nine Hundred Fifty-Two (21,952) shares of Class A Common Stock of Emmis Communications Corporation (the “Shares”); and (ii) Six Thousand Five Hundred Eighty-Five (6,585) restricted Shares (the “Restricted Shares”).

Each Option granted pursuant to this Section 4.3 shall: (i) have an exercise price per share equal to its Fair Market Value (as defined in the applicable Equity Compensation Plan, or any subsequent equity compensation or similar plan adopted by Emmis Communications Corporation and generally used to make equity-based awards to management-level employees of the Emmis Group (the “Plan”)); (ii) notwithstanding any other provisions in this Agreement, be granted according to the terms and subject to the conditions of the Plan; (iii) be evidenced by a written grant agreement containing such terms and conditions as are generally provided for other management-level employees of the Emmis Group (including vesting requirements); and (iv) be exercisable for Shares with such restrictive legends on the certificates in accordance with the Plan and applicable securities laws. Options granted pursuant to this Section 4.3 are intended to satisfy the regulatory exemption from the application of Code Section 409A for certain options for service recipient shares, and they shall be administered accordingly. Any Restricted Shares granted pursuant to this Section 4.3 shall be granted according to the terms and subject to the conditions of the Plan and shall include a restrictive legend as provided for by the Plan.

4.4 Completion Bonus. On the condition that Executive remains employed by Employer, on a full-time, continuous basis, through February 29, 2012, Employer shall make a cash payment to Executive in an amount equal to the average annual Base Salary paid to Executive during the Term (“Completion Bonus”), subject to applicable taxes and withholdings as required by law. The Completion Bonus shall be paid to Executive within ten (10) days after February 29, 2012. Notwithstanding the foregoing, Employer shall pay a pro-rated portion of the Completion Bonus to Executive within two (2) weeks after termination of Executive’s employment if the effective date of such termination is prior to March 1, 2012 and such termination is: (i) due to Executive’s death, or (ii) on account of Executive’s incapacity pursuant to Section 10, or (iii) by Employer other than for Cause (as defined below), or (iv) due to Employer’s election not to renew this Agreement according to its terms for any Contract Year after February 28, 2010. Such pro-rated portion shall be based upon the number of calendar days elapsed between March 1, 2009 and the date of termination divided by the total number of calendar days between March 1, 2009 and February 29, 2012.

5. Expenses; Travel. Employer shall pay or reimburse Executive for all reasonable expenses actually incurred or paid by Executive during the Term in connection with the performance of Executive’s services hereunder upon presentation of expense statements, vouchers or other supporting documentation as Employer may require of Executive; provided such expenses are otherwise in accordance with Employer’s policies. Executive shall undertake such travel as may be required in the performance of Executive’s duties pursuant to this Agreement.

6. Fringe Benefits.

6.1 Vacation and Other Benefits. Each Contract Year, Executive shall be entitled to four (4) weeks of paid vacation in accordance with Employer’s applicable policies and procedures for executive-level employees. Executive shall also be eligible to participate in and receive the fringe benefits generally made available to other executive-level employees of Employer in accordance with and to the extent that Executive is eligible under, the general provisions of Employer’s fringe benefit plans or programs; provided, however, Executive understands that these benefits may be increased, changed, eliminated or added from time to time during the Term as determined in Employer’s sole and absolute discretion.

6.2 Life and Disability Insurance. Each Contract Year, Employer agrees to reimburse Executive in an amount not to exceed Five Thousand Dollars ($5,000) for the annual premium associated with Executive’s purchase or maintenance of a life or disability insurance policy or other insurance policies on the life, or related to the care, of Executive. Executive shall be entitled to freely select and change the beneficiary or beneficiaries under such policy or policies. Notwithstanding anything to the contrary contained in this Agreement, Employer’s obligations under this Section 6.2 are expressly contingent upon Executive providing required information and taking all necessary actions required of Executive in order to obtain and maintain the subject policy or policies, including without limitation, passing any required physical examinations.

