Company Quick10K Filing
Quick10K
Emmis Communications
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$3.62 13 $47
10-Q 2019-05-31 Quarter: 2019-05-31
10-K 2019-02-28 Annual: 2019-02-28
10-Q 2018-11-30 Quarter: 2018-11-30
10-Q 2018-08-31 Quarter: 2018-08-31
10-Q 2018-05-31 Quarter: 2018-05-31
10-K 2018-02-28 Annual: 2018-02-28
10-Q 2017-11-30 Quarter: 2017-11-30
10-Q 2017-08-31 Quarter: 2017-08-31
10-Q 2017-05-31 Quarter: 2017-05-31
10-K 2017-02-28 Annual: 2017-02-28
10-Q 2016-11-30 Quarter: 2016-11-30
10-Q 2016-08-31 Quarter: 2016-08-31
10-Q 2016-05-31 Quarter: 2016-05-31
10-K 2016-02-29 Annual: 2016-02-29
10-Q 2015-11-30 Quarter: 2015-11-30
10-Q 2015-08-31 Quarter: 2015-08-31
10-Q 2015-05-31 Quarter: 2015-05-31
10-K 2015-02-28 Annual: 2015-02-28
10-Q 2014-11-30 Quarter: 2014-11-30
10-Q 2014-08-31 Quarter: 2014-08-31
10-Q 2014-05-31 Quarter: 2014-05-31
10-K 2014-02-28 Annual: 2014-02-28
10-Q 2013-11-30 Quarter: 2013-11-30
8-K 2019-07-11 Shareholder Vote
8-K 2019-07-11 Earnings, Regulation FD, Exhibits
8-K 2019-06-28 Enter Agreement, Regulation FD, Exhibits
8-K 2019-06-07 Enter Agreement, Regulation FD, Exhibits
8-K 2019-05-09 Exhibits
8-K 2019-04-12 Off-BS Arrangement, Exhibits
8-K 2019-01-10 Earnings, Exhibits
8-K 2018-10-11 Earnings, Exhibits
8-K 2018-07-12 Shareholder Vote
8-K 2018-07-12 Earnings, Regulation FD, Exhibits
8-K 2018-06-29 Officers, Exhibits
8-K 2018-04-30 M&A
8-K 2018-03-01 Officers, Exhibits
8-K 2018-02-22 Enter Agreement, Regulation FD, Exhibits
8-K 2018-01-30 Regulation FD
CUBE CubeSmart 6,120
LSI Life Storage 4,440
SEAS Seaworld Entertainment 2,360
SKY Skyline Champion 1,190
LPI Life Partners Position Holder Trust 852
CYH Community Health Systems 411
CLIR Clearsign Combustion 21
CYTX Cytori Therapeutics 6
TDNT Trident Brands 0
EGLT Egalet 0
EMMS 2019-05-31
Part I - Financial Information
Item 1. Financial Statements
Note 1. Summary of Significant Accounting Policies
Note 2. Share Based Payments
Note 3. Intangible Assets and Goodwill
Note 4. Long-Term Debt
Note 5. Fair Value Measurements
Note 6. Revenue
Note 7. Segment Information
Note 8. Regulatory, Legal and Other Matters
Note 9. Income Taxes
Note 10. Restructuring Reserve
Note 11. Leases
Note 12. Subsequent Event
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 emms-ex311_9.htm
EX-31.2 emms-ex312_8.htm
EX-32.1 emms-ex321_7.htm
EX-32.2 emms-ex322_6.htm

Emmis Communications Earnings 2019-05-31

EMMS 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 emms-10q_20190531.htm 10-Q emms-10q_20190531.htm

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2019

 

EMMIS COMMUNICATIONS CORPORATION

(Exact name of registrant as specified in its charter)

 

INDIANA

(State of incorporation or organization)

0-23264

(Commission file number)

35-1542018

(I.R.S. Employer Identification No.)

