1
As filed with the Securities and Exchange Commission on July 15, 1999
=====================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended May 31, 1999 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 COMMUNICATIONS 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.)
ONE EMMIS PLAZA
40 MONUMENT CIRCLE
SUITE 700
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
------ -----
2
The number of shares outstanding of each of the Registrant's classes of
common stock, as of July 12, 1999, was:
13,271,394 Shares of Class A Common Stock, $.01 Par Value
2,622,125 Shares of Class B Common Stock, $.01 Par Value
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3
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.......................................................................5
Condensed Consolidated Balance Sheets
at May 31, 1999 and February 28, 1999....................................................5
Condensed Consolidated Statements of
Operations for the three months
ended May 31, 1999 and 1998..............................................................7
Condensed Consolidated Statements of Cash
Flows for the three months ended
May 31, 1999 and 1998....................................................................8
Notes to Condensed Consolidated
Financial Statements....................................................................10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results
of Operations.....................................................................21
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..........................................................27
4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Emmis Communications Corporation and Subsidiaries:
We have reviewed the accompanying condensed consolidated balance sheet of Emmis
Communications Corporation (an Indiana corporation) and Subsidiaries as of May
31, 1999, and the related condensed consolidated statements of operations and
the condensed consolidated statements of cash flows for the three-month periods
ended May 31, 1999 and 1998. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Emmis Communications Corporation as
of February 28, 1999 (not presented separately herein), and, in our report dated
April 30, 1999, we expressed an unqualified opinion on that statement. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of February 28, 1999 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
ARTHUR ANDERSEN LLP
Indianapolis, Indiana,
June 23,1999.
5
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
February 28, May 31,
1999 1999
---------- ---------
(Note 1) (Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,117 $ 1,419
Accounts receivable, net 51,479 57,694
Prepaid expenses and other 13,486 19,057
----------- -----------
Total current assets 71,082 78,170
Property and equipment, net 106,060 108,763
Intangible assets, net 802,307 828,331
Other assets, net 35,382 33,476
----------- -----------
Total assets $ 1,014,831 $ 1,048,740
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of other
long-term liabilities $ 835 $ 835
Accounts payable and book cash overdraft 15,635 18,464
Accrued salaries and commissions 4,545 5,247
Accrued interest 6,223 11,987
Deferred revenue 7,238 10,779
Current portion of TV program
rights payable 9,471 9,607
Income tax payable 12,057 8,294
Other 13,829 2,898
----------- -----------
Total current liabilities 69,833 68,111
6
CREDIT FACILITY AND SENIOR
SUBORDINATED NOTES 577,000 605,000
TV PROGRAM RIGHTS PAYABLE, NET OF
CURRENT PORTION 25,161 22,502
OTHER LONG-TERM DEBT, NET OF
CURRENT PORTION 18,805 16,701
OTHER NONCURRENT LIABILITIES 3,466 7,877
DEFERRED INCOME TAXES 85,017 91,430
----------- -----------
Total liabilities 779,282 811,621
----------- -----------
SHAREHOLDERS' EQUITY:
Class A common stock, $.01
par value; authorized 34,000,000
shares; issued and outstanding
13,190,207 shares at
February 28, 1999 and 13,251,144
shares at May 31, 1999 132 132
Class B common stock, $.01
par value; authorized 6,000,000
shares; issued and outstanding
2,582,265 shares at
February 28, 1999 and 2,622,125
shares at May 31, 1999 26 26
Additional paid-in capital 260,344 262,648
Accumulated deficit (24,305) (24,064)
Accumulated other comprehensive income (648) (1,623)
----------- -----------
Total shareholders' equity 235,549 237,119
----------- -----------
Total liabilities and
shareholders' equity $ 1,014,831 $ 1,048,740
=========== ===========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
7
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
Three Months
Ended May 31,
(Unaudited)
----------------------------
1998 1999
------------ ------------
GROSS REVENUES $ 52,848 $ 84,921
LESS: AGENCY COMMISSIONS 8,229 12,569
------------ ------------
NET REVENUES 44,619 72,352
Operating expenses 27,795 45,463
International business development expenses 207 380
Corporate expenses 1,957 3,206
Time brokerage fees 2,125 --
Depreciation and amortization 3,407 9,709
Non-cash compensation 955 645
------------ ------------
OPERATING INCOME 8,173 12,949
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (5,508) (13,229)
Minority interest 1,007 1,059
Other income (expense), net 312 (238)
------------ ------------
Total other income (expense) (4,189) (12,408)
------------ ------------
INCOME BEFORE INCOME TAXES 3,984 541
PROVISION FOR INCOME TAXES 2,196 300
------------ ------------
NET INCOME $ 1,788 $ 241
============ ============
Basic net income per share $ .16 $ .02
============ ============
Diluted net income per share $ .16 $ .01
============ ============
Weighted average common shares outstanding:
Basic 11,018,141 15,804,064
Diluted 11,449,254 16,143,856
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
8
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months
Ended May 31,
(Unaudited)
--------------------
1998 1999
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,788 $ 241
Adjustments to reconcile net income
to net cash used in operating
activities-
Depreciation and amortization 3,688 11,524
Provision for bad debts 413 501
Provision for deferred income taxes 96 961
Gain on sale of property and equipment (533) --
Non-cash compensation 955 645