7. Confidential Information.

7.1 Non-Disclosure. Executive acknowledges that certain information concerning the business of the Emmis Group and its members (including but not limited to trade secrets and other proprietary information) is of a highly confidential nature, and that, as a result of Executive’s employment with Employer prior to and during the Term, Executive shall receive and develop, proprietary and confidential information concerning the business of Employer and/or other members of the Emmis Group which, if known to Employer’s competitors, would damage Employer, other members of the Emmis Group and their respective businesses. Accordingly, Executive hereby agrees that during the Term and thereafter, Executive shall not divulge or appropriate for Executive’s own use, or for the use or benefit of any third party (other than Employer and its representatives, or as directed in writing by Employer), any information or

knowledge concerning the business of Employer or any other member of the Emmis Group which is not generally available to the public other than through the activities of Executive. Executive further agrees that, immediately upon termination of Executive’s employment for any reason, Executive shall promptly surrender to Employer all documents, brochures, plans, strategies, writings, illustrations, client lists, price lists, sales, financial or marketing plans, budgets and any and all other materials (regardless of form or character) which Executive received from or developed on behalf of Employer or any member of the Emmis Group in connection with Executive’s employment prior to or during the Term. Executive acknowledges that all such materials shall remain at all times during the Term and thereafter the sole and exclusive property of Employer and that nothing in this Agreement shall be deemed to grant Executive any right, title or interest in such material.

7.2 Ownership of Materials. Employer shall solely and exclusively own all rights of every kind and nature in perpetuity and throughout the universe in: (i) the programs and broadcasts on which Executive appears or for which Executive renders services to Employer in any capacity; (ii) the results and proceeds of Executive’s services pursuant to this Agreement including, without limitation, those results and proceeds provided in connection with the creation, development, preparation, writing, editing or production by Executive or any employee of any member of the Emmis Group of any and all materials, properties or elements of any and all kinds for the programs on which Executive appears or for which Executive renders services (whether directly or indirectly); and (iii) any business, financial, sales or marketing plans and strategies, documents, presentations, or other similar materials, regardless of kind or character, each of which Executive acknowledges is a work specially ordered by Employer which shall be considered to be a “work made for hire” for Employer. Therefore, Employer shall be the author and copyright owner of the programs on which Executive appears or for which Executive renders services pursuant to this Agreement, the broadcasts and tapes or recordings thereof for all purposes without limitation of any kind, and all materials described in the immediately preceding sentence. All characters developed for the programs and broadcasts during the Term shall be solely and exclusively owned by Employer, including all right, title and interest thereto. The exclusive legal title to all of the aforesaid works and matters, programs, broadcasts, and materials and all secondary and derivative rights therein, shall belong, at all times, to Employer which shall have the right to copyright the same and apply for copyright registrations and copyright renewal registrations and to make whatever use thereof that Employer, in its sole and absolute discretion, deems advisable, including but not limited to rebroadcasts of programs or use of any portions of any program in the production or broadcast of other programs at any time, notwithstanding expiration of the Term or termination of this Agreement for any reason.

7.3 Injunctive Relief. Executive acknowledges that Executive’s breach of this Section 7 will cause irreparable harm and damage to Employer, the exact amount of which will be difficult to ascertain; that the remedies at law for any

such breach would be inadequate; and that the provisions of this Section 7 have been specifically negotiated and carefully written to prevent such irreparable harm and damage. Accordingly, if Executive breaches this Section 7, Employer shall be entitled to injunctive relief (including attorneys’ fees and costs) enforcing this Section 7 to the extent reasonably necessary to protect Employer’s legitimate interests, without posting bond or other security.