ONE EMMIS PLAZA

40 MONUMENT CIRCLE, SUITE 700

INDIANAPOLIS, INDIANA 46204

(Address of principal executive offices)

(317) 266-0100

(Registrant’s Telephone Number, Including Area Code)

NOT APPLICABLE

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

Non-accelerated filer

(Do not check if a smaller reporting company)

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes       No  

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Class A common stock, $0.01 par value

EMMS

Nasdaq Global Select Market

The number of shares outstanding of each of Emmis Communications Corporation’s classes of common stock, as of July 2, 2019, was:

 

 

 

11,893,828

 

Shares of Class A Common Stock, $.01 Par Value

1,242,366

 

Shares of Class B Common Stock, $.01 Par Value

 

Shares of Class C Common Stock, $.01 Par Value

 

 

 

 

 

 


Table of Contents

 

INDEX

 

 

Page

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

3

Condensed Consolidated Statements of Operations for the three-month periods ended May 31, 2018 and 2019

3

Condensed Consolidated Statements of Comprehensive Income for the three-month periods ended May 31, 2018 and 2019

4

Condensed Consolidated Balance Sheets as of February 28, 2019 and May 31, 2019

5

Condensed Consolidated Statement of Changes in Equity for the three-month periods ended May 31, 2018 and 2019

6

Condensed Consolidated Statements of Cash Flows for the three-month periods ended May 31, 2018 and 2019

7

Notes to Condensed Consolidated Financial Statements

8

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

23

Item 3. Quantitative and Qualitative Disclosures about Market Risk

31

Item 4. Controls and Procedures

31

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

32

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

32

Item 6. Exhibits

33

Signatures

34

 

 


Table of Contents

 

PART I — FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)

 

 

 

Three Months Ended

May 31,

 

 

 

2018

 

 

2019

 

NET REVENUES

 

$

28,006

 

 

$

27,771

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

Station operating expenses excluding depreciation and amortization expense of $600 and $553, respectively

 

 

21,531

 

 

 

19,777

 

Corporate expenses excluding depreciation and amortization expense of $199 and $197, respectively

 

 

2,508

 

 

 

2,558

 

Depreciation and amortization

 

 

799

 

 

 

750

 

Gain on sale of assets, net of disposition costs

 

 

(32,067

)

 

 

 

Total operating expenses

 

 

(7,229

)

 

 

23,085

 

OPERATING INCOME

 

 

35,235

 

 

 

4,686

 

OTHER EXPENSE:

 

 

 

 

 

 

 

 

Interest expense

 

 

(2,641

)

 

 

(1,481

)

Loss on debt extinguishment

 

 

(771

)

 

 

 

Other income, net

 

 

16

 

 

 

12

 

Total other expense

 

 

(3,396

)

 

 

(1,469

)

INCOME BEFORE INCOME TAXES

 

 

31,839

 

 

 

3,217

 

PROVISION FOR INCOME TAXES

 

 

7,600

 

 

 

701

 

CONSOLIDATED NET INCOME

 

 

24,239

 

 

 

2,516

 

NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

 

754

 

 

 

846

 

NET INCOME ATTRIBUTABLE TO THE COMPANY

 

$

23,485

 

 

$

1,670

 

NET INCOME PER SHARE - BASIC

 

$

1.88

 

 

$

0.13

 

NET INCOME PER SHARE - DILUTED

 

$

1.75

 

 

$

0.13

 

WEIGHTED AVERAGE SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

Basic

 

 

12,483

 

 

 

12,773

 

Diluted

 

 

13,411

 

 

 

13,293

 

 

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

- 3 -


Table of Contents

 

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

May 31,

 

 

 

2018

 

 

2019

 

CONSOLIDATED NET INCOME

 

$

24,239

 

 

$

2,516

 

LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

 

754

 

 

 

846

 

COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

23,485

 

 

$

1,670

 

 

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

- 4 -


Table of Contents

 

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

 

February 28,

2019

 

 

May 31,

2019

 

 

 

 

 

 

 

(Unaudited)

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,438

 

 

$

2,760

 

Restricted cash

 

 

2,504

 

 

 

1,374

 

Accounts receivable, net

 

 

16,775

 

 

 

18,212

 

Prepaid expenses

 

 

3,831

 

 

 

4,968

 

Other current assets

 

 

1,446

 

 

 

1,428

 

Total current assets

 

 

29,994

 

 

 

28,742

 