Other (1,167) (1,003)
Changes in assets and liabilities-
Accounts receivable (6,221) (4,535)
Prepaid expenses and other (323) (5,348)
Other assets 326 2,540
Accounts payable and accrued liabilities (111) 8,535
Deferred revenue (57) (328)
Other liabilities (116) (18,985)
-------- --------
Net cash used in operating activities (1,262) (5,252)
-------- --------
9
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (7,375) (9,954)
Proceeds from sale of
property and equipment 607 --
Deposits on acquisitions (34,000) --
Acquisition of Country Sampler -- (18,454)
-------- --------
Net cash used in investing activities (40,768) (28,408)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (1,000) (4,000)
Proceeds from long-term debt 44,085 32,000
Purchase of interest rate cap agreements
and other debt related costs (68) --
Proceeds from exercise of stock options 1,783 962
-------- --------
Net cash provided by financing activities 44,800 28,962
-------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 2,770 (4,698)
CASH AND CASH EQUIVALENTS:
Beginning of period 5,785 6,117
-------- --------
End of period $ 8,555 $ 1,419
======== ========
SUPPLEMENTAL DISCLOSURES:
Cash paid for-
Interest $ 5,753 $ 6,111
Income taxes 265 4,516
ACQUISITION OF COUNTRY SAMPLER:
Fair value of assets acquired 25,608
Cash paid 18,454
--------
Liabilities assumed 7,154
========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
10
EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MAY 31, 1999
Note 1. General
Pursuant to the rules and regulations of the Securities and Exchange Commission,
the condensed consolidated interim financial statements included herein have
been prepared, without audit, by Emmis Communications Corporation and
Subsidiaries ("Emmis" or the "Company"). 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, 1999. On an interim basis, the Company defers major advertising campaigns
for which future benefits can be demonstrated. These costs are amortized over
the shorter of the estimated period benefited (generally six months) or the
remainder of the fiscal year.
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, 1999 and the results of its operations and cash flows for the
three months ended May 31, 1999 and 1998.
Because of the seasonal nature of Emmis' broadcasting operations, the
results shown on a quarterly basis are not necessarily indicative of annual
results.
Note 2. Acquisitions and Pro Forma Information
On April 1, 1999, the Company completed its acquisition of
substantially all of the assets of Country Sampler, Inc.( the "Country Sampler
Acquisition") for approximately $18.5 million in cash, $2.0 million payable
under a contract with the principal shareholder through April 2003, $.5 million
of the purchase price payable by October 1999, and assumed liabilities of
approximately $4.7 million (the "Country Sampler Acquisition"). The acquisition
was accounted for as a purchase and in the preliminary purchase price allocation
the excess of the purchase price over the estimated fair value of identifiable
assets was
11
$17.7 million and is being amortized over 15 years. The acquisition was financed
through additional borrowings under the Credit Facility.
Unaudited pro forma summary information is presented below for the
three months ended May 31, 1999 and 1998, assuming the June 1998 WQCD
Acquisition, the July 1998 SF Acquisition, the October 1998 Wabash Acquisition,
the Country Sampler Acquisition, and the use of proceeds from the June 1998
Equity Offering, the July 1998 Credit Facility, and the February 1999 Senior
Subordinated Notes Offering all had occurred on the first day of the pro forma
periods presented below.
Preparation of the pro forma summary information was based upon
assumptions deemed appropriate by the Company. The pro forma summary information
presented below is not necessarily indicative of the results that actually would
have occurred if the transactions indicated above had been consummated at the
beginning of the periods presented, and is not intended to be a projection of
future results.
Three Months
Ended May 31,
(Pro Forma)
------------------------
1998 1999
---------- -----------
Net revenues $ 67,301 $ 74,336
========== ===========
Broadcast/publishing cash flow $ 22,812 $ 27,466
========== ===========
Net income (loss) $ (1,113) $ 284
========== ===========
Basic net income (loss) per share $ (0.07) $ 0.02
========== ===========
Diluted net income (loss) per share $ (0.07) $ 0.02
========== ===========
Weighted average shares outstanding:
Basic 15,618,141 15,804,064
========== ===========
Diluted 16,049,254 16,143,856
========== ===========
12
Note 3. Basic and Diluted Net Income Per Share
Basic net income per share is computed by dividing net income available
to common shareholders by the weighted-average number of common shares
outstanding for the period. Diluted net income per 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 May 31, 1998 and
1999 consisted solely of stock options. For the quarters ended May 31, 1998 and
1999, the difference between the weighted-average shares outstanding used to
compute basic and diluted EPS is attributable to dilution caused by stock
options.
Note 4. Comprehensive Income
Comprehensive income was comprised of the following for the three
months ended May 31, 1998 and 1999 (dollars in thousands):
Three Months
Ended May 31,
-------------------
1998 1999
------- --------
Net income $ 1,788 $ 241
Translation adjustment (171) (975)
------- -------
Total comprehensive income (loss) $ 1,617 $ (734)
======= =======
Note 5. Segment Information
The Company's operations are aligned into three business segments:
Radio, Television and Publishing. These business segments are consistent with
the Company's management of these businesses and its financial reporting
structure.
The Radio and Television segments derive its revenue from the sale of
commercial broadcast inventory. The Company's Publishing segment derives revenue
from subscriptions and the sale of print advertising inventory.
The category Corporate and other represents the results of in-
significant operations and income and expense not allocated to reportable
segments.