8. Non-Interference; Non-Competition; Injunctive Relief.

8.1 Non-Interference. During the Term, and for a period of two (2) years immediately following the expiration or early termination of the Term for any reason, Executive shall not, directly or indirectly, take any action (or permit any action to be taken by an entity with which Executive is associated) which has the effect of interfering with Employer’s relationship (contractual or otherwise) with: (i) on-air talent of any member of the Emmis Group; or (ii) any other employee of any member of the Emmis Group. Without limiting the generality of the foregoing, Executive specifically agrees that during such time period, neither Executive nor any entity with which Executive is associated shall solicit, hire or engage any on-air talent or other employee of any member of the Emmis Group or any other employee of any member of the Emmis Group to provide services for Executive’s benefit or for the benefit of any other business or entity, or solicit or encourage them to cease their employment with any member of the Emmis Group for any reason.

8.2 Non-Competition. Executive acknowledges the special and unique nature of Executive’s employment with Employer as a senior management level employee, and understands that, as a result of Executive’s employment with Employer prior to and during the Term, Executive has gained and will continue to gain knowledge of and have access to highly sensitive and valuable information regarding the operations of Employer and its subsidiaries and affiliated entities, including but not limited to the Confidential Information described more fully in Section 7.1. Accordingly, Executive acknowledges Employer’s interest in preventing the disclosure of such information through the engagement of Executive’s services by any of Employer’s competitors following the expiration or termination of the Term for any reason. Consequently, during the Term and for a period of twelve (12) months immediately following the expiration or termination of the Term for any reason, Executive shall not engage directly or indirectly in, or become employed by, serve as an agent or consultant to, or become an officer, director, partner, principal or shareholder of, any corporation, partnership or other entity which is engaged in the radio broadcasting business or has an interest in any radio station in Slovakia, Bulgaria, Hungary, Belgium or in any market in which Employer owns or operates a radio station as of the termination date of Executive’s employment with Employer. As long as Executive does not engage in any other activity prohibited by the immediately preceding sentence, Executive’s ownership of less than five percent (5%) of the issued and outstanding stock of any corporation whose stock is traded on an established securities market shall not constitute competition with Employer for the purpose of this Section 8.2.

8.3 Injunctive Relief. Executive acknowledges and agrees that the provisions of this Section 8 have been specifically negotiated and carefully worded in recognition of the opportunities which will be afforded to Executive by Employer by virtue of Executive’s continued association with Employer during the Term, and the influence that Executive has and will continue to have over Employer’s employees, customers and suppliers. Executive further acknowledges that Executive’s breach of Section 8.1 or 8.2 herein will cause irreparable harm and damage to Employer, the exact amount of which will be difficult to ascertain; that the remedies at law for any such breach would be inadequate; and that the provisions of this Section 8 have been specifically negotiated and carefully written to prevent such irreparable harm and damage. Accordingly, if Executive breaches Section 8.1 or 8.2, Employer shall be entitled to injunctive relief (including attorneys’ fees and costs) enforcing Section 8.1 or 8.2, to the extent reasonably necessary to protect Employer’s legitimate interests, without posting bond or other security. Notwithstanding anything to the contrary contained in this Agreement, if Executive violates Section 8.1 or 8.2, and Employer brings legal action for injunctive or other relief, Employer shall not, as a result of the time involved in obtaining such relief, be deprived of the benefit of the full period of noninterference set forth therein. Accordingly, the obligations set forth in Section 8.1 or 8.2 shall have the duration set forth therein, computed from the date such relief is granted but reduced by the time expired between the date the restrictive period began to run and the date of the first violation of the obligation(s) by Executive.

8.4 Construction. Despite the express agreement herein between the parties, in the event that any provisions set forth in this Section 8 shall be determined by any court or other tribunal of competent jurisdiction to be unenforceable for any reason whatsoever, the parties agree that this Section 8 shall be interpreted to extend only to the maximum extent as to which it may be enforceable, and that this Section 8 shall be severable into its component parts, all as determined by such court or tribunal.