PROPERTY AND EQUIPMENT, NET

 

 

23,477

 

 

 

23,043

 

INTANGIBLE ASSETS (NOTE 3):

 

 

 

 

 

 

 

 

Indefinite-lived intangibles

 

 

170,547

 

 

 

170,547

 

Goodwill

 

 

4,338

 

 

 

4,338

 

Other intangibles, net

 

 

758

 

 

 

686

 

Total intangible assets

 

 

175,643

 

 

 

175,571

 

OPERATING LEASE RIGHT-OF-USE ASSETS

 

 

 

 

 

23,820

 

OTHER ASSETS, NET

 

 

8,632

 

 

 

8,696

 

Total assets

 

$

237,746

 

 

$

259,872

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

4,451

 

 

$

5,323

 

Current maturities of long-term debt

 

 

32,150

 

 

 

8,922

 

Accrued salaries and commissions

 

 

2,570

 

 

 

2,218

 

Deferred revenue

 

 

4,055

 

 

 

5,027

 

Income taxes payable

 

 

11,218

 

 

 

7,339

 

Operating lease liabilities

 

 

 

 

 

3,688

 

Other current liabilities

 

 

2,922

 

 

 

1,637

 

Total current liabilities

 

 

57,366

 

 

 

34,154

 

LONG-TERM DEBT, NET OF CURRENT MATURITIES AND UNAMORTIZED DISCOUNT (NOTE 4)

 

 

48,757

 

 

 

71,478

 

OPERATING LEASE LIABILITIES, NET OF CURRENT

 

 

 

 

 

24,077

 

OTHER NONCURRENT LIABILITIES

 

 

6,024

 

 

 

2,437

 

DEFERRED INCOME TAXES

 

 

25,232

 

 

 

25,628

 

Total liabilities

 

 

137,379

 

 

 

157,774

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

EQUITY:

 

 

 

 

 

 

 

 

Class A common stock, $.01 par value; authorized 42,500,000 shares; issued and outstanding 11,809,291 shares at February 28, 2019 and 11,882,578 shares at May 31, 2019

 

 

118

 

 

 

119

 

Class B common stock, $.01 par value; authorized 7,500,000 shares; issued and outstanding 1,242,366 shares at February 28, 2019 and May 31, 2019

 

 

12

 

 

 

12

 

Additional paid-in capital

 

 

595,984

 

 

 

596,319

 

Accumulated deficit

 

 

(523,900

)

 

 

(522,230

)

Total shareholders’ equity

 

 

72,214

 

 

 

74,220

 

NONCONTROLLING INTERESTS

 

 

28,153

 

 

 

27,878

 

Total equity

 

 

100,367

 

 

 

102,098

 

Total liabilities and equity

 

$

237,746

 

 

$

259,872

 

 

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

- 5 -


Table of Contents

 

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Unaudited)

(In thousands, except share data)

 

 

 

Class A Common Stock

 

 

Class B Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Noncontrolling

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Interests

 

 

Equity

 

Balance, February 28, 2018

 

 

11,649,440

 

 

$

116

 

 

 

1,142,366

 

 

$

11

 

 

$

594,708

 

 

$

(547,252

)

 

$

30,680

 

 

$

78,263

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,485

 

 

 

754

 

 

 

24,239

 

Issuance of common stock to employees and officers, net

 

 

(4,097

)

 

 

 

 

 

 

1,000,000

 

 

 

1

 

 

 

389

 

 

 

 

 

 

 

 

 

 

 

390

 

Exercise of stock options

 

 

45,834

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

119

 

 

 

 

 

 

 

 

 

 

 

120

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,721

)

 

 

(1,721

)

Balance, May 31, 2018

 

 

11,691,177

 

 

$

117

 

 

 

2,142,366

 

 

$

12

 

 

$

595,216

 

 

$

(523,767

)

 

$

29,713

 

 

$

101,291

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, February 28, 2019

 

 

11,809,291

 

 

$

118

 

 

 

1,242,366

 

 

$

12

 

 

$

595,984

 

 

$

(523,900

)

 

$

28,153

 

 

$

100,367

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,670

 

 

 

846

 

 

 

2,516

 