The Company's segments operate primarily in the United States with one
radio station located in Hungary. Total revenues of this radio station for the
three months ended May 31, 1999 were $1.1 million.
13
Revenues during the three months ended May 31, 1998 were nominal due to the
commencement of broadcasting during the quarter. This station's total assets as
of May 31, 1998 and 1999 were $27.1 million and $18.1 million, respectively.
The Company evaluates performance of its operating entities based on
broadcast cash flow (BCF) and publishing cash flow (PCF). Management believes
that BCF and PCF are useful because they provide a meaningful comparison of
operating performance between companies in the industry and serve as an
indicator of the market value of a group of stations or publishing entities. BCF
and PCF are generally recognized by the broadcast and publishing industries as a
measure of performance and are used by analysts who report on the performance of
broadcasting and publishing groups. BCF and PCF do not take into account Emmis'
debt service requirements and other commitments and, accordingly, BCF and PCF
are not necessarily indicative of amounts that may be available for dividends,
reinvestment in Emmis' business or other discretionary uses. BCF and PCF are not
a measure of liquidity or of performance in accordance with generally accepted
accounting principles, and should be viewed as a supplement to and not a
substitute for our results of operations presented on the basis of generally
accepted accounting principles.
The accounting policies as described in the summary of significant
accounting policies are applied consistently across segments.
THREE MONTHS ENDED CORPORATE
MAY 31, 1999 RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
- -----------------------------------------------------------------------------------------------------------
Net revenues $ 41,965 $ 18,054 $ 11,917 $ 416 $ 72,352
Operating expenses 23,035 12,006 10,102 320 45,463
---------- ---------- ---------- ---------- ----------
Broadcast/publishing
cash flow 18,930 6,048 1,815 96 26,889
International business
development expenses -- -- -- 380 380
Corporate expenses -- -- -- 3,206 3,206
Depreciation and
amortization 4,011 3,380 1,514 804 9,709
Non-cash compensation -- -- -- 645 645
---------- ---------- ---------- ---------- ----------
Operating income $ 14,919 $ 2,668 $ 301 $ (4,939) $ 12,949
========== ========== ========== ========== ==========
Total assets $ 461,165 $ 447,490 $ 69,982 $ 70,103 $1,048,740
========== ========== ========== =========== ==========
14
THREE MONTHS ENDED CORPORATE
MAY 31, 1998 RADIO TELEVISION PUBLISHING AND OTHER CONSOLIDATED
- -----------------------------------------------------------------------------------------
Net revenues $ 35,429 $ -- $ 8,840 $ 350 $ 44,619
Operating expenses 20,068 -- 7,500 227 27,795
-------- ------ -------- -------- --------
Broadcast/publishing
cash flow 15,361 -- 1,340 123 16,824
International business
development expenses -- -- -- 207 207
Corporate expenses -- -- -- 1,957 1,957
Time brokerage fee 2,125 -- -- -- 2,125
Depreciation and
amortization 2,376 -- 1,005 26 3,407
Non-cash compensation -- -- -- 955 955
-------- ------ -------- -------- --------
Operating income $ 10,860 $ -- $ 335 $ (3,022) $ 8,173
======== ====== ======== ======== ========
Total assets $257,840 $ -- $ 48,320 $ 73,473 $379,633
======== ====== ======== ======== ========
Note 6. Financial Information for Subsidiary Guarantors and Subsidiary
Non-Guarantor
Emmis conducts a significant portion of its business through
subsidiaries. The Senior Subordinated Notes are fully and unconditionally
guaranteed, jointly and severally, by certain direct and indirect subsidiaries
(the "Subsidiary Guarantors"). One of Emmis' subsidiaries does not guarantee the
Senior Subordinated Notes (the "Subsidiary Non-Guarantor"). The claims of
creditors of the Subsidiary Non-Guarantor have priority over the rights of Emmis
to receive dividends or distributions from such subsidiary.
Presented below is condensed consolidating financial information for
Emmis, the Subsidiary Guarantors and the Subsidiary Non-Guarantor as of May 31,
1999 and February 28, 1999 and for the three months ended May 31, 1999 and 1998.
The equity method has been used by Emmis with respect to investments in
subsidiaries. Separate financial statements for Subsidiary Guarantors are not
presented based on management's determination that they do not provide
additional information that is material to investors.