9. Termination of Agreement by Employer for Cause.

9.1 Termination. Employer may terminate this Agreement and Executive’s employment hereunder for Cause (as defined in Section 9.3 below) in accordance with the terms and conditions of this Section 9. Following a determination by Employer that Executive should be terminated for Cause, Employer shall give written notice (the “Preliminary Notice”) to Executive specifying the grounds for such termination, and Executive shall have ten (10) days after receipt of the Preliminary Notice to respond to Employer in writing. If following the expiration of such ten (10) day period Employer reaffirms its determination that Executive should be terminated for Cause, such termination shall be effective upon delivery by Employer to Executive of a final notice of termination.

9.2 Effect of Termination. In the event of termination for Cause
as provided in Section 9.1 above:

(i) Executive shall have no further obligations or liabilities hereunder except Executive’s obligations under Sections 7 and 8, which shall survive the termination of this Agreement, and except for any obligations arising in connection with any conduct of Executive described in Section 9.3;

(ii) Employer shall have no further obligations or liabilities hereunder, except that Employer shall, not later than two (2) weeks after the termination date:

(a) Pay to Executive all earned but unpaid Base Salary with respect to any applicable pay period ending on or before the termination date; and

(b) Pay to Executive any bonus amounts which have been earned on or prior to the termination date pursuant to Section 4, if any, but which remain unpaid as of the termination date.

9.3 Definition of Cause. For purposes of this Agreement, “Cause” shall be defined to mean any of the following: (i) Executive’s failure, refusal or neglect to perform any of Executive’s material duties or obligations under this Agreement (or any material duties assigned to Executive consistent with the terms of this Agreement) or abide by any applicable policy of Employer, or Executive’s breach of any material term or condition of this Agreement, and continuation of such failure, refusal, neglect, or breach after written notice and the expiration of a ten (10) day cure period; provided, however, that it is not the parties’ intention that the Employer shall be required to provide successive such notices, and in the event Employer has provided Executive with a notice and opportunity to cure pursuant to this Section 9.3, Employer may terminate this Agreement for a subsequent breach similar or related to the breach for which notice was previously given or for a continuing series or pattern of breaches (whether or not similar or related) without providing notice and an opportunity to cure; (ii) commission of any felony or any other crime involving an act of moral turpitude which is harmful to Employer’s business or reputation; (iii) Executive’s action or omission, or knowing allowance of actions or omissions, which are in violation of any law or any of the rules or regulations of the Federal Communications Commission (the “FCC”), or which otherwise jeopardize any of the licenses granted to Employer or any member of the Emmis Group in connection with the ownership or operation of any radio station; (iv) theft in any amount; (v) actual or threatened violence against another employee or individual; (vi) sexual or other prohibited harassment of others; (vii) unauthorized disclosure or use of trade secrets or proprietary or confidential information, as described more fully in Section 7.1; (viii) any action which brings Employer or member of the Emmis Group into

public disrepute, contempt, scandal or ridicule, and which is harmful to Employer’s business or reputation; and (ix) any matter constituting cause or misconduct under applicable laws.

10. Termination of Agreement by Employer for Incapacity.

10.1 Termination. If Executive shall become incapacitated (as defined in the Employer’s employee handbook or, if that is not applicable, as reasonably determined by Employer), Employer shall continue to compensate Executive under the terms of this Agreement without diminution and otherwise without regard to such incapacity or nonperformance of duties until Executive has been incapacitated for a cumulative period of six (6) months, at which time Employer may, in its sole discretion, elect to terminate Executive’s employment. The date that Executive’s employment terminates pursuant to this section is referred to herein as the “Incapacity Termination Date.”

10.2 Obligations after Termination. Executive shall have no further obligations or liabilities hereunder after an Incapacity Termination Date except Executive’s obligations under Section 7 and 8 that shall survive the termination or expiration of this Agreement. After an Incapacity Termination Date, Employer shall have no further obligations or liabilities hereunder except that Employer shall, not later than two (2) weeks after an Incapacity Termination Date, pay to Executive those amounts described in Sections 4.4 and Section 9.2(ii). Nothing in this Section 10 or in Section 11 shall affect the amount of any benefits which may be payable to Executive under any insurance plan or policy maintained by Employer or Executive or pursuant to any Employer company practice, plan or program applicable to other senior management level employees of the Emmis Group.