Issuance of common stock to employees and officers, net

 

 

56,458

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

312

 

 

 

 

 

 

 

 

 

 

 

313

 

Exercise of stock options

 

 

16,829

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23

 

 

 

 

 

 

 

 

 

 

 

23

 

Distributions to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,121

)

 

 

(1,121

)

Balance, May 31, 2019

 

 

11,882,578

 

 

$

119

 

 

 

1,242,366

 

 

$

12

 

 

$

596,319

 

 

$

(522,230

)

 

$

27,878

 

 

$

102,098

 

 

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

- 6 -


Table of Contents

 

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

 

 

 

Three Months Ended May 31,

 

 

 

2018

 

 

2019

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Consolidated net income

 

$

24,239

 

 

$

2,516

 

Adjustments to reconcile consolidated net income to net cash used in operating activities -

 

 

 

 

 

 

 

 

Gain on sale of assets, net of disposition costs

 

 

(32,067

)

 

 

 

Depreciation and amortization

 

 

799

 

 

 

750

 

Amortization of debt discount

 

 

465

 

 

 

139

 

Noncash accretion of debt

 

 

21

 

 

 

21

 

Loss on debt extinguishment

 

 

771

 

 

 

 

Provision for bad debts

 

 

698

 

 

 

64

 

Deferred income taxes

 

 

(4,181

)

 

 

396

 

Noncash compensation

 

 

463

 

 

 

395

 

Changes in assets and liabilities -

 

 

 

 

 

 

 

 

Accounts receivable

 

 

2,518

 

 

 

(1,501

)

Prepaid expenses and other current assets

 

 

(387

)

 

 

(1,119

)

Other assets

 

 

(22

)

 

 

884

 

Accounts payable and accrued liabilities

 

 

(5,146

)

 

 

507

 

Deferred revenue

 

 

1,534

 

 

 

972

 

Income taxes

 

 

9,245

 

 

 

(3,891

)

Other liabilities

 

 

239

 

 

 

(1,863

)

Net cash used in operating activities

 

 

(811

)

 

 

(1,730

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(20

)

 

 

(244

)

Proceeds from the sale of assets

 

 

60,000

 

 

 

 

Net cash provided by (used in) investing activities

 

 

59,980

 

 

 

(244

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Payments on long-term debt

 

 

(54,533

)

 

 

(27,050

)

Proceeds from long-term debt

 

 

2,500

 

 

 

27,000

 

Debt-related costs

 

 

 

 

 

(617

)

Distributions to noncontrolling interests

 

 

(1,721

)

 

 

(1,121

)

Proceeds from the exercise of stock options

 

 

119

 

 

 

23

 

Settlement of tax withholding obligations on stock issued to employees

 

 

(73

)

 

 

(69

)

Net cash used in financing activities

 

 

(53,708

)

 

 

(1,834

)

INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

 

5,461

 

 

 

(3,808

)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

 

 

 

 

 

 

 

 

Beginning of period

 

 

6,115

 

 

 

7,942

 

End of period

 

$

11,576

 

 

$

4,134

 

SUPPLEMENTAL DISCLOSURES:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

2,043

 

 

$

1,246

 

Cash paid for income taxes, net

 

 

369

 

 

 

4,195

 

Noncash financing transactions-

 

 

 

 

 

 

 

 

Stock issued to employees and directors

 

 

463

 

 

 

382

 

 

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

- 7 -


Table of Contents

 

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

May 31, 2019

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Preparation of Interim Financial Statements

Pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), the condensed consolidated interim financial statements included herein have been prepared, without audit, by Emmis Communications Corporation (“ECC”) and its subsidiaries (collectively, “our,” “us,” “we,” “Emmis” or the “Company”). As permitted under the applicable rules and regulations of the SEC, certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations; however, Emmis believes that the disclosures are adequate to make the information presented not misleading. The condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report for Emmis filed on Form 10-K for the year ended February 28, 2019. The Company’s results are subject to seasonal fluctuations. Therefore, results shown on an interim basis are not necessarily indicative of results for a full year.