15
Emmis Communications Corporation
Condensed Consolidating Balance Sheet
As of May 31, 1999
(Unaudited, dollars in thousands)
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
----------- ----------- ------------- ------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ -- $ -- $ 1,419 $ -- $ 1,419
Accounts receivable, net -- 56,819 875 -- 57,694
Prepaid expenses and other 2,292 16,544 221 -- 19,057
----------- ----------- ----------- ----------- -----------
Total current assets 2,292 73,363 2,515 -- 78,170
Property and equipment, net 40,869 67,038 856 -- 108,763
Intangible assets, net 465 812,963 14,903 -- 828,331
Investment in affiliates 893,929 -- -- (893,929) --
Other assets, net 30,656 7,385 -- (4,565) 33,476
----------- ----------- ----------- ----------- -----------
Total assets $ 968,211 $ 960,749 $ 18,274 $ (898,494) $ 1,048,740
=========== =========== =========== =========== ===========
CURRENT LIABILITIES:
Current portion of other
long-term liabilities $ 34 $ 17 $ 2,237 $ (1,453) $ 835
Accounts payable and
book cash overdraft 10,380 7,870 214 -- 18,464
Accrued salaries and
commissions 27 5,220 -- -- 5,247
Accrued interest 11,985 2 -- -- 11,987
Deferred revenue -- 10,779 -- -- 10,779
Current portion of TV program
rights payable -- 9,607 -- -- 9,607
Income taxes payable 8,012 282 -- -- 8,294
Other 100 1,432 1,366 -- 2,898
----------- ----------- ----------- ----------- -----------
Total current liabilities 30,538 35,209 3,817 (1,453) 68,111
CREDIT FACILITY AND SENIOR
SUBORDINATED NOTES 605,000 -- -- -- 605,000
TV PROGRAM RIGHTS PAYABLE, NET
OF CURRENT PORTION -- 22,502 -- -- 22,502
OTHER LONG-TERM DEBT, NET OF
CURRENT PORTION 2,543 (2,786) 20,056 (3,112) 16,701
OTHER NONCURRENT LIABILITIES (4) 7,881 -- -- 7,877
DEFERRED INCOME TAXES 91,392 38 -- -- 91,430
----------- ----------- ----------- ----------- -----------
Total liabilities 729,469 62,844 23,873 (4,565) 811,621
----------- ----------- ----------- ----------- -----------
Shareholders' Equity
Class A common stock 132 -- -- -- 132
Class B common stock 26 -- -- -- 26
Additional paid-in capital 262,648 -- 4,393 (4,393) 262,648
Subsidiary investment -- 664,921 -- (664,921) --
Retained earnings
(accumulated deficit) (24,064) 232,984 (8,369) (224,615) (24,064)
Accumulated other
comprehensive income -- -- (1,623) -- (1,623)
----------- ----------- ----------- ----------- -----------
Total shareholders' equity 238,742 897,905 (5,599) (893,929) 237,119
----------- ----------- ----------- ----------- -----------
Total liabilities and
shareholders' equity $ 968,211 $ 960,749 $ 18,274 $ (898,494) $ 1,048,740
=========== =========== =========== =========== ===========
16
Emmis Communications Corporation
Condensed Consolidating Balance Sheet
As of February 28, 1999
(Note 1, dollars in thousands)
ELIMINATIONS
PARENT AND
COMPANY SUBSIDIARY SUBSIDIARY CONSOLIDATING
ONLY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
----------- ---------- ------------- ------------- -------------
CURRENT ASSETS:
Cash and cash equivalents $ 2,286 $ 3,146 $ 685 $ -- $ 6,117
Accounts receivable, net -- 50,436 1,043 -- 51,479
Prepaid expenses and other 5,720 7,694 72 -- 13,486
----------- ----------- ----------- ----------- -----------
Total current assets 8,006 61,276 1,800 -- 71,082
Property and equipment, net 33,769 71,342 949 -- 106,060
Intangible assets, net 151 785,219 16,937 -- 802,307
Investment in affiliates 856,701 -- -- (856,701) --
Other assets, net 31,866 7,648 702 (4,834) 35,382
----------- ----------- ----------- ----------- -----------
Total assets $ 930,493 $ 925,485 $ 20,388 $ (861,535) $ 1,014,831
=========== =========== =========== =========== ===========
CURRENT LIABILITIES:
Current portion of other
long-term liabilities $ 34 $ 16 $ 2,239 $ (1,454) $ 835
Accounts payable 7,527 7,739 369 -- 15,635
Accrued salaries and
commissions 1,262 2,719 564 -- 4,545
Accrued interest 6,222 1 -- -- 6,223
Deferred revenue -- 7,238 -- -- 7,238
Current portion of TV program
rights payable -- 9,471 -- -- 9,471
Income taxes payable 11,790 267 -- -- 12,057
Other 146 13,683 -- -- 13,829
----------- ----------- ----------- ----------- -----------
Total current liabilities 26,981 41,134 3,172 (1,454) 69,833
CREDIT FACILITY AND SENIOR
SUBORDINATED NOTES 577,000 -- -- -- 577,000
TV PROGRAM RIGHTS PAYABLE, NET
OF CURRENT PORTION -- 25,161 -- -- 25,161
OTHER LONG-TERM DEBT, NET OF
CURRENT PORTION 2,543 (45) 19,687 (3,380) 18,805
OTHER NONCURRENT LIABILITIES (4) 3,470 -- -- 3,466
DEFERRED INCOME TAXES 87,776 (2,759) -- -- 85,017
----------- ----------- ----------- ----------- -----------
Total liabilities 694,296 66,961 22,859 (4,834) 779,282
----------- ----------- ----------- ----------- -----------
Shareholders' Equity
Class A common stock 132 -- -- -- 132
Class B common stock 26 -- -- -- 26
Additional paid-in capital 260,344 -- 4,297 (4,297) 260,344
Subsidiary investment -- 637,223 -- (637,223) --
Retained earnings
(accumulated deficit) (24,305) 221,301 (6,120) (215,181) (24,305)
Accumulated other
comprehensive income -- -- (648) -- (648)
----------- ----------- ----------- ----------- -----------
Total shareholders' equity 236,197 858,524 (2,471) (856,701) 235,549
----------- ----------- ----------- ----------- -----------
Total liabilities and
shareholders' equity $ 930,493 $ 925,485 $ 20,388 $ (861,535) $ 1,014,831
=========== =========== =========== =========== ===========
17
Emmis Communications Corporation
