As filed with the Securities and Exchange Commission on July 15, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended May 31, 1997 or
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________ to ________
Commission file number: 0-23264
EMMIS BROADCASTING CORPORATION
(Exact name of registrant as specified in its charter)
INDIANA 35-1542018
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
950 NORTH MERIDIAN STREET
SUITE 1200
INDIANAPOLIS, INDIANA 46204
(Address of principal executive offices) (Zip Code)
(317) 266-0100
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
(Former Name, Former Address and Former Fiscal Year, if Changed Since
Last Report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of each of the Registrant's classes
of common stock, as of July 9, 1997, was:
8,272,077 Shares of Class A Common Stock, $.01 Par Value
2,574,470 Shares of Class B Common Stock, $.01 Par Value
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements. . . . . . . . . . . . . . . . .4
Condensed Consolidated Balance Sheets
at May 31, 1997 and February 28, 1997. . . . . . . . . .4
Condensed Consolidated Statements of
Operations for the three months
ended May 31, 1997 and 1996. . . . . . . . . . . . . . .6
Condensed Consolidated Statements of Cash
Flows for the three months ended
May 31, 1997 and 1996 . . . . . . . . . . . . . . . . .8
Notes to Condensed Consolidated
Financial Statements. . . . . . . . . . . . . . . . . .10
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . .16
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . .19
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Emmis Broadasting Corporation and Subsidiaries:
We have reviewed the accompanying condensed consolidated balance sheet of
Emmis Broadcasting Corporation (an Indiana corporation) and Subsidiaries
as of May 31, 1997, and the related condensed consolidated statements of
operations and cash flows for the three-month periods ended May 31, 1997
and 1996. These financial statements are the responsibility of the Company's
management .
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any meterial modifications that
should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Emmis Broadcasting Corporation
as of February 28, 1997, and related consolidated statements of operations,
changes in shareholders' equity and cash flows for the year ended (not
presented separately herein), and in our report dated April 2, 1997, we
expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of February 28, 1997 is fairly stated, in all material
respects, in relation to the balance sheet from which it has been derived.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
July 14, 1997.
ITEM 1. FINANCIAL STATEMENTS
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in thousands, except per share data)
February 28, May 31,
1997 1997
------- -------
(Note 1) (unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,191 $ 1,354
Accounts receivable, net 20,831 26,240
Current income tax receivable 2,482 825
Prepaid expenses and other 4,243 4,404
-------- --------
Total current assets 28,747 32,823
Property and equipment, net 12,991 18,018
Intangible assets, net 131,743 170,617
Other assets, net 16,235 9,690
-------- --------
Total assets $ 189,716 $ 231,148
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,868 $ 62
Book cash overdraft 1,942 -
Accounts payable 3,687 4,384
Accrued salaries and commissions 1,561 2,529
Accrued interest 174 358
Deferred revenue 1,593 2,544
Other 1,459 1,382
------- -------
Total current liabilities 13,284 11,259
LONG-TERM DEBT, NET OF CURRENT MATURITIES 112,304 151,089
OTHER NONCURRENT LIABILITIES 436 515
DEFERRED INCOME TAXES 29,270 29,055
------- ------
Total liabilities 155,294 191,918
------- ------
SHAREHOLDERS' EQUITY:
Class A common stock, $.01 par value;
authorized 34,000,000 shares; issued
and outstanding 8,410,956 shares at
February 28, 1997 and 8,447,646 shares
at May 31, 1997 84 84
Class B common stock, $.01 par value;
authorized 6,000,000 shares; issued
and outstanding 2,574,470 shares at
February 28, 1997 and May 31, 1997 26 26
Additional paid-in capital 70,949 72,390
Accumulated deficit (36,637) (33,270)
------- -------
Total shareholders' equity 34,422 39,230
------- -------
Total liabilities and shareholders'
equity $ 189,716 $ 231,148
======= =======
The accompanying notes to condensed consolidated financial
statements are an integral part of these balance sheets.