11. Death of Executive. This Agreement shall terminate immediately upon Executive’s death. In the event of such termination, Employer shall have no further obligations or liabilities hereunder except that Employer shall, not later than two (2) weeks after Executive’s date of death, pay or grant to Executive’s estate or designated beneficiary those amounts described in Sections 4.4 and 9.2(ii).

12. Gross Up for Taxes Imposed Under Code Section 409A.

12.1 Employer’s Gross-Up Obligation. This Agreement is intended to comply with Code Section 409A, and it is intended that no amounts payable hereunder shall be subject to tax under Section 409A. If, however, Executive pays taxes imposed pursuant to Code Section 409A, Employer shall reimburse Executive to the extent provided in Section 12.2 or 12.3.

12.2 Reimbursement by Agreement. If, before Executive’s tax return due date for the year in which an amount is paid hereunder, (i) Employer reasonably determines that part or all of the amounts payable pursuant to this Agreement during the year was subject to taxes under Code Section 409A, or (ii)

Executive reasonably determines that part or all of such amounts was subject to taxes under Code Section 409A, and Employer agrees with Executive’s determination (such agreement not to be unreasonably withheld, conditioned or delayed), Employer shall reimburse Executive for any taxes under Code Section 409A with respect to such payment and any additional federal, state, or local income or employment taxes imposed on Executive due to the foregoing reimbursement, so that the after-tax payment to Executive is equal to the after-tax amount that Executive would have received if Code Section 409A had not applied. Employer shall pay the reimbursement required by the preceding sentence only if Executive provides acceptable proof of payment within sixty (60) days after having paid the taxes subject to reimbursement. If Executive provides acceptable proof to Employer within such period, Employer shall pay the reimbursement required by this Section 12.2 as soon as administratively feasible (and under no circumstances more than one hundred twenty (120) days) after receiving such proof.

12.3 Reimbursement following Audit. If Employer does not report any portion of the amounts payable to Executive hereunder as subject to taxes under Code Section 409A, and as a result of a later tax audit by the Internal Revenue Service, Executive is required to pay taxes under Code Section 409A, Employer shall reimburse Executive for any taxes under Code Section 409A with respect to such payment, any interest and penalties imposed on Executive for the failure to make timely payment of such taxes (with respect to any period before the end of the audit), and any additional federal, state, or local income or employment taxes imposed on Executive due to the foregoing reimbursement, so that the after-tax payment to Executive is equal to the after-tax amount that Executive would have received if Code Section 409A had not applied. Employer shall pay the reimbursement required by the preceding sentence only if Executive provides acceptable proof of payment within sixty (60) days after having paid the taxes subject to reimbursement. If Executive provides acceptable proof to Employer within such period, Employer shall pay the reimbursement required by this Section 12.3 as soon as administratively feasible (and under no circumstances more than one hundred twenty (120) days) after receiving such proof.

13. Adjustments for Changes in Capitalization of Employer. In the event of any change in Employer’s outstanding Shares during the Term by reason of any reorganization, recapitalization, reclassification, merger, stock split, reverse stock split, stock dividend, asset spin-off, share combination, consolidation, or other event, the number and class of Shares and/or Options and/or Restricted Shares awarded pursuant to Section 4 (and any applicable Option exercise price) shall be adjusted by the Compensation Committee in its sole and absolute discretion and, if applicable, in accordance with the terms of the Plan, the Option agreement evidencing the grant of the Option, and the restricted stock agreement evidencing the grant of Restricted Shares. The determination of the Compensation Committee shall be conclusive and binding. All adjustments pursuant to this Section shall be made in a manner that does not result in taxation to the Executive under Code Section 409A.