In the opinion of Emmis, the accompanying condensed consolidated interim financial statements contain all material adjustments (consisting only of normal recurring adjustments, except as otherwise noted) necessary to present fairly the consolidated financial position of Emmis at May 31, 2019, the results of its operations for the three-month periods ended May 31, 2018 and 2019, and cash flows for the three-month periods ended May 31, 2018 and 2019.

There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended February 28, 2019 that have had a material impact on our condensed consolidated financial statements and related notes.

Basic and Diluted Net Income Per Common Share

Basic net income per common share is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted net income per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted. Potentially dilutive securities at May 31, 2018 and 2019 consisted of stock options and restricted stock awards. The following table sets forth the calculation of basic and diluted net income per share:

 

 

 

 

For the Three Months Ended May 31,

 

 

 

2018

 

 

2019

 

 

 

Net Income

 

 

Shares

 

 

Net Income

Per Share

 

 

Net Income

 

 

Shares

 

 

Net Income

Per Share

 

 

 

(amounts in 000’s, except per share data)

 

Basic net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common shareholders

 

$

23,485

 

 

 

12,483

 

 

$

1.88

 

 

$

1,670

 

 

 

12,773

 

 

$

0.13

 

Impact of equity awards

 

 

 

 

 

928

 

 

 

 

 

 

 

 

 

520

 

 

 

 

Diluted net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income available to common shareholders

 

$

23,485

 

 

 

13,411

 

 

$

1.75

 

 

$

1,670

 

 

 

13,293

 

 

$

0.13

 

 

Shares excluded from the calculation as the effect of their conversion into shares of our common stock would be antidilutive were as follows:

 

 

 

For the Three Months

Ended May 31,

 

 

 

2018

 

 

2019

 

 

 

(shares in 000’s )

 

Equity awards

 

 

849

 

 

 

1,588

 

Antidilutive common share equivalents

 

 

849

 

 

 

1,588

 

 

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Local Programming and Marketing Agreement Fees

The Company from time to time enters into local programming and marketing agreements (“LMAs”), often pending regulatory approval of transfer of the Federal Communications Commission ("FCC") licenses in connection with acquisitions or dispositions of radio stations. Under the terms of these agreements, the acquiring company makes specified periodic payments to the holder of the FCC license in exchange for the right to program and sell advertising for a specified portion of the station’s inventory of broadcast time. The acquiring company records revenues and expenses associated with the portion of the station’s inventory of broadcast time it manages. Nevertheless, as the holder of the FCC license, the owner-operator retains control and responsibility for the operation of the station, including responsibility over all programming broadcast on the station.

On April 30, 2018, Emmis closed on the sale of substantially all of its radio station assets in St. Louis. The St. Louis stations were operated pursuant to LMAs from March 1, 2018 through April 30, 2018. The buyers of the stations paid LMA fees totaling $0.7 million during the period, which was recognized as a component of net revenues in the accompanying condensed consolidated statements of operations for the three-month period ending May 31, 2018.

On April 26, 2012, Emmis entered into an LMA with a subsidiary of Disney Enterprises, Inc. for 98.7FM in New York (formerly WRKS-FM and now WEPN-FM, hereinafter referred to as “98.7FM”). The LMA for this station started on April 30, 2012 and will continue until August 31, 2024. Emmis retains ownership and control of the station, including the related FCC license during the term of the LMA and is scheduled to receive an annual fee until the LMA’s termination. LMA fee revenue is recorded on a straight-line basis over the term of the LMA as a component of net revenues in our accompanying condensed consolidated statements of operations.

The following table summarizes certain operating results of 98.7FM for all periods presented. Net revenues for 98.7FM are solely related to LMA fees. 98.7FM is a part of our radio segment.