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Dollars in thousands, except per share data)
Three Months Ended May 31,
(Unaudited)
--------------------------
1996 1997
------ ------
GROSS BROADCASTING REVENUES $ 29,948 $ 33,820
LESS: AGENCY COMMISSIONS 4,598 5,258
------- -------
NET BROADCASTING REVENUES 25,350 28,562
Broadcasting operating expenses 13,131 16,225
Publication and other revenue, net
of operating expenses 271 245
International business development expenses 260 338
Corporate expenses 1,468 1,644
Depreciation and amortization 1,345 1,682
Noncash compensation 1,131 827
------- ------
OPERATING INCOME 8,286 8,091
------- ------
OTHER INCOME (EXPENSE):
Interest expense (2,502) (2,649)
Other income (expense), net 21 172
------- ------
Total Other Income (Expense) (2,481) (2,477)
------- ------
INCOME BEFORE INCOME TAXES 5,805 5,614
PROVISION FOR INCOME TAXES 2,300 2,246
-------- -------
NET INCOME $ 3,505 $ 3,368
======== =======
Net income per common and common
equivalent share $ .30 $ .29
======== =======
Net income per fully diluted common share $ .30 $ .29
======== =======
Weighted average common shares outstanding:
Before full dilution 11,497,105 11,488,463
Assuming full dilution 11,516,894 11,504,312
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(Dollars in thousands)
Three Months Ended
May 31,
(Unaudited)
-------------------
1996 1997
---- ----
OPERATING ACTIVITIES:
Net income $ 3,505 $ 3,368
Adjustments to reconcile net income to net
cash provided by operating activities-
Depreciation and amortization of
property and equipment 337 582
Amortization of debt issuance costs
and cost of interest rate cap agreements 360 191
Amortization of intangible assets 1,008 1,100
Benefit from deferred income taxes - (215)
Compensation related to stock options
granted 930 661
Contribution to profit sharing plan paid
with common stock 201 166
(Increase) decrease in certain current
assets -
Accounts receivable (4,130) (5,409)
Prepaid expenses and other 526 1,496
Increase (decrease) in certain current
liabilities -
Accounts payable 457 (1,245)
Accrued salaries and commissions (1,211) 968
Accrued interest (35) 184
Deferred revenue 177 (48)
Other 367 2
Increase in other assets, net (58) (143)
----- -----
Net cash provided by operating
activities 2,434 1,658
----- -----
INVESTING ACTIVITIES:
Purchases of property and equipment (885) (941)
Aquisition of WALC-FM, WKBQ-AM, and WKKX-FM - (36,964)
----- -----
Net cash used by investment
activities (885) (37,905)
----- -----
FINANCING ACTIVITIES:
Payments on long-term debt (2,022) (2,022)
Proceeds from Long-term debt - 38,000
Purchase of interest rate cap agreements and
other debt related costs - (181)
Proceeds from exercise of stock options and
related income taxe benefits 489 613
------ ------
Net cash provided (used) by
financing activities (1,533) 36,410
------ ------
INCREASE IN CASH AND CASH EQUIVALENTS 16 163
CASH AND CASH EQUIVALENTS:
Beginning of period 1,218 1,191
------ ------
End of period $1,234 $1,354
====== ======
SUPPLEMENTAL DISCLOSURES:
Cash paid for-
Interest $ 2,177 $ 2,274
Income taxes 416 589
ACQUISITION OF WALC-FM, WKBQ-AM AND WKKX-FM:
Fair value of assets acquired $ 44,642
Cash paid 43,642
------
Liabilities assumed $1,000
======
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
EMMIS BROADCASTING CORPORATION AND SUBSIDIARIES
-----------------------------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------
(Unaudited)
MAY 31, 1997
-------------
NOTE 1. GENERAL
--------
The condensed consolidated interim financial statements included
herein have been prepared by Emmis Broadcasting Corporation and
Subsidiaries (Emmis or the Company) without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations; however, Emmis believes that the disclosures are adequate
to make the information presented not misleading. The condensed
consolidated financial statements included herein should be read in
conjunction with the consolidated financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the year
ended February 28, 1997.
In the opinion of the registrant, the accompanying interim financial
statements contain all material adjustments (consisting only of normal
recurring adjustments), necessary to present fairly the consolidated
financial position of Emmis at May 31, 1997 and the results of its
operations for the three months ended May 31, 1997 and 1996 and its cash
flows for the three months ended May 31, 1997 and 1996.
NOTE 2. PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF OPERATIONS
-------------
On March 31, 1997, Emmis completed its acquisition of substantially
all of the assets of radio stations WALC-FM, WKBQ-AM, and WKKX-FM in St.