14. Notices. All notices, requests, consents and other communications, required or permitted to be given hereunder, shall be made in writing and shall be deemed to have been made as of: (a) the date that is three (3) days after the date of mailing, if sent via the U.S. postal service, first-class, postage-prepaid, (b) the date that is the next date upon which an overnight delivery service (Federal Express, UPS or DHL only) will make such delivery, if sent via such overnight delivery service, first-class, postage prepaid, or (c) the date such delivery is made, if delivered in person to the notice party specified below. Such notice shall be delivered as follows (or to such other or additional address as either party shall designate by notice in writing to the other in accordance herewith):

(i) If to Employer:

Ian D. Arnold, Esq.
Corporate Counsel
Emmis Communications Corporation
40 Monument Circle, Suite 700
Indianapolis, Indiana 46204

With a copy to:

Gary L. Kaseff, Esq.
Executive Vice President and General Counsel
Emmis Communications Corporation
3500 W. Olive Avenue, Suite 1450
Burbank, CA 91505

(ii) If to Executive, to Executive at Executive’s address in the personnel records of Employer.

15. Miscellaneous.

15.1 Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Indiana without regard to its conflict of law principles.

15.2 Payment Delays Required by Code Section 409A. To the extent required by Code Section 409A(a)(2)(B)(i) and the regulations thereunder, if Executive is a “specified employee” for purposes of such Section, payments on account of Executive’s separation from service shall be delayed to the earliest date permissible under Code Section 409A(a)(2)(B)(i).

15.3 Captions. The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of any of the terms and conditions of this Agreement.

15.4 Entire Agreement. This Agreement shall supersede and replace, in all respects, any prior employment agreement entered into between the parties and

any such agreement shall immediately terminate and be of no further force or effect. For purposes of the preceding sentence, any change in control, restricted stock, option, and other benefits-related agreement shall not constitute a “prior employment agreement.”

15.5 Assignment. This Agreement, and Executive’s rights and obligations hereunder, may not be assigned by Executive to any third party; provided, however, that Executive may designate pursuant to Section 15.7 one (1) or more beneficiaries to receive any amounts that would otherwise be payable hereunder to Executive’s estate. Employer may assign all or any portion of its rights and obligations hereunder to any other member of the Emmis Group or to any successor or assignee of Employer pursuant to a reorganization, recapitalization, merger, consolidation, sale of substantially all of the assets or stock of Employer, or otherwise.

15.6 Amendments; Waivers. Except as expressly provided in the following sentence, this Agreement cannot be changed, modified or amended, and no provision or requirement hereof may be waived, without the written consent of Executive and Employer. Employer may amend this Agreement to the extent that Employer reasonably determines that such change is necessary to comply with Code Section 409A and further guidance thereunder, provided that such change does not reduce the amounts payable to Executive hereunder. The failure of a party at any time to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce such provision. No waiver by a party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach or a waiver of the breach of any other term or covenant contained in this Agreement.

15.7 Beneficiaries. Whenever this Agreement provides for any payment to Executive’s estate, such payment may be made instead to such beneficiary as Executive may have designated in a writing filed with Employer. Executive shall have the right to revoke any such designation and to re-designate a beneficiary by written notice to Employer (or to any applicable insurance company).

15.8 No Obligation to Utilize Services. Employer shall not be obligated to utilize Executive’s services nor use the results or products of such services even if Executive is not in default hereunder. Employer may at any time during the Term, for any reason, elect not to use Executive’s services or have any further obligations to Executive under this Agreement except as provided in the next sentence. If Employer elects not to use Executive’s services as permitted herein, Executive shall be paid Executive’s full compensation as described more fully in Sections 3 and 4 at the times and in the installments as provided herein as if Executive had fulfilled Executive’s obligations hereunder through the Term.

15.9 Change in Fiscal Year. If, at any time during the Term, Employer changes its fiscal year, Employer shall make such adjustments to the various dates and target amounts included herein as are necessary or appropriate, provided that no such change shall affect the date on which any amount is payable hereunder.