Condensed Consolidating Statement of Operations
For the Three Months Ended May 31, 1999
(Unaudited, dollars in thousands)
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTOR ENTRIES CONSOLIDATED
-------- ---------- ---------- -------------- ------------
NET REVENUES $ 416 $ 70,843 $ 1,093 $ -- $ 72,352
Operating expenses 320 43,959 1,184 -- 45,463
International business -- 380 -- -- 380
development expenses
Corporate expenses 3,206 -- -- -- 3,206
Time brokerage fees -- -- -- -- --
Depreciation and amortization 804 8,155 750 -- 9,709
Non-cash compensation 484 161 -- -- 645
-------- -------- -------- -------- --------
OPERATING INCOME (4,398) 18,188 (841) -- 12,949
-------- -------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest expense (12,380) 141 (1,180) 190 (13,229)
Other income (expense), net 17 216 (281) 869 821
-------- -------- -------- -------- --------
Total other income (expense) (12,363) 357 (1,461) 1,059 (12,408)
-------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES (16,761) 18,545 (2,302) 1,059 541
PROVISION (BENEFIT) FOR INCOME
TAXES (6,509) 6,862 (53) -- 300
-------- -------- -------- -------- --------
(10,252) 11,683 (2,249) 1,059 241
EQUITY IN EARNINGS (LOSS) OF
SUBSIDIARIES 10,493 -- -- (10,493) --
-------- -------- -------- -------- --------
NET INCOME (LOSS) $ 241 $ 11,683 $ (2,249) $ (9,434) $ 241
======== ======== ======== ======== ========
18
Emmis Communications Corporation
Condensed Consolidating Statement of Operations
For the Three Months Ended May 31, 1998
(Unaudited, dollars in thousands)
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTOR ENTRIES CONSOLIDATED
--------- ---------- ------------ ------------- ------------
NET REVENUES $ 350 $ 44,234 $ 35 $ -- $ 44,619
Operating expenses 227 27,031 537 -- 27,795
International business
development expenses -- 207 -- -- 207
Corporate expenses 1,957 -- -- -- 1,957
Time brokerage fees -- 2,125 -- -- 2,125
Depreciation and amortization 28 2,943 436 -- 3,407
Non-cash compensation 716 239 -- -- 955
-------- -------- -------- -------- --------
OPERATING INCOME (2,578) 11,689 (938) -- 8,173
-------- -------- -------- -------- --------
OTHER INCOME (EXPENSE)
Interest expense (4,783) (6) (999) 280 (5,508)
Other income (expense), net 18 826 (252) 727 1,319
-------- -------- -------- -------- --------
Total other income (expense) (4,765) 820 (1,251) 1,007 (4,189)
-------- -------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES (7,343) 12,509 (2,189) 1,007 3,984
PROVISION(BENEFIT) FOR INCOME TAXES (2,379) 4,628 (53) -- 2,196
-------- -------- -------- -------- --------
(4,964) 7,881 (2,136) 1,007 1,788
EQUITY IN EARNINGS (LOSS) OF
SUBSIDIARIES 6,752 -- -- (6,752) --
-------- -------- -------- -------- --------
NET INCOME (LOSS) $ 1,788 $ 7,881 $ (2,136) $ (5,745) $ 1,788
======== ======== ======== ======== ========
19
Emmis Communications Corporation
Consolidating Statement of Cash Flows
For the Three Months Ended May 31, 1999
(Unaudited, dollars in thousands)
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTOR ENTRIES CONSOLIDATED
--------- ----------- ------------- ------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITES:
Net income $ 241 $ 11,683 $ (2,249) $ (9,434) $ 241
Adjustments to reconcile net
income to net cash provided
(used) by operating
activities -
Depreciation and amortization 1,368 9,406 750 -- 11,524
Provision for bad debts -- 501 -- -- 501
Provision for deferred income
taxes 961 -- -- -- 961
Non-cash compensation 484 161 -- -- 645
Equity in earnings of
subsidiaries (10,493) -- -- 10,493 --
Other 56 -- -- (1,059) (1,003)
Changes in assets and
liabilities -
Accounts receivable -- (4,703) 168 -- (4,535)
Prepaid expenses and other
current assets 3,428 (8,627) (149) -- (5,348)
Other assets 646 1,192 702 -- 2,540
Accounts payable and accrued
liabilities 7,381 1,873 (719) -- 8,535
Deferred revenue -- (328) -- -- (328)
Other liabilities (4,001) (16,719) 1,735 -- (18,985)
-------- -------- -------- -------- -------
Net cash provided (used) by
operating activities 71 (5,561) 238 -- (5,252)
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment (7,872) (1,425) (657) -- (9,954)
Acquisition of Country Sampler -- (18,454) -- -- (18,454)
-------- -------- -------- -------- --------
Net cash used by investing
activities (7,872) (19,879) (657) -- (28,408)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payments on long-term debt (4,000) -- -- -- (4,000)
Proceeds from long-term debt 32,000 -- -- -- 32,000
Proceeds from exercise of stock
options 962 -- -- -- 962
Intercompany (23,447) 22,294 1,153 -- --
-------- -------- -------- -------- --------
Net cash provided by
financing activities 5,515 22,294 1,153 -- 28,962
-------- -------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (2,286) (3,146) 734 -- (4,698)
CASH AND CASH EQUIVALENTS:
Beginning of period 2,286 3,146 685 -- 6,117
-------- -------- -------- -------- --------
End of period -- -- $ 1,419 $ -- $ 1,419
======== ======== ======== ======== ========
20
Emmis Communications Corporation
Consolidating Statement of Cash Flows
For the Three Months Ended May 31, 1998
(Unaudited, dollars in thousands)
ELIMINATIONS
PARENT SUBSIDIARY AND
COMPANY SUBSIDIARY NON- CONSOLIDATING
ONLY GUARANTORS GUARANTOR ENTRIES CONSOLIDATED
-------- ---------- ------------ ---------------- ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 1,788 $ 7,881 $ (2,136) $ (5,745) $ 1,788
Adjustments to reconcile net
