Emmis Communications Reports 4th Quarter and Full-Year Results

Market share gains in radio and television continue

Indianapolis… Emmis Communications Corporation (NASDAQ: EMMS) today announced results for its fourth fiscal quarter and full year ending Feb. 29, 2004.

For the fourth fiscal quarter, reported net revenue was $136.9 million, compared to $126.8 million for the same quarter of the prior year, an increase of 8%. On a pro forma basis, net revenue for the quarter was $136.9 million, compared to $130.2 million for the same quarter of the prior year, an increase of 5%. Diluted Earnings Per Share (EPS) for the quarter were ($0.43) compared to diluted EPS of ($0.14) for the same quarter of the prior year. Included in the current quarter is a loss from discontinued operations of $10.4 million, or $0.19 per share, and a non-cash impairment loss resulting from the company’s annual SFAS 142 review of $12.4 million, or $0.14 per share, net of tax.

“This has been a tremendous year for Emmis,” said Jeff Smulyan, Chairman and CEO of Emmis. “Despite a challenging advertising environment, our radio stations outperformed our markets by 2% in our fiscal year, while in our television markets that are measured, we outperformed for the calendar year by 4%. The employees of Emmis deserve the credit for making the extraordinary happen.”

For the fourth quarter, reported radio net revenues increased 9%, while pro forma radio net revenues increased 2%. Reported television net revenues increased 8% and pro forma television net revenues increased 9%. Publishing net revenues increased 4%.

For the fourth quarter, operating income was $6.73 million including the $12.4 million impairment charge, compared to $15.79 million for the same quarter of the prior year. Emmis’ station operating income for the fourth quarter was $43.0 million, compared to $37.6 million for the same quarter of the prior year, an increase of 14%.

For the full year, net revenue grew to $591.9 million from $562.4 million, an increase of 5%. Operating income was $114.0 million for the year, including the $12.4 million impairment charge, down from $125.9 million of the prior year. Station operating income rose to $220.4 million this year from $213.1 million in the prior year.

Emmis has included supplemental pro forma net revenues station operating expenses excluding non-cash compensation and certain other finanicial data, on its website, www.emmis.com. This information, which includes all announced and consummated station and magazine acquisitions and dispositions, and certain other balance sheet data and cash interest expense, can be found under the “Investors” tab.

As of Feb. 29, 2004, Emmis’ total debt-to-EBITDA leverage (including senior discount notes) was 6.7x compared with Emmis’ Feb. 28, 2002 leverage of 9.3x. The company’s senior bank leverage is under 4x, and Emmis Operating Company’s total debt-to-EBITDA leverage is 5.5x. On the same tab of the website, the company has provided a detailed calculation of its leverage ratios as of Feb. 29, 2004.

During the fourth quarter, Emmis announced that it agreed to sell its controlling interest in Votionis, S.A., an Argentine broadcasting company, to its local minority partners, Daniel Hadad and Viviana Zocco, for approximately $7.3 million in cash. That transaction is expected to close in the first half of 2004, subject to regulatory approval. Votionis operates one AM and one FM station in Buenos Aires. Emmis also announced that the Flemish Government has awarded licenses to operate nine FM radio stations serving more than 50% of the population in the Flanders region of Belgium

International radio net revenues for the quarter ended Feb. 29, 2004, were $3.9 million. International radio station operating expenses for the fourth quarter were $2.7 million.

Pro forma calculations assume the following events all had occurred on March 1, 2002: (a) the acquisition of (i) a controlling interest of 50.1% in a partnership that owns six radio stations in the Austin, Texas metropolitan area in July 2003 and (ii) WBPG-TV in March 2003 and (b) the disposition of (i) KALC-FM and KXPK-FM in May 2002, (ii) Mira Mobile, a mobile television production company, in June 2003, and (c) the announced sale of two radio stations in Argentina.

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

3 months ended Feb. 28 (29), Change 12 months ended Feb. 28 (29), Change
  2004 2003 % 2004 2003 %
Radio
Reported net revenues $61,725 $56,494 9% $279,882 $254,818 10%
Plus: Revenues from assets acquired 5,056   8,860 23,395  
Less: net revenues from assets disposed (1,057)   (3,884)  
Pro forma net revenues $61,725 $60,493 2% $288,682 $274,329 5%
 
Television
Reported net revenues $56,406 $52,259 8% $235,938 $234,752 1%
Plus: Revenues from assets acquired 266   1,033  
Less: net revenues from assets disposed (879)   (1,140) (3,401)  
Pro forma net revenues $56,406 $51,646 9% $234,798 $232,384 1%
 
Publishing
Reported net revenues $18,809 $18,038 4% $76,108 $72,793 5%
Plus: Revenues from assets acquired    
Less: net revenues from assets disposed    
Pro forma net revenues $18,809 $18,038 4% $76,108 $72,793 5%
 
Total Company
Reported net revenues operating income $136,940 $126,791 8% $591,868 $562,363 5%
Plus: Revenues from assets acquired 5,322   8,860 24,428  
Less: Revenues from assets disposed   (1,936)   (1,140) (7,285)  
Pro forma net revenues $136,940 $130,177 5% $599,588 $579,506 3%
Guidance Table
(Dollars in millions)
  Quarter Ending 5/31/04
Net Revenues:
Domestic Radio $71.8
International Radio $2.9
Total Radio $74.7
Television $65.7
Publishing $17.9
Total net revenues $158.3
Station Operating Expenses, excluding non-cash compensation:
Domestic Radio $39.6
International Radio $2.7
Total Radio $42.3
Television $40.7
Publishing $17.1
Total station operating expenses, excluding non-cash comp $100.1

The above domestic radio net revenue guidance implies pro forma growth of 5% in Q1. The above international radio guidance excludes operating results of Emmis’ two Argentine radio stations, which it expects to sell shortly. Prior year pro forma results are available on the company’s website.

Emmis will host a conference call regarding this information on Thursday, April 15, 2004 at 9 a.m. Eastern at 1.773.756.4626, with a replay available until Thursday, April 22, 2004 at 1.402.220.6016, or listen on-line by logging on to 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 accounting principles generally accepted in the United States, and should be viewed as a supplement to and not a substitute for our results of operations presented on the basis of accounting principles generally accepted in the United States. 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
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Emmis Communications is an Indianapolis based diversified media firm with radio broadcasting, television broadcasting and magazine publishing operations. Emmis’ 23 FM and 4 AM domestic radio stations serve 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 addition, Emmis owns two radio networks, three international radio stations, 16 television stations, and regional and specialty magazines, and ancillary businesses in broadcast sales and book publishing.