15.10 Executive’s Warranty and Indemnity. Executive hereby represents and warrants that Executive: (i) has the full and unqualified right to enter into and fully perform this Agreement according to each and every term and condition contained herein; (ii) has not made any agreement, contractual obligation, or commitment in contravention of any of the terms and conditions of this Agreement or which would prevent Executive from performing according to any of the terms and conditions contained herein; and (iii) has not entered into any agreement with any prior employer or other person, corporation or entity which would in any way adversely affect Executive’s or Employer’s right to enter into this Agreement. Furthermore, Executive hereby agrees to fully indemnify and hold harmless Employer and each of its subsidiaries, affiliates and related entities, and each of their respective officers, directors, employees, agents, attorneys, shareholders, insurers and representatives from and against any and all losses, costs, damages, expenses (including attorneys’ fees and expenses), liabilities and claims, arising from, in connection with, or in any way related to Executive’s breach of any of the representations or warranties contained in this Section 15.11.

15.11 Venue. Any action to enforce, challenge or construe the terms or making of this Agreement or to recover for its breach shall be litigated exclusively in a state court located in Marion County, Indiana, except that the Employer may elect, at its sole and absolute discretion, to litigate the action in the county or state where any breach by Executive occurred or where Executive can be found. Executive acknowledges and agrees that this venue provision is an essential provision of this Agreement and Executive hereby waives any defense of lack of personal jurisdiction or improper venue.

15.12 Indemnification. Executive shall be entitled to the benefit of the indemnification provisions set forth in Employer’s Amended and Restated Articles of Incorporation and/or By-Laws, or any applicable corporate resolution, as the same may be amended from time to time during the Term (not including any limiting amendments or additions, but including any amendments or additions that add to or broaden the protection afforded to Executive at the time of execution of this Agreement) to the fullest extent permitted by applicable law. Additionally, Employer shall cause Executive to be indemnified in accordance with Chapter 37 of the Indiana Business Corporation Law (the “IBCL”), as the same may be amended from time to time during the Term, to the fullest extent permitted by the IBCL as required to make Executive whole in connection with any indemnifiable loss, cost or expense incurred in Executive’s performance of Executive’s duties and obligations pursuant to this Agreement. Employer shall also maintain during the Term an insurance policy providing directors’ and officers’ liability coverage in a commercially reasonable amount. It is understood that the foregoing indemnification obligations shall survive the expiration or termination of the Term.

15.13 Severance Payment; Subsequent Employment. According to the terms and subject to the conditions set forth in this Section 15.13, in the event Employer does not allow this Agreement to automatically renew for any Contract Year after February 28, 2010 and Executive’s employment with Employer terminates, Employer shall continue to make Base Salary payments to Executive at the rate of fifty percent (50%) of Executive’s Base Salary (the “Severance Payment”) for a period of twelve (12) months immediately following Executive’s termination of employment with Employer (the “Severance Period”); provided, however, in the event Executive commences subsequent employment at any time during the Severance Period, Employer’s financial obligation pursuant to this provision shall be reduced by any amounts paid to Executive by Executive’s subsequent employer during the Severance Period. In the event that Executive’s subsequent compensation equals or exceeds the Severance Payment, Employer’s financial obligation to Executive pursuant to this provision shall immediately terminate. It is understood and agreed that, as a material condition upon which Executive shall be entitled to receive the Severance Payment, and as an inducement to Emmis’ agreement to pay Executive the Severance Payment, Executive agrees to: (i) execute a general release in a form acceptable to Emmis upon the termination of Executive’s employment; and (ii) promptly notify Employer in writing of the commencement date upon which Executive begins subsequent employment along with the particulars of Executive’s subsequent compensation package for purposes of determining Employer’s continuing obligations, if any, under this Section 15.13. Notwithstanding anything to the contrary contained in this Agreement, Executive shall not be entitled to the Severance Payment if Employer elects not to allow the Agreement to automatically renew for any Contract Year after February 28, 2010, but offers Executive reasonably acceptable employment for that Contract Year or if Executive’s employment is terminated either (a) by Employer under Section 9.1, (b) by reason of Executive’s disability or death under Section 10 or 11, (c) by Executive for any reason other than a material breach of any of the terms and conditions of this Agreement by Employer (after providing Employer with notice of such breach and a reasonable opportunity to cure such breach), or (d) by Executive not allowing this Agreement to automatically renew for any Contract Year after February 28, 2010. Executive acknowledges that Executive shall not be entitled to any additional severance compensation upon the termination or expiration of this Agreement other than the Severance Payment.