income (loss) to net cash
provided (used) by operating
activities -
Depreciation and amortization 309 2,943 436 -- 3,688
Provision for bad debts -- 413 -- -- 413
Provision (benefit) for
deferred income taxes 96 -- -- -- 96
Gain on sale of property and
equipment -- (533) -- -- (533)
Non-cash compensation 716 239 -- -- 955
Equity in earnings of
subsidiaries (6,752) -- -- 6,752 --
Other (160) -- -- (1,007) (1,167)
Changes in assets and
liabilities
Accounts receivable 345 (7,945) 1,379 -- (6,221)
Prepaid expenses and other 613 1,024 (1,960) -- (323)
Other assets (733) 30 1,029 -- 326
Accounts payable and accrued
liabilities (2,107) 1,257 739 -- (111)
Deferred revenue (57) (57)
Other liabilities (2,017) 703 1,198 -- (116)
-------- -------- -------- -------- --------
Net cash provided (used) by
operating activities (7,902) 5,955 685 -- (1,262)
-------- -------- -------- -------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of property and
equipment (6,046) (610) (719) -- (7,375)
Proceeds from sale of
equipment 607 -- -- 607
Deposits on acquisitions (34,000) (34,000)
-------- -------- -------- -------- --------
Net cash used in investing
activities (40,046) (3) (719) -- (40,768)
-------- -------- -------- -------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payments on long-term debt (1,000) -- -- -- (1,000)
Proceeds from long-term debt 44,085 -- -- -- 44,085
Purchase of interest rate cap
agreements and other debt
related costs (68) -- -- -- (68)
Intercompany transactions 4,677 (4,564) (113) -- --
Proceeds from exercise of stock
options 1,783 -- -- -- 1,783
-------- -------- -------- -------- --------
Net cash provided (used) by
financing activities 49,477 (4,564) (113) -- 44,800
-------- -------- -------- -------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,529 1,388 (147) -- 2,770
Beginning of period 623 243 4,919 -- 5,785
-------- -------- -------- -------- --------
End of period $ 2,152 $ 1,631 $ 4,772 $ -- $ 8,555
======== ======== ======== ======== ========
21
Note 7. Subsequent Events
On June 3, 1999, the Company entered into an agreement to purchase
substantially all of the assets of television station WKCF in Orlando, Florida,
from Press Communications, LLC, for $191.5 million in cash. The acquisition is
awaiting approval by the FCC. In connection with this transaction, the Company
has entered into an agreement with the WB Network, which (among other things)
obtains the WB's consent to transfer the WB affiliation upon closing and extends
the existing network affiliation agreement through 2009.
On June 25, 1999, the Company entered into an agreement with a former
Sinclair executive to purchase his right to acquire certain broadcast properties
in St. Louis, Missouri. The right allows the Company to purchase, at fair market
value, six radio stations and one television station from Sinclair Broadcast
Group, Inc.
In July 1999, the Fox Network entered into an agreement with its
affiliates which requires the affiliates to buy prime time spots from the
network. The Company's agreement with Fox Network commences on July 15, 1999 and
terminates on June 30, 2002. As a result of this agreement, the Company expects
its broadcast cash flow will decrease by less than $1.0 million annually.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Note: Certain statements in this report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such risks may include dependence upon advertising,
competitive nature of broadcasting, substantial leverage, Federal regulation and
future capital cost of digital conversion among others.
GENERAL
The Company evaluates performance of its operating entities based on
broadcast cash flow (BCF) and publishing cash flow (PCF). Management believes
that BCF and PCF are useful because they provide a meaningful comparison of
operating performance between companies in the industry and serve as an
indicator of the market value of a group of stations or publishing entities. BCF
and PCF are generally recognized by the broadcast and publishing industries as a
measure of performance and are used by analysts who report on the performance of
broadcasting and publishing groups. BCF and PCF do not take into account Emmis'
debt service requirements and other commitments and, accordingly, BCF and PCF
are not necessarily indicative of amounts that may be available for dividends,
reinvestment in Emmis' business or other discretionary uses.
22
BCF and PCF are not measures of liquidity or of performance in
accordance with generally accepted accounting principles, and should be viewed
as a supplement to and not a substitute for our results of operations presented
on the basis of generally accepted accounting principles. Moreover, BCF and PCF
are not standardized measures and may be calculated in a number of ways. Emmis
defines BCF and PCF as revenues net of agency commissions and operating
expenses. The primary source of broadcast advertising revenues is the sale of
advertising time to local and national advertisers. Publishing entities derive
revenue from subscriptions and sale of print advertising inventory. The most
significant broadcast operating expenses are employee salaries and commissions,
costs associated with programming, advertising and promotion, and station
general and administrative costs. Significant publishing operating expenses are
employee salaries and commissions, costs associated with producing the magazine,
and general and administrative costs.
