Indianapolis…Emmis Communications Corporation (NASDAQ: EMMS) today announced results for its second fiscal quarter ending August 31, 2003.
“This quarter is the continuation of a very good year at Emmis, as our divisions continue to outperform their industries,” Jeff Smulyan, Chairman and CEO of Emmis, said. “In radio, we outperformed our markets by 4.5%, while in television we outperformed our markets by 3.8%. The audience share gains we realized this quarter continue to position Emmis for future growth.”
In total, pro forma net revenue for the quarter was $158.2 million, compared to $148.4 million for the same quarter of the prior year, an increase of 7%.
Earnings Per Share (EPS) for the quarter was $0.14, compared to $(0.13) for the same quarter of the prior year. These results exceed the company’s previous guidance, as well as Wall Street First Call consensus estimates for revenues and profitability.
For the second fiscal quarter, reported radio net revenues increased 16%, while pro forma radio net revenues increased 10%. Reported television net revenues increased 1% and pro forma television net revenues increased 3% in a non-political year, replacing approximately $2.0 million in political advertising revenues from the prior year. Publishing net revenues were up 3%.
For the second fiscal quarter, operating income was $37.2 million for the quarter, compared to $35.8 million for the same quarter of the prior year. Emmis’ station operating income was $60.1 million, compared to $57.3 million for the same quarter of the prior year, an increase of 5%.
Emmis has included supplemental pro forma net revenues and station operating expenses, excluding non-cash compensation, on its website, www.emmis.com. This information, which includes all consummated station and magazine acquisitions and dispositions, can be found under the “Investors” tab.
During the quarter Emmis completed the transactions which results in its ownership of 50.1% of a six-station radio cluster in Austin, Texas for approximately $106 million. The radio stations involved are KLBJ-AM (590 News-Talk), KLBJ-FM (93.7 Rock), KGSR-FM (107.1 Adult Alternative), KROX-FM (101.5 Alternative), KEYI-FM (103.5 Oldies) and KXMG-FM (93.3 Hip Hop). Emmis already owns Texas Monthly in the market.
Net revenues attributable to the Austin radio stations and included in reported results were $4.4 million. Station operating expenses attributable to the Austin radio stations and included in reported results were $2.6 million.
Also during the second quarter, Emmis sold Portland, Oregon-based Mira Mobile Television, a remote production facilities for sports, corporate, and entertainment clients throughout the western United States, to an ownership group for $4 million. Emmis acquired Mira Mobile in October 2000 in connection with the purchase of certain television assets from Lee Enterprises, Inc.
International radio net revenues for the three and six months ended August 31, 2003, were $4.6 million and $7.2 million, respectively. International radio net revenues for the three and six months ended August 31, 2002, were $3.1 million and $5.3 million, respectively. International radio station operating expenses for the three and six months ended August 31, 2003, were $3.1 million and $5.6 million, respectively. International radio station operating expenses for the three and six months ended August 31, 2002, were $2.4 million and $4.9 million, respectively.
Emmis entered into various interest rate swap agreements in fiscal 2002, at a time when interest rates were substantially higher than they are today. Emmis has included a summary of these swap agreements under the “Investors” tab on its website. On the same tab of the website, the company has provided a detailed calculation of its leverage ratios as of Aug. 31, 2003.
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 and (ii) Mira Mobile, a mobile television production company, in June 2003.
The follow table reconciles reported results to pro forma results (dollars in thousands):
| 3 months ended Aug. 31, | % Change | 6 months ending Aug. 31, | % Change | |||
| 2003 | 2002 | 2003 | 2002 | |||
| Radio | ||||||
| Reported net revenues | $81,159 | $69,890 | 16% | $145,756 | $132,614 | 10% |
| Plus: Revenues from assets acquired | 2,456 | 6,063 | 8,860 | 12,438 | ||
| Less: net revenues from assets disposed | — | — | — | — | (1,235) | |
| Pro forma net revenues | $83,615 | $75,952 | 10% | $154,616 | $143,817 | 8% |
| Television | ||||||
| Reported net revenues | $56,052 | $55,426 | 1% | $116,350 | $112,583 | 3% |
| Plus: Revenues from assets acquired | — | 197 | — | 382 | ||
| Less: net revenues from assets disposed | (6) | (1,045) | (1,140) | (1,856) | ||
| Pro forma net revenues | $56,046 | $54,578 | 3% | $115,210 | $111,109 | 4% |
| Publishing | ||||||
| Reported net revenues | $18,498 | $17,906 | 3% | $35,964 | $34,831 | 3% |
| Plus: Revenues from assets acquired | — | — | — | — | ||
| Less: net revenues from assets disposed | — | — | — | — | ||
| Pro forma net revenues | $18,498 | $17,906 | 3% | $35,964 | $34,831 | 3% |
| Total Company | ||||||
| Reported net revenues operating income | $155,709 | $143,222 | 9% | $298,070 | $280,028 | 6% |
| Plus: Revenues from assets acquired | 2,456 | 6,259 | 8,860 | 12,820 | ||
| Less: Revenues from assets disposed | (6) | (1,045) | (1,140) | (3,091) | ||
| Pro forma net revenues | $158,159 | $148,436 | 7% | $305,790 | $289,757 | 6% |
| Guidance Table (Dollars in millions) |
|||
| Quarter Ending 11/30/03 | Quarter Ending 2/29/04 | Reported Full Year | |
| Net Revenues: | |||
| Domestic Radio | $71.7 – $73.1 | $60.0 – $61.1 | $270.2 – $272.7 |
| International Radio | $3.2 – $3.3 | $4.0 – $4.1 | $14.4 – $14.6 |
| Total Radio | $74.9 – $76.4 | $64.0 – $65.2 | $284.6 – $287.3 |
| Television | $62.0 – $62.7 | $55.0 – $56.0 | $233.4 – $235.0 |
| Publishing | $20.9 – $21.1 | $18.2 – $18.6 | $75.1 – $75.7 |
| Total net revenues | $157.8 – $160.2 | $137.2 – $139.8 | $593.1 – $598.0 |
| Station Operating Expenses, excluding non-cash compensation: | |||
| Domestic Radio | $37.5 – $37.9 | $36.5 – $36.8 | $147.1 – $147.8 |
| International Radio | $2.7 – $2.8 | $2.8 – $3.0 | $11.3 |
| Total Radio | $40.2 – $40.7 | $39.3 – $39.8 | $158.4 – $159.1 |
| Television | $37.6 – $37.8 | $39.0 – $39.2 | $150.8 – $150.9 |
| Publishing | $16.3 – $16.4 | $16.5 – $16.8 | $65.5 – $65.8 |
| Total station operating expenses, excluding non-cash comp | $94.1 – $94.9 | $94.8 – $95.8 | $374.8 – $375.7 |
The above domestic radio net revenue guidance implies pro forma growth of 4%-6% in Q3 and 4%-6% in Q4. Prior year pro forma results are available on the company’s website.
Emmis will host a conference call regarding this information on Tuesday, Sept. 30, 2003 at 9 a.m. Eastern at 1.773.756.4621, with a replay available until Tuesday, Oct. 7 by calling 1.402.998.0628 (passcode 5895) 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.