15.14 Change in Control. In the event of a “Change in Control,” the rights and obligations of Executive and Employer shall be set forth in the separate Change in Control Agreement executed by the parties (“CIC Agreement”). “Change in Control” shall have the meaning ascribed to it in the CIC Agreement. Notwithstanding the preceding provisions or any provision of the CIC Agreement, Employer shall have the right to amend the CIC Agreement to the extent that it reasonably deems such amendment necessary to comply with the requirements of Code Section 409A.

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above.


	EMMIS OPERATING COMPANY (“Employer”)
	By:	/s/ Jeffrey H. Smulyan
		Jeffrey H. Smulyan
		Chief Executive Officer


	PAUL W. FIDDICK (“Executive”)
	/s/ Paul W. Fiddick
	Paul W. Fiddick

EX-12 3 c46843exv12.htm EXHIBIT 12 exv12

Exhibit 12

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited, dollars in thousands)


	Three Months Ended August 31,				Six Months Ended August 31,
	2007		2008		2007		2008

EARNINGS:
Pre-tax income from continuing operations before adjustment for minority interests in consolidated subsidiaries or income or loss from equity investees	$	8,726	$	9,330	$	11,917	$	15,399
Add:
Fixed charges		11,618		9,499		23,919		19,536
Less:
Preferred stock dividends		2,246		2,246		4,492		4,492

Earnings	$	18,098	$	16,583	$	31,344	$	30,443

FIXED CHARGES:
Interest expense (including amortization of debt expenses)	$	8,654	$	6,564	$	17,986	$	13,621
Portion of rents representative of the interest factor		718		689		1,441		1,423
Preferred stock dividends		2,246		2,246		4,492		4,492

Fixed Charges	$	11,618	$	9,499	$	23,919	$	19,536

Ratio of Earnings to Fixed Charges		1.6		1.7		1.3		1.6

EX-31.1 4 c46843exv31w1.htm EXHIBIT 31.1 exv31w1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Jeffrey H. Smulyan, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Emmis Communications Corporation;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 10, 2008


	/s/ JEFFREY H. SMULYAN
	Jeffrey H. Smulyan
	Chairman of the Board, President and Chief Executive Officer

EX-31.2 5 c46843exv31w2.htm EXHIBIT 31.2 exv31w2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Patrick Walsh, certify that:

1.		I have reviewed this quarterly report on Form 10-Q of Emmis Communications Corporation;

2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 10, 2008


	/s/ PATRICK M. WALSH
	Patrick M. Walsh
	Executive Vice President, Chief Financial Officer and Treasurer

EX-32.1 6 c46843exv32w1.htm EXHIBIT 32.1 exv32w1

Exhibit 32.1

SECTION 1350 CERTIFICATION

The undersigned hereby certifies, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Emmis Communications Corporation (the “Company”), that, to his knowledge:

(1)		the Quarterly Report of the Company on Form 10-Q for the period ended August 31, 2008, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)		the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 10, 2008


	/s/ JEFFREY H. SMULYAN
	Jeffrey H. Smulyan
	Chairman of the Board, President and Chief Executive Officer

EX-32.2 7 c46843exv32w2.htm EXHIBIT 32.2 exv32w2

Exhibit 32.2

SECTION 1350 CERTIFICATION

(1)		the Quarterly Report of the Company on Form 10-Q for the period ended August 31, 2008, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)		the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 10, 2008


	/s/ PATRICK M. WALSH
	Patrick M. Walsh
	Executive Vice President, Chief Financial Officer and Treasurer

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