RESULTS OF OPERATIONS THREE MONTHS ENDED MAY 31, 1999 COMPARED TO MAY 31, 1998
Net revenues for the quarter ended May 31, 1999 were $72.4 million
compared to $44.6 million for the same quarter of the prior year, an increase of
$27.8 million or 62.2%. This increase is principally due to the SF, Wabash and
Country Sampler Acquisitions as well as the ability to realize higher
advertising rates at certain of 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.
Operating expenses for the quarter ended May 31, 1999 were $45.5
million compared to $27.8 million for the same quarter of the prior year, an
increase of $17.7 million or 63.6%. This increase is primarily attributable to
the SF, Wabash and Country Sampler Acquisitions.
Broadcast/publishing cash flow for the quarter ended May 31, 1999 was
$26.9 million compared to $16.8 million for the same quarter of the prior year,
an increase of $10.1 million or 59.8%. This increase is principally due to
increased net revenues partially offset by increased operating expenses as
discussed above.
International business development expenses for the quarter ended May
31, 1999 were $.4 million compared to $.2 million for the same quarter of the
prior year. 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.
Corporate expenses for the quarter ended May 31, 1999 were $3.2 million
compared to $2.0 million for the same quarter of the prior year, an increase of
$1.2 million or 63.8%. This increase is due to an increase in the number of
corporate employees as a result of the growth of the Company.
23
Adjusted EBITDA is defined as broadcast/publishing cash flow less
corporate and international development expenses. Adjusted EBITDA for the
quarter ended May 31, 1999 was $23.3 million compared to $14.7 million for the
same quarter of the prior year, an increase of $8.6 million or 59.0%. This
increase is principally due to an increase in broadcast/publishing cash flow
partially offset by an increase in corporate expenses.
Depreciation and amortization expense for the quarter ended May 31,
1999 was $9.7 million compared to $3.4 million for the same period of the prior
year, an increase of $6.3 million or 185.0%. This increase was primarily due to
the WQCD, SF, Wabash and Country Sampler Acquisitions.
Non-cash compensation expense for quarter ended May 31, 1999 was $.6
million compared to $1.0 million for the same period of the prior year, a
decrease of $.4 million or 32.5%. Non-cash compensation includes compensation
expense associated with stock options granted, restricted common stock issued
under employment agreements and common stock contributed to the Company's Profit
Sharing Plan. This decrease was due primarily to a decrease in the number of
stock options granted at fixed exercise prices under employment agreements.
Interest expense was $13.2 million for the quarter ended May 31, 1999
compared to $5.5 million for the same quarter of the prior year, an increase of
$7.7 million or 140.2%. This increase reflects higher outstanding debt due to
the WQCD, SF, Wabash and Country Sampler Acquisitions and an increase in
interest rates.
RESULTS OF OPERATIONS THREE MONTHS ENDED MAY 31, 1998 COMPARED TO MAY 31, 1997
Net revenues for the quarter ended May 31, 1998 were $44.6 million
compared to $31.3 million for the same quarter of the prior year, an increase of
$13.3 million or 42.4%. This increase is principally due to the operation of
WQCD under a time brokerage agreement, the acquisition of WTLC FM and AM, and
the acquisition of Texas Monthly as well as 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.
Operating expenses for the quarter ended May 31, 1998 were $27.8
million compared to $18.7 million for the same quarter of the prior year, an
increase of $9.1 million or 48.3%. Included in operating expense for the three
months ended May 31, 1998 is $.5 million of expense from the operations of
Slager Radio for which revenue was nominal due to the commencement of
broadcasting during the first quarter. The remaining increase is primarily
attributable to the operation of WQCD under a time brokerage agreement, the
acquisition of WTLC FM and AM and the acquisition of Texas Monthly.
Broadcast/publishing cash flow for the fiscal quarter ended May 31,
1998 was $16.8 million compared to $12.6 million for the same quarter of the
prior year, an increase of $4.2 million or 33.7%. This
24
increase is principally due to increased net revenues partially offset by
increased operating expenses as discussed above.
International business development expenses for the quarter ended May
31, 1998 were $.2 million compared to $.3 million for the same quarter of the
prior year. 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.
Corporate expenses for the quarter ended May 31, 1998 were $2.0 million
compared to $1.6 million for the same quarter of the prior year, an increase of
$0.4 million or 19.0%. This increase is primarily due to the establishment of a
corporate division for publishing.
Adjusted EBITDA is defined as broadcast/publishing cash flow less
corporate and international development expenses. Adjusted EBITDA for the
quarter ended May 31, 1998 was $14.7 million compared to $10.6 million for the
same quarter of the prior year, an increase of $4.1 million or 38.3%. This
increase is principally due to increased net revenues offset by increased
operating expenses, as discussed above.
Depreciation and amortization expense for the quarter ended May 31,
1998 was $3.4 million compared to $1.7 million for the same period of the prior
year, an increase of $1.7 million or 102.6%. This increase was primarily due to
the St. Louis, WTLC-FM and AM and Texas Monthly acquisitions.
