Emmis Communications Reports Fourth-Quarter and Full-Year Results

Emmis Communications Reports Fourth-Quarter and Full-Year Results

Emmis Beats Markets for the Third Year in a Row

INDIANAPOLIS, April 18 /PRNewswire-FirstCall/ -- Emmis Communications Corporation (NASDAQ:EMMS) today announced results for its fourth fiscal quarter and full year ending Feb. 28, 2006.

For the fourth fiscal quarter, reported net revenue was $84.5 million, compared to $80.9 million for the same quarter of the prior year, an increase of 4%. Reported net revenues for all periods presented exclude the results of Emmis' television stations and WRDA-FM, which have been classified as discontinued operations.

For the fourth quarter, reported radio net revenues increased 4%, while pro forma radio net revenues (including WLUP-FM and the Emmis radio networks in Slovakia and Bulgaria for all periods) decreased 2%. Publishing net revenues increased 7%.

Diluted net loss per common share from continuing operations was $1.01, compared to $0.04 for the same quarter of the prior year. This increase in net loss per common share from continuing operations was principally driven by four factors: (1) a pre-tax impairment loss of $37.4 million resulting from our annual SFAS No. 142 impairment review; (2) a pre-tax loss on debt extinguishment of $7.0 million resulting from the application of television station asset sale proceeds; (3) corporate bonus and severance payments of approximately $6.1 million associated with the sale of the Company's television stations and reflected in corporate expense and (4) an increase in interest expense of $11.9 million due to (a) higher debt outstanding during the quarter as compared to the prior year and (b) in accordance with EITF 87-24 "Allocation of Interest to Discontinued Operations," as modified, Emmis did not allocate any interest to discontinued operations in the three months ended Feb. 28, 2006, as opposed to $6.7 million of interest that the Company allocated to discontinued operations in the three months ended Feb. 28, 2005. Together, these four items represent a diluted net loss per common share of $0.99.

"In the past fiscal year, we have transformed the company," said Jeff Smulyan, Emmis Chairman and CEO. "We sold 13 of our 16 television stations at higher than expected prices, and we used that money to pay down debt and buy back nearly 40% of our stock. Our balance sheet is very strong, which will allow us to invest both in our core properties and in businesses we expect to grow faster, including our interactive division."

For the fourth quarter, operating losses were $35.6 million, compared to operating income of $10.1 million for the same quarter of the prior year. The decrease in operating income is principally due to the impairment charge and the bonus and severance payments discussed above. Emmis' station operating income for the fourth quarter was $19.5 million, compared to $24.4 million for the same quarter of the prior year. The decrease in station operating income was principally due to three factors: (1) lower than expected revenue growth due to a weaker than expected radio advertising environment; (2) increased promotion and programming expenses, especially in the Company's Chicago duopoly, as Emmis invests for longer-term growth; and (3) the unexpected bankruptcy of an advertiser that resulted in a $1.3 million charge.

For the full year, net revenue grew to $387.4 million from $351.8 million, an increase of 10%. Operating income was $38.9 million for the year, compared to $72.6 million for the prior year. Station operating income rose to $134.2 million this year from $131.3 million in the prior year.

Emmis has included supplemental pro forma net revenues, station operating expenses, including non-cash compensation, and certain other financial data on its website, http://www.emmis.com/. This information, which includes all consummated station acquisitions and dispositions, can be found under the "Investors" tab. In accordance with SFAS No. 123R, which the Company adopted on March 1, 2006, and SAB No. 107, Emmis will no longer exclude noncash compensation expense from station operating expenses or corporate expenses in future quarterly results. The supplemental pro forma information included on the website now reflects noncash compensation expense as a component of station operating expenses and corporate expenses for all periods presented. The Company plans to continue to disclose the portion of station operating expenses and corporate expenses that are paid in stock via footnote disclosure.

Under the terms of Emmis Operating Company's 6.875% senior subordinated notes, Emmis Communications Corporation total consolidated debt-to-EBITDA leverage was 5.0x as of Feb. 28, 2006, compared to 5.8x a year ago.

International radio net revenues and station operating expenses for the quarter ended Feb. 28, 2006 were $8.7 million and $6.2 million, respectively. Full-year consolidated net revenues and station operating income from Slager Radio, Emmis' 59.5% majority-owned radio station in Hungary, were $19.2 million (up 11%) and $7.8 million (up 16%) respectively.

On Dec. 5, 2005, Emmis sold substantially all of the assets of television stations WFTX in Ft. Myers, Fla. and KGUN in Tucson, Ariz, and the tangible assets and many of the intangible assets (excluding, principally, the FCC license) of KMTV in Omaha, Neb. to Journal Communications for $225 million of cash proceeds. Emmis used the proceeds to repay outstanding debt obligations. Also on Dec. 5, 2005, Emmis entered into an LMA with Journal for KMTV.