 

 

 

For the Three Months

Ended May 31,

 

 

 

2018

 

 

2019

 

Net revenues

 

$

2,583

 

 

$

2,583

 

Station operating expenses, excluding depreciation and amortization expense

 

 

297

 

 

 

350

 

Interest expense

 

 

609

 

 

 

540

 

 

Assets and liabilities of 98.7FM as of February 28, 2019 and May 31, 2019 were as follows:

 

 

 

As of

February 28,

2019

 

 

As of

May 31,

2019

 

Current assets:

 

 

 

 

 

 

 

 

Restricted cash

 

$

1,504

 

 

$

1,149

 

Prepaid expenses

 

 

394

 

 

 

380

 

Other current assets

 

 

340

 

 

 

432

 

Total current assets

 

 

2,238

 

 

 

1,961

 

Noncurrent assets:

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

188

 

 

 

183

 

Indefinite lived intangibles

 

 

46,390

 

 

 

46,390

 

Deposits and other

 

 

6,255

 

 

 

6,124

 

Total noncurrent assets

 

 

52,833

 

 

 

52,697

 

Total assets

 

$

55,071

 

 

$

54,658

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

15

 

 

$

15

 

Current maturities of long-term debt

 

 

7,150

 

 

 

7,297

 

Deferred revenue

 

 

864

 

 

 

894

 

Other current liabilities

 

 

162

 

 

 

156

 

Total current liabilities

 

 

8,191

 

 

 

8,362

 

Noncurrent liabilities:

 

 

 

 

 

 

 

 

Long-term debt, net of current portion and unamortized debt discount

 

 

38,747

 

 

 

36,947

 

Total noncurrent liabilities

 

 

38,747

 

 

 

36,947

 

Total liabilities

 

$

46,938

 

 

$

45,309

 

 

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Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed consolidated balance sheets to the same amounts shown in the condensed consolidated statements of cash flows.

 

 

 

As of

February 28,

2019

 

 

As of

May 31,

2019

 

Cash and cash equivalents

 

$

5,438

 

 

$

2,760

 

Restricted cash:

 

 

 

 

 

 

 

 

98.7FM LMA restricted cash

 

 

1,504

 

 

 

1,149

 

Cash used to secure the Company's purchasing card and travel and expense program

 

 

1,000

 

 

 

225

 

Total cash, cash equivalents and restricted cash

 

$

7,942

 

 

$

4,134

 

 

As of February 28, 2019 and May 31, 2019, restricted cash relates to cash on deposit in trust accounts related to our 98.7FM LMA in New York City that services long-term debt and cash held by JPMorgan Chase as collateral to secure the Company’s corporate purchasing card and travel and expense program.

Noncontrolling Interests

The Company follows Accounting Standards Codification paragraph 810-10-65-1 to report the noncontrolling interests related to our Austin radio partnership and Digonex Technologies Inc., a dynamic pricing business (hereinafter "Digonex"). We have a 50.1% controlling interest in our Austin radio partnership. We do not own any of the common equity of Digonex, but we consolidate the entity because we control its board of directors via rights granted in convertible preferred stock and convertible debt that we own. As of May 31, 2019, Emmis owns rights that are convertible into approximately 84% of Digonex's common equity.

Noncontrolling interests represent the noncontrolling interest holders' proportionate share of the equity of the Austin radio partnership and Digonex. Noncontrolling interests are adjusted for the noncontrolling interest holders' proportionate share of the earnings or losses of the applicable entity. The noncontrolling interest continues to be attributed its share of losses even if that attribution results in a deficit noncontrolling interest balance. Below is a summary of the noncontrolling interest activity for the three months ended May 31, 2018 and 2019:

 

 

 

Austin radio

partnership

 

 

Digonex

 

 

Total

noncontrolling

interests

 

Balance, February 28, 2018

 

$

47,424

 

 

$

(16,744

)

 

$

30,680

 

Net income (loss)

 

 

1,372

 

 

 

(618

)

 

 

754

 

Distributions to noncontrolling interests

 

 

(1,721

)

 

 

 

 

 

(1,721

)

Balance, May 31, 2018

 

$

47,075

 

 

$

(17,362

)

 

$

29,713

 

Balance, February 28, 2019

 

$

47,146

 

 

$

(18,993

)

 

$

28,153

 

Net income (loss)

 

 

1,347

 

 

 

(501

)

 

 

846

 

Distributions to noncontrolling interests

 

 

(1,121

)

 

 

 

 

 

(1,121

)

Balance, May 31, 2019

 

$

47,372

 

 

$

(19,494

)

 

$

27,878

 

 

Implementation of Recent Accounting Pronouncements

On March 1, 2019, we adopted Accounting Standard Update 2016-02, Leases, using the modified retrospective approach, applied at the beginning of the period of adoption, and we elected the package of transitional practical expedients. The adoption of this standard resulted in recording operating lease liabilities of approximately $28.8 million as of March 1, 2019 along with a corresponding right-of-use asset. The implementation of this standard did not have an impact on our condensed consolidated statements of operations. See Note 11 for more discussion of the Company’s leases.