Non-cash compensation expense for quarter ended May 31, 1998 was $1.0
million compared to $.8 million for the same period of the prior year, an
increase of $.2 million or 15.5%. Non-cash compensation includes compensation
expense associated with stock options granted, restricted common stock issued
under employment agreements and common stock contributed to the Company's Profit
Sharing Plan.
Interest expense was $5.5 million for the quarter ended May 31, 1998
compared to $2.6 million for the same quarter of the prior year, an increase of
$2.9 million or 107.9%. This increase reflects higher outstanding debt due to
the St. Louis, WTLC FM and AM and Texas Monthly acquisitions and deposits
related to the SF and Wabash Acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
At May 31, 1999 the Company had up to $445.0 million available under
its credit facility.
25
On June 3, 1999, the Company entered into an agreement to purchase
substantially all of the assets of television station WKCF in Orlando, Florida,
from Press Communications, LLC, for $191.5 million in cash. The acquisition is
awaiting approval by the FCC. To complete the acquisition of assets from Press
Communications, LLC, the Company will increase its bank borrowings.
On June 25, 1999, the Company entered into an agreement with a former
Sinclair executive to purchase his right to acquire certain broadcast properties
in St. Louis, Missouri. The right allows the Company to purchase, at fair market
value, six radio stations and one television station from Sinclair Broadcast
Group, Inc.
In July 1999, the Fox Network entered into an agreement with its
affiliates which requires the affiliates to buy prime time spots from the
network. The Company's agreement with Fox Network commences on July 15, 1999 and
terminates on June 30, 2002. As a result of this agreement, the Company expects
its broadcast cash flow will decrease by less than $1.0 million annually.
Included in the Company's capital expenditures budget is approximately
$16.3 million for the construction of new operating facilities at KHON-TV in
Hawaii. Capital expenditures incurred for the three months ended May 31, 1999,
were approximately $10.0 million including $4.3 million at KHON-TV.
The Company expects that cash flow from operating activities will be
sufficient to fund all debt service for debt existing at May 31, 1999, working
capital and capital expenditure requirements.
As part of its business strategy, the Company continually evaluates
potential acquisitions of radio and television stations as well as publishing
properties. 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.
YEAR 2000 COMPLIANCE
Emmis has completed its assessment phase of year 2000 compliance for
information technology, other equipment, including broadcast equipment, and
embedded technology. Certain technology and equipment is represented by its
vendors to be year 2000 compliant. Technology and equipment that is currently
not represented as year 2000 compliant will be upgraded or replaced, and tested
prior to August 31, 1999.
Emmis has trained its employees regarding year 2000 issues and
compliance. Certain employees at each entity are responsible for year 2000
compliance. Emmis' information systems department is currently auditing the year
2000 compliance of each entity. This audit includes (1) verifying that critical
applications have been identified, (2) testing of critical applications, (3)
ensuring that year 2000 compliance documentation exists, (4) verifying that
remediation is occurring as planned and (5) developing written contingency
plans. Steps 1 through 4 of the audit have been performed at substantially all
of the Company's entities. The audit should be complete by August 31, 1999.
In connection with the move of our corporate and Indianapolis
operations to an office building in downtown Indianapolis, substantially all
information technology and other equipment in the building has been replaced and
is believed to be year 2000 compliant. Emmis estimates that the cost of the
remaining year 2000 remediation effort will be approximately $1.0 million, which
will be funded from current operations. Emmis recently began tracking costs
relating to year 2000 compliance. As of May 31, 1999, these costs were not
significant.
26
If certain broadcast equipment and information technology is not year
2000 compliant prior to January 1, 2000, an entity using that equipment and
information technology might not be able to broadcast and process transactions.
If this were to occur, temporary solutions or processes not involving the
malfunctioning equipment could be implemented. The contingency plans documented
during the audit process would be used to implement such temporary solutions.
27
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following exhibits are filed or incorporated by reference as a
part of this report:
3.1 Amended and Restated Articles of Incorporation of Emmis
Broadcasting Corporation, incorporated by reference from
Exhibit 3.3 to the Registration Statement, as amended (the
"Registration Statement") of the Company on Form S-1, file
no. 33-73218. *
3.2 Amended and Restated Bylaws of Emmis Broadcasting
Corporation, incorporated by reference from Exhibit 3.2 to
the Company's Annual Report on Form 10-K for the fiscal year
ended February 28, 1995 (the "1995 10-K"). *
15 Letter re: unaudited interim financial information
27 Financial data schedule (Edgar version only)
*Previously submitted
(b) Reports on Form 8-K
On March 15, 1999, the Company filed a Form 8-K to disclose
financial information for subsidiary guarantors and
non-guarantor subsidiaries for the years ended February
28(29), 1996, 1997 and 1998 and the nine months ended
November 30, 1997 and 1998.
On May 6, 1999, the Company filed a Form 8-K regarding its
financial performance for the fiscal year ended February 28,
1999.
On May 6, 1999, the Company filed a Form 8-K/A to amend
previously disclosed financial information for subsidiary
guarantors and non-guarantor subsidiaries for the years ended
February 28(29), 1996, 1997 and 1998 and the nine months
ended November 30, 1997 and 1998.
28
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: July 15, 1999 By: /s/ WALTER Z. BERGER
--------------------------------
Walter Z. Berger
Executive Vice President (Authorized
Corporate Officer), Chief
Financial Officer and Treasurer