Louis from Zimco, Inc. for approximately $43.1 million in cash, plus an
agreement to broadcast approximately $1 million in trade spots, for
Zimco, Inc. over a period of several years. Emmis financed the
acquisition through additional borrowings under its existing Credit
Facility. The acquisition was accounted for as a purchase.
Concurrent with the signing of the asset purchase agreement, Emmis
entered into a time brokerage agreement that permitted Emmis to operate
the acquired stations effective December 1, 1996 through the date of
closing. Operating results of these stations are reflected in the
consolidated statements of operations for the period March 1, 1997
through May 31, 1997.
A pro forma condensed consolidated statement of operations is
presented below for the three months ended May 31, 1996, assuming the
acquisition of WALC-FM, WKBQ-AM and WKKX-FM all had occurred on the first
date of the three month period ended May 31, 1996. Pro forma results for
the period ended May 31, 1997, include pro forma results for March and
actual results for April and May. Pro forma interest expense,
depreciation of property and equipment and amortization expense related
to the intangibles resulting from the allocation of the purchase price
for the above acquisition have been included in the pro forma statements
presented below.
PRO FORMA CONDENSED CONSOLIDATED
--------------------------------
STATEMENT OF OPERATIONS
----------------------
(Dollars in thousands, except per share data)
Three Months Ended
May 31,
------------------
1996 1997
---- ----
Pro forma Pro forma
---------- ----------
Net broadcasting revenues $ 26,415 $ 28,562
Broadcasting operating expenses 14,143 16,225
Publication and other revenue,
net of operating expenses 271 245
International business development
expenses 260 338
Corporate expenses 1,468 1,644
Depreciation and amortization 1,746 1,815
Noncash compensation 1,131 827
------ ------
Operating income 7,938 7,958
Interest expense (3,226) (2,828)
Other income (expense), net 24 172
------ ------
Income before income taxes 4,736 5,302
Provision for income taxes 1,870 2,100
------ ------
Net income $ 2,866 $ 3,202
====== ======
Net income per common and common
equivalent share $ .25 $ .28
====== ======
Net income per fully diluted common
share $ .25 $ .28
====== ======
Weighted average shares outstanding
Before full dilution 11,497,105 11,488,463
Assuming full dilution 11,516,894 11,504,312
The pro forma condensed consolidated statements of operations presented
above do not purport to be indicative of the results that actually
would have been obtained if the indicated transaction had been effective
at the beginning of the three month periods ended May 31, 1996 and 1997,
and is not intended to be projection of future results or trends.
NOTE 3. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
-------------------------------------------------
Net income per share is computed by dividing net income by the weighted
average number of common shares outstanding during the period. Weighted
average common shares outstanding assumes the exercise of stock options when
the effect would be dilutive.
Fully diluted net income per share assumes the fully dilutive effect
of the exercise of stock options.
NOTE 4. ACCOUNTING PRONOUNCEMENTS
-------------------------
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share", was issued. This new statement supersedes APB
Opinion No. 15, "Earnings Per Share", and supersedes or amends other
related accounting pronouncements. SFAS No. 128 must be adopted by the
Company in the fourth quarter of fiscal 1998. All prior period earnings
per share (EPS) data will be restated when the new statement is adopted.
SFAS No. 128 replaces the presentation of primary EPS with a presentation of
of basic EPS. It also requires dual presentation of basic and diluted EPS
on the face of the income statement for all entities with complex capital
structures such as the Company's. Basic EPS excludes dilution and is computed
by dividing net income available to common shareholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in the
earnings of the entity.
Pro forma EPS, assuming the Company had adopted SFAS No. 128 as of
March 1, 1996 is as follows:
Three Month Period Ended May 31, 1996 1997
- ------------------------------- ---- ----
Weighted Average Common Shares 10,905,132 11,004,147
Weighted Average Common Shares
and Potential Common Shares 11,323,318 11,372,963
Net income per common share $ .32 $ .31
Net income per common share-
Assuming dilution $ .31 $ .30
NOTE 5. INCOME TAXES
------------
Under Statement of Financial Accounting Standards No. 109, the Company
recognizes income taxes under the liability method of accounting for
income taxes. The liability method measures the expected tax impact of
future taxable income or deductions resulting from differences in the tax
and financial reporting bases of assets and liabilities reflected in the
consolidated balance sheet and the expected tax impact of carryforwards
for tax purposes.