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Recent Accounting Pronouncements Not Yet Implemented

In June 2016, the Financial Accounting Standards Board issued Accounting Standards Update 2016-13, Financial Instruments – Credit Losses, which introduces new guidance for an approach based on using expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. Instruments in scope include loans, held-to-maturity debt securities and net investments in leases as well as reinsurance and trade receivables. This standard will be effective for us as of March 1, 2020. We are currently evaluating the impact that the adoption of the new standard will have on our condensed consolidated financial statements.

Note 2. Share Based Payments

The amounts recorded as share based compensation expense consist of stock option grants, restricted stock grants, and common stock issued to employees and directors in lieu of cash payments.

Stock Option Awards

The Company has granted options to purchase its common stock to employees and directors of the Company under various stock option plans at no less than the fair market value of the underlying stock on the date of grant. These options are granted for a term not exceeding 10 years and are forfeited, except in certain circumstances, in the event the employee or director terminates his or her employment or relationship with the Company. Generally, these options either vest annually over 3 years (one-third each year for 3 years), or cliff vest at the end of 3 years. The Company issues new shares upon the exercise of stock options.

The fair value of each option awarded is estimated on the date of grant using a Black-Scholes option-pricing model and expensed on a straight-line basis over the vesting period. Expected volatilities are based on historical volatility of the Company’s stock. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. The Company includes estimated forfeitures in its compensation cost and updates the estimated forfeiture rate through the final vesting date of awards. The risk-free interest rate for periods within the life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The following assumptions were used to calculate the fair value of the Company’s options on the date of grant during the three months ended May 31, 2018 and 2019:

 

 

 

Three Months Ended May 31,

 

 

 

2018

 

 

2019

 

Risk-Free Interest Rate:

 

2.6%

 

 

2.5% - 2.6%

 

Expected Dividend Yield:

 

0%

 

 

0%

 

Expected Life (Years):

 

4.8

 

 

4.6

 

Expected Volatility:

 

53.2%

 

 

50.3% - 50.4%

 

 

The following table presents a summary of the Company’s stock options outstanding at May 31, 2019, and stock option activity during the three months ended May 31, 2019 (“Price” reflects the weighted average exercise price per share; "Aggregate Intrinsic Value" dollars in thousands):

 

 

 

Options

 

 

Price

 

 

Weighted

Average

Remaining

Contractual

Term

 

 

Aggregate

Intrinsic

Value

 

Outstanding, beginning of period

 

 

2,738,087

 

 

$

4.72

 

 

 

 

 

 

 

 

 

Granted

 

 

224,500

 

 

 

3.71

 

 

 

 

 

 

 

 

 

Exercised

 

 

16,829

 

 

 

1.39

 

 

 

 

 

 

 

 

 

Forfeited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expired

 

 

10,375

 

 

 

3.75

 

 

 

 

 

 

 

 

 

Outstanding, end of period

 

 

2,935,383

 

 

 

4.67

 

 

 

6.1

 

 

$

1,371

 

Exercisable, end of period

 

 

2,248,708

 

 

 

4.97

 

 

 

5.2

 

 

$

1,165

 

 

Cash received from option exercises for the three months ended May 31, 2018 and 2019 was $0.1 million and less than $0.1 million, respectively. The Company did not record an income tax benefit relating to the options exercised during the three months ended May 31, 2018 or 2019.

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The weighted average per share grant date fair value of options granted during the three months ended May 31, 2018 and 2019, was $2.03 and $1.65, respectively.

A summary of the Company’s nonvested options at May 31, 2019, and changes during the three months ended May 31, 2019, is presented below:

 

 

 

Options

 

 

Weighted

Average

Grant Date

Fair Value

 

Nonvested, beginning of period

 

 

608,175

 

 

$

1.64<