On Jan. 23, 2006, Emmis redeemed $230 million aggregate outstanding principal amount of its Floating Rate Senior Notes due in 2012 (the "Notes"), pursuant to the terms of the Indenture, dated June 21, 2005, between the Company and The Bank of Nova Scotia Trust Company of New York, as trustee. On Feb. 7, 2006, Emmis called for redemption the remaining $120 million aggregate outstanding principal amount of the Notes. This redemption occurred March 9, 2006.

On Jan. 27, 2006, Emmis completed the sale of four of its television stations to the Montecito Broadcast Group, LLC (an affiliate of the Blackstone Group) for $259 million. The purchase included KOIN-TV (Ch. 6, CBS affiliate) in Portland, Ore.; KHON-TV (Ch. 2, Fox affiliate) in Honolulu; KSNW-TV (Ch. 3, NBC affiliate) in Wichita, Kan.; and KSNT-TV (Ch. 27, NBC affiliate) in Topeka, Kan. To date, Emmis has sold 13 of its 16 stations. The Company continues to own and operate KGMB-TV (Ch. 9, CBS affiliate) in Honolulu, WVUE- TV (Ch. 8, Fox affiliate) in New Orleans and WKCF-TV (Ch. 18, WB/CW affiliate) in Orlando.

On April 12, 2006, Emmis determined that it will be restating its financial statements for the quarters ended August 31, 2005 and November 30, 2005, to classify its preferred stock in mezzanine rather than permanent equity on the Company's balance sheet. The restatement is due to a misinterpretation of certain technical accounting principles relating to the balance sheet classification of preferred stock that contains a redemption feature. The restatement has no impact on the statements of operations, the statements of cash flows, or any balance sheet items except stockholders' equity and mezzanine. The restatement also has no impact on the Company's operations, including the compliance with covenants under its debt instruments, other agreements or regulatory requirements.

The following table reconciles reported results to pro forma results (dollars in thousands):

3 months 12 months
ended Feb.28, % ending Feb.28, %
2006 2005 Change 2006 2005 Change
Radio
Reported net
revenues $63,045 $60,855 4% $300,545 $274,145 10%
Plus: Revenues
from assets
acquired 230 3,440 2,383 18,178
Less: net revenues
from assets
disposed -- -- -- --
Pro forma
net revenues $63,275 $64,295 -2% $302,928 $292,323 4%

Publishing
Reported net
revenues $21,440 $20,021 7% $86,836 $77,675 12%
Plus: Revenues
from assets
acquired -- -- -- --
Less: net revenues
from assets
disposed -- -- -- --
Pro forma
net revenues $21,440 $20,021 7% $86,836 $77,675 12%

Total Company
Reported net
revenues
operating
income $84,485 $80,876 4% $387,381 $351,820 10%
Plus: Revenues
from assets
acquired 230 3,440 2,383 18,178
Less: Revenues
from assets
disposed -- -- -- --
Pro forma
net revenues $84,715 $84,316 0% $389,764 $369,998 5%

On a pro forma basis, the Company expects its radio net revenues for its quarter ending May 31, 2006 to be down mid-single digits. For the full year, the Company expects its radio station operating expenses to be up mid-single digits on a pro forma basis, with higher expenses in the first half of the year.

Emmis will host a call regarding this information on Tuesday, April 18 at 9 a.m. Eastern at 1.517.623.4891, with a replay available through Tuesday, April 25 at 1.203.369.1456. Listen online at http://www.emmis.com/.

Emmis generally evaluates the performance of its operating entities based on station operating income. Management believes that station operating income is useful to investors because it provides a meaningful comparison of operating performance between companies in the industry and serves as an indicator of the market value of a group of stations or publishing entities. Station operating income is generally recognized by the broadcast and publishing industries as a measure of performance and is used by analysts who report on the performance of broadcasting and publishing groups. Station operating income does not take into account Emmis' debt service requirements and other commitments, and, accordingly, station operating income is not necessarily indicative of amounts that may be available for dividends, reinvestment in Emmis' business or other discretionary uses.

Station operating income is not a measure of liquidity or of performance, in accordance with generally accepted U.S. 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 U.S. accounting principles. Moreover, station operating income is not a standardized measure and may be calculated in a number of ways. Emmis defines station operating income as revenues net of agency commissions and station operating expenses, excluding non-cash compensation.

Emmis Communications - Great Media, Great People, Great Service(R)

Emmis is an Indianapolis-based diversified media firm with radio broadcasting, television broadcasting and magazine publishing operations. Emmis owns 23 FM and 2 AM domestic radio stations serving the nation's largest markets of New York, Los Angeles and Chicago as well as Phoenix, St. Louis, Austin, Indianapolis and Terre Haute, IN. In May 2005, Emmis announced its intent to seek strategic alternatives for its 16 television stations, and the Company has sold or announced signed definitive agreements to sell 13 of them. In September the Company announced it had signed an agreement to sell St. Louis radio station WRDA-FM. Emmis owns a radio network, international radio stations, regional and specialty magazines and ancillary businesses in broadcast sales.