Income tax expense is reported during interim periods on the basis of
the estimated annual effective tax rate for the taxable jurisdictions in
which the Company operates.
NOTE 6. SUBSEQUENT EVENTS
-----------------
On July 14, 1997, Emmis signed a definitive agreement to acquire
substantially all of the assets of radio stations WTLC-FM and AM in
Indianapolis from Panache Broadcasting, L.P. for approximately $15
million in cash. As part of the transaction, Emmis made a $750,000
escrow payment which will be credited against the purchase price at the
closing date. The acquisition is subject to various conditions,
including regulatory approval. The acquisition will be accounted for as
a purchase. Emmis intends to finance the acquisition through additional
borrowings under the Company's amended and restated Credit Facility dated
July 1, 1997.
In June 1997, Emmis acquired 194,444 shares of its common stock from
Morgan Stanley at $36 per share. The aggregate purchase price of
$6,999,984 was financed through additional borrowings under the Company's
existing Credit Facility.
On May 15, 1997, the Company entered into an agreement involving radio
station WQCD-FM in New York City wereby the current owner of the station
has the option to require the Company to purchase the station at any date
through May 2000. The current owner may extend the option for an
additional one-year period. The Company has an option to acquire the
radio station during the two month period subsequent to the current
owner's option. In connection therewith, the Company has issued an
irrevocable letter of credit totaling $50 million as security to the
current owner of the Company's obligations under this agreement. The
purchase price agreed to ranges from approximately $145 million to $160
million based on certain events and conditions as specified in the
agreement.
In connection with the above agreement, the Company entered into a
time brokerage agreement which permitted them to begin operating the
station effective July 1, 1997. This agreement expires upon the purchase
of the station by the Company or by agreement by the parties to
terminate. In consideration for the time brokerage agreement, the
Company will pay a monthly fee of approximately $700,000. If the current
owner elects to extend the option beyond May 2000, the monthly fee to
operate the station will be waived during the extension period.
On July 1, 1997, the Company entered into an amended and restated
Credit Facility. As a result of the early payoff of the refinanced
debt, the Company will record a loss of approximately $ 1.3 million in the
quarter ending August 31, 1997 related to unamortized deferred debt
issuance costs. The amended and restated Credit Facility matures on
February 28, 2005 and consists of the following:
Credit Facility Amount
- --------------- ------
Revolving Credit Facility Up to $250,000,000; subject
to certain adjustments as
defined in the Credit
Facility; An additional
commitment for $100,000,000
may be requested by Emmis
prior to May 31, 1999.
Term Note $100,000,000
In addition to the above facilities, the Company has also negotiated
a $150 million Revolving Credit Facility/Term Note which will be
effective upon completion of syndication of the Credit Facility to
participating institutions.
The Credit Facility provides for Letters of Credit to be made
available to the Company not to exceed $50,000,000. The
aggregate amount of outstanding Letters of Credit and amounts borrowed
under the Revolving Credit Facility cannot exceed the Revolving Credit
Facility commitment.
All outstanding amounts under the Credit Facility bear interest, at
the option of Emmis, at a rate equal to the Eurodollar Rate or an
alternative base rate (as defined in the Credit Facility) plus a margin.
The margin over the Eurodollar Rate or the alternative base rate varies
from time to time, depending on Emmis' ratio of debt to earnings before
interest, taxes, depreciation and amortization (EBITDA), as defined in
the agreement. Interest is due on a calendar quarter basis under the
alternative base rate and at least every three months under the
Eurodollar Rate.
The Credit Facility requires the Company to maintain interest rate
protection agreements through July 2000. The notional amount required
varies based upon Emmis' ratio of adjusted debt to EBITDA, as defined in
the Credit Facility.
The aggregate amount of the Revolving Credit Facility reduces
quarterly beginning May 31, 2000. Amortization of the outstanding
principal amount under the Term Note and pending Revolving Credit
Facility/Term Note is payable in quarterly installments beginning May 31, 2000.
The annual amortization and reduction schedules as of February 28, 1998,
assuming the entire $500 million Credit Facility was outstanding prior to the
scheduled amortization payments are as follows:
SCHEDULED AMORTIZATION/REDUCTION OF
----------------------------------
CREDIT FACILITY AVAILABILITY
----------------------------
(In thousands)
Revolving
Revolving Credit Facility/
Year ended Credit Facility Term Note Term Note
February 28(29) Amortization Amortization Amortization Total
- -------------- ------------- ------------ ------------ ------
2001 $ 37,500 $ 15,000 $15,000 $67,500
2002 50,000 20,000 22,500 92,500
2003 50,000 20,000 22,500 92,500
2004 50,000 20,000 37,500 107,500
2005 62,500 25,000 52,500 140,000
------- ------- ------- -------
Total $250,000 $100,000 $150,000 $500,000
======= ======= ======= =======
Commencing with the fiscal year ending February 28, 2001 and
continuing through February 29, 2004, in addition to the scheduled
amortization/reduction of the Credit Facility, within 60 days after the
end of each fiscal year, the Credit Facility is permanently reduced by
50% of the Company's excess cash flow if the ratio of adjusted debt (as
defined in the Credit Facility) to EBITDA exceeds 5 to 1. Excess cash
flow is generally defined as EBITDA reduced by cash taxes, capital
expenditures, required debt service, increases in working capital (net
of cash or cash equivalents), the fixed fees paid under the WQCD-FM time
brokerage agreement, and $3,000,000. The net proceeds of any sale of
certain assets must also be used to permanently reduce borrowings under
the Credit Facility. If the ratio of adjusted debt to EBITDA is less
than 5.5 to 1 and certain other conditions are met, the Company will be
permitted in certain circumstances to reborrow the amount of the net
proceeds within nine months solely for the purpose of funding an
acquisition.
The Credit Facility contains various financial and operating covenants
and other restrictions with which Emmis must comply, including, among
others, restrictions on additional indebtedness, engaging in businesses
other than radio broadcasting and publishing, paying cash dividends,
redeeming or repurchasing capital stock of Emmis and use of borrowings,
as well as requirements to maintain certain financial ratios. The Credit
Facility also prohibits Emmis, under certain circumstances, from making
acquisitions and disposing of certain assets without the prior consent
of the lenders, and will provide that an event of default will occur if
Jeffrey H. Smulyan ceases to maintain (i) a significant equity investment
in Emmis (as specified in the Credit Facility), (ii) the ability to elect
a majority of Emmis' directors or (iii) control of a majority of
shareholder voting power. Substantially all of Emmis' assets, including
the stock of Emmis' subsidiaries, are pledged to secure the Credit
Facility.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The performance of a radio group, such as the Company, is customarily
measured by the ability of its stations to generate Broadcast Cash Flow
and Operating Cash Flow. Operating Cash Flow is defined as operating
income before depreciation, amortization and noncash compensation
expenses. Broadcast Cash Flow is defined as Operating Cash Flow before
corporate expenses (excluding noncash compensation), publication and
other revenue net of operating expenses, and international business
development expenses. Although Broadcast Cash Flow and Operating Cash
Flow are not measures of performance calculated in accordance with
generally accepted accounting principles, and should be viewed as a
supplement to and not a substitute for the Company's results of
operations presented on the basis of generally accepted accounting
principles, the Company believes that Broadcast Cash Flow and Operating
Cash Flow are useful because they are generally recognized by the radio
broadcasting industry as a measure of performance and are used by
analysts who report on the performance of broadcast companies.
RESULTS OF OPERATIONS
Net broadcasting revenues for the quarter ended May 31, 1997 were
$28.6 million compared to $25.4 million for the same quarter of the prior
year, an increase of $3.2 million or 12.7%. This increase is principally
due to the St. Louis acquisition and the ability to realize higher
advertising rates at the Company's broadcasting properties, resulting
from higher ratings at certain broadcasting properties, as well as
increases in general radio spending in the markets in which the Company
operates. On a pro forma basis, assuming the acquisition of the St. Louis
stations had occurred for the periods presented,net broadcasting revenues
would have increased $2.2 million or 8.1%. Pro forma basis assumes the
comparison between historical results for the quarter ended May 31, 1997 and
the pro forma results for the quarter ended May 31, 1996.
Broadcasting operating expenses for the quarter ended May 31, 1997
were $16.2 million compared to $13.1 million for the same quarter of the
prior year, an increase of $3.1 million or 23.6%. This increase is
principally attributable to the St. Louis acquisition and increased
promotional spending at the Company's broadcasting properties. On a pro
forma basis, broadcasting operating expenses would have increased $2.1
million or 14.7%.