The information in this news release is being widely disseminated in accordance with the Securities & Exchange Commission's Regulation FD.

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," "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;
* 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;
* competition from new or different technologies;
* war, terrorist acts or political instability; and
* other factors mentioned in 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.

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited, dollars in thousands, except per share data)

Three months ended Twelve months ended
February 28, February 28,
2006 2005 2006 2005
OPERATING DATA:
Net revenues:
Radio $63,045 $60,855 $300,545 $274,145
Publishing 21,440 20,021 86,836 77,675
Total net revenues 84,485 80,876 387,381 351,820
Operating expenses, excluding
noncash compensation:
Radio 43,978 38,768 174,321 152,603
Publishing 20,976 17,683 78,837 67,870
Total station operating
expenses, excluding
noncash compensation 64,954 56,451 253,158 220,473
Corporate expenses, excluding
noncash compensation 12,195 7,438 31,586 30,792
Noncash compensation (a) 690 2,318 8,906 11,300
Depreciation and amortization 4,867 3,835 17,335 15,870
Impairment loss 37,372 -- 37,372 --
Loss on disposal of assets 9 718 94 795

Operating income (loss) (35,602) 10,116 38,930 72,590
Interest expense (21,513) (9,568) (70,586) (39,690)
Interest income 3,040 564 3,532 1,037
Gain from unconsolidated
affiliates 55 3 8 97
Loss on debt
extinguishment(b) (6,952) -- (6,952) (97,248)
Other income (expense), net (170) 680 (500) 1,062

Income (loss) before income
taxes, minority
interest, discontinued
operations and accounting
change (61,142) 1,795 (35,568) (62,152)
Provision (benefit) for
income taxes (25,298) 1,544 (15,005) 821
Minority interest (income)
expense, net of tax (485) 539 3,026 2,486

Income (loss) from continuing
operations (35,359) (288) (23,589) (65,459)
Income (loss) from
discontinued operations, net
of tax 174,951 37,389 382,010 64,091
Income (loss) before
accounting change 139,592 37,101 358,421 (1,368)
Cumulative effect of
accounting change, net of
tax -- (303,000) -- (303,000)
Net income (loss) 139,592 (265,899) 358,421 (304,368)
Preferred stock dividends 2,246 2,246 8,984 8,984
Net income (loss) available
to common shareholders $137,346 $(268,145) $349,437 $(313,352)

Basic net income (loss) per
common share:
Continuing operations $(1.01) $(0.04) $(0.76) $(1.33)
Discontinued operations,
net of tax 4.72 0.66 8.91 1.15
Cumulative effect of
accounting change, net of
tax -- (5.37) -- (5.40)
Net income (loss)
available to common
shareholders $3.71 $(4.75) $8.15 $(5.58)

Diluted net income (loss) per
common share:
Continuing operations $(1.01) $(0.04) $(0.76) $(1.33)
Discontinued operations,
net of tax 4.72 0.66 8.91 1.15
Cumulative effect of
accounting change, net of
tax -- (5.37) -- (5.40)
Net income (loss)
available to common
shareholders $3.71 $(4.75) $8.15 $(5.58)

Weighted average shares
outstanding:
Basic 37,056 56,397 42,876 56,129
Diluted 37,056 56,397 42,876 56,129

(a) Noncash compensation by
segment:
Radio $650 $934 $3,481 $4,749
Publishing 385 328 1,240 2,007
Corporate (345) 1,056 4,185 4,544
Total $690 $2,318 $8,906 $11,300

(b) Reflects costs associated
with our debt
recapitalization, which
closed on May 10, 2004 and a
subsequent subordinated debt
extinguishment on June 10,
2004.

OTHER DATA:
Station operating income (See
below) 19,531 24,425 134,223 131,347
Cash paid for taxes 5,006 15 5,045 286
Capital expenditures 4,154 4,225 12,833 10,519

COMPUTATION OF STATION
OPERATING INCOME:
Operating income $(35,602) $10,116 $38,930 $72,590
Plus: Depreciation and
amortization 4,867 3,835 17,335 15,870
Plus: Corporate expenses,
excluding noncash
compensation 12,195 7,438 31,586 30,792
Plus: Noncash compensation 690 2,318 8,906 11,300
Plus: Impairment loss 37,372 -- 37,372 --
Station operating income $19,531 $24,425 $134,223 $131,347

SELECTED BALANCE SHEET Feb. 28 Feb. 28,
INFORMATION: 2006 2005

Total Cash and Cash Equivalents $140,822 $16,054

Senior Debt $296,174 $804,313
Senior Subordinated Debt 375,000 375,000
Senior Discount Notes 1,406 1,245
Senior Floating Rate Notes 120,000 --
Total Senior, Senior
Subordinated and Holding
Company Debt $792,580 $1,180,558

Source: Emmis Communications

CONTACT: David Newcomer, Interim CFO, or Jodi Wright, media contact,
both of Emmis Communications, +1-317-266-0100

Web site: http://www.emmis.com/

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