Broadcast Cash Flow for the fiscal quarter ended May 31, 1997 was
$12.3 million compared to $12.2 million for the same quarter of the prior
year, an increase of $.1 million or 1.0%. This increase is principally
due to increased net broadcasting revenues offset by increased
broadcasting operating expenses as discussed above. On a pro forma
basis, broadcast cash flow would have increased less than $.1 million.
Corporate expenses for the quarter ended May 31, 1997 were $1.6
million compared to $1.5 million for the same quarter of the prior year,
an increase of $0.1 million or 12%. This increase was primarily due to
increased travel expenses and other expenses related to potential
acquisitions.
International business development expenses for the quarters ended May
31, 1997 and 1996 were $.3 million. These expenses reflect costs
associated with Emmis International Corporation. The purpose of this
wholly owned subsidiary is to identify, investigate and develop
international broadcast investments or other international business
opportunities. Expenses consist primarily of salaries, travel and
various administrative costs.
Operating Cash Flow for the quarter ended May 31, 1997 was $10.6
million compared to $10.8 million for the same quarter of the prior year,
a decrease of $.2 million or 1.5%. This decrease is principally due to
increased corporate and international expenses.
On a pro forma basis, operating cash flow would have also decreased $.2
million.
Interest expense was $2.6 million for the quarter ended May 31, 1997
compared to $2.5 million for the same quarter of the prior year, an
increase of $.1 million or 5.9%. This increase reflects higher
outstanding debt due to the St. Louis acquisition offset by voluntary
repayments made under the Company's Credit Facility.
LIQUIDITY AND CAPITAL RESOURCES
The increase in accounts receivable from February 28, 1997 to May 31,
1997 is due to the increase of net broadcasting revenues in the quarter
ended May 31, 1997 compared to the quarter ended February 28, 1997.
In the fiscal quarter ended May 31, 1997, the Company made voluntary
payments of $2.0 million under its Credit Facility.
In August 1996, Emmis announced its plan to build an office building
in downtown Indianapolis for its corporate office and its Indianapolis
operations. The project is expected to be completed in 1999 for an
estimated cost of $20 million, net of reimbursable construction costs of
$2 million. Certain factors such as additional studio costs related to
digital technology and historical landmark requirements may cause the
cost of this project to increase. The Company plans to fund this project
through additional borrowings under the Credit Facility.
In the fiscal quarter ended May 31, 1997, the Company had capital
expenditures of $.9 million. These capital expenditures consist
primarily of progress payments in connection with the Indianapolis
building project.
In June 1997, the Company acquired 194,444 shares of its common stock
at $36 per share. On July 14, 1997, the Company signed a definitive
agreement to acquire substantially all of the assets of radio stations
WTLC-FM and AM, for approximately $15 million. Both transactions were/will be
financed through additional borrowings. In July 1997, the Company
amended and restated their existing Credit Facility. These items are
more fully discussed in Note 6 to the financial statements.
The Company expects that cash flow from operating activities will be
sufficient to fund all debt service, working captial and capital
expenditure requirements. As part of its business strategy, the Company
frequently evaluates potential acquisitions of radio stations. In
connection with future acquisition opportunities, the Company may incur
additional debt or issue additional equity or debt securities depending
on market conditions and other factors.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits.
The following exhibits are filed or incorporated by reference as a
part of this report:
10.1 Amended and Restated Revolving Credit and Term Loan Agreement
10.2 Option Agreement (WQCD-FM, New York, New York)
10.3 Time Brokerage Agreement (WQCD-FM, New York, New York)
11 Statements re: Calculations of per share net income (loss)
15 Letter re: unaudited interim financial information
27 Financial data schedule (Edgar version only)
Reports on Form 8-K
The Company filed Form 8-K on April 15, 1997, to report the closing
under the Asset Purchase Agreement dated as of October 31, 1996, by
and between Zimco, Inc. and Emmis Broadcasting Corporation, as amended
by first and second amendments to the Asset Purchase Agreement.
Additionally, the Company filed Form 8-K/A on June 16, 1997, to include
the financial statements of Zimco, Inc. as of December 31, 1996.
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
EMMIS BROADCASTING CORPORATION
Date: July 15, 1997 By: /s/ Howard L.Schrott
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Howard L. Schrott
Vice President(Authorized
Corporate Officer), Chief
Financial Officer and
Treasurer