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, 2017 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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 Table of Contents The number of shares outstanding of each of Emmis Communications Corporation’s classes of common stock, as of July 7, 2017, was: 11,381,001 Shares of Class A Common Stock, $.01 Par Value 1,142,366 Shares of Class B Common Stock, $.01 Par Value — Shares of Class C Common Stock, $.01 Par Value INDEX Page PART I — FINANCIAL INFORMATION Item 1. Financial Statements 3 Condensed Consolidated Statements of Operations for the three-month periods ended May 31, 2016 and 2017 3 Condensed Consolidated Statements of Comprehensive Income for the three-month periods ended May 31, 2016 and 2017 4 Condensed Consolidated Balance Sheets as of February 28, 2017 and May 31, 2017 5 Condensed Consolidated Statement of Changes in Deficit for the three-month period ended May 31, 2017 7 Condensed Consolidated Statements of Cash Flows for the three-month periods ended May 31, 2016 and 2017 8 Notes to Condensed Consolidated Financial Statements 10 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25 Item 3. Quantitative and Qualitative Disclosures about Market Risk 34 Item 4. Controls and Procedures 34 PART II — OTHER INFORMATION Item 1. Legal Proceedings 34 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 35 Item 6. Exhibits 36 Signatures 37 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, 2016 2017 NET REVENUES $ 56,002 $ 40,164 OPERATING EXPENSES: Station operating expenses excluding depreciation and amortization expense of $1,110 and $794, respectively 42,989 31,230 Corporate expenses excluding depreciation and amortization expense of $222 and $184, respectively 3,044 2,743 Depreciation and amortization 1,332 978 Total operating expenses 47,365 34,951 OPERATING INCOME 8,637 5,213 OTHER EXPENSE: Interest expense (4,690) (4,666) Other income, net 43 3 Total other expense (4,647) (4,663) INCOME BEFORE INCOME TAXES 3,990 550 PROVISION (BENEFIT) FOR INCOME TAXES 675 (22) CONSOLIDATED NET INCOME 3,315 572 NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS 629 839 NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY 2,686 (267) NET INCOME (LOSS) PER SHARE - BASIC $ 0.23 $ (0.02) NET INCOME (LOSS) PER SHARE - DILUTED $ 0.23 $ (0.02) WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 11,768 12,257 Diluted 11,824 12,257 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, 2016 2017 CONSOLIDATED NET INCOME $ 3,315 $ 572 LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS 629 839 COMPREHENSIVE INCOME (LOSS ) ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 2,686 $ (267) 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) May 31, February 28, 2017 2017 (Unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 11,349 $ 2,190 Restricted cash 2,323 2,310 Accounts receivable, net 26,484 27,742 Prepaid expenses 4,798 6,782 Other current assets 1,503 4,704 Total current assets 46,457 43,728 PROPERTY AND EQUIPMENT, NET 30,845 29,012 INTANGIBLE ASSETS (NOTE 3): Indefinite-lived intangibles 197,666 195,648 Goodwill 4,603 4,603 Other intangibles, net 1,523 1,354 Total intangible assets 203,792 201,605 OTHER ASSETS, NET 8,244 8,375 Total assets $ 289,338 $ 282,720 The accompanying notes are an integral part of these unaudited condensed consolidated statements. -5- Table of Contents EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED) (In thousands, except share data) May 31, February 28, 2017 2017 (Unaudited) LIABILITIES AND DEFICIT CURRENT LIABILITIES: Accounts payable and accrued expenses $ 13,398 $ 5,324 Current maturities of long-term debt (Note 4) 23,600 21,633 Accrued salaries and commissions 6,238 3,731 Deferred revenue 4,560 5,813 Other current liabilities 6,807 6,146 Total current liabilities 54,603 42,647 LONG-TERM DEBT, NET OF CURRENT MATURITIES (NOTE 4) 190,372 195,745 OTHER NONCURRENT LIABILITIES 4,842 4,645 DEFERRED INCOME TAXES 43,537 43,512 Total liabilities 293,354 286,549 COMMITMENTS AND CONTINGENCIES DEFICIT: Class A common stock, $.01 par value; authorized 42,500,000 shares; issued and outstanding 11,278,065 shares at February 28, 2017 and 11,378,812 shares at May 31, 2017 113 114 Class B common stock, $.01 par value; authorized 7,500,000 shares; issued and outstanding 1,142,366 shares at February 28, 2017 and May 31, 2017 11 11 Additional paid-in capital 592,320 593,006 Accumulated deficit (629,381) (629,648) Total shareholders’ deficit (36,937) (36,517) NONCONTROLLING INTERESTS 32,921 32,688 Total deficit (4,016) (3,829) Total liabilities and deficit $ 289,338 $ 282,720 The accompanying notes are an integral part of these unaudited condensed consolidated statements. -6- Table of Contents EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN DEFICIT (Unaudited) (In thousands, except share data) Class A Class B Common Stock Common Stock Additional Accumulated Noncontrolling Shares Amount Shares Amount Paid-in Capital Deficit Interests Total Deficit Balance, February 28, 2017 11,278,065 $ 113 1,142,366 $ 11 $ 592,320 $ (629,381) $ 32,921 $ (4,016) Net (loss) income (267) 839 572 Issuance of common stock to employees and officers 76,372 1 631 632 Exercise of stock options 24,375 55 55 Distributions to noncontrolling interests (1,072) (1,072) Balance, May 31, 2017 11,378,812 $ 114 1,142,366 $ 11 $ 593,006 $ (629,648) $ 32,688 $ (3,829) The accompanying notes are an integral part of these unaudited condensed consolidated statements. -7- Table of Contents EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in thousands) Three Months Ended May 31, 2016 2017 CASH FLOWS FROM OPERATING ACTIVITIES: Consolidated net income $ 3,315 $ 572 Adjustments to reconcile consolidated net income to net cash provided by (used in) operating activities - Depreciation and amortization 1,332 978 Amortization of debt discount 427 651 Noncash accretion of debt 186 185 (Recovery of) provision for bad debts (36) 92 Provision (benefit) for deferred income taxes 634 (25) Noncash compensation 856 689 Other 2 — Changes in assets and liabilities - Restricted cash (283) 13 Accounts receivable (2,020) (1,350) Prepaid expenses and other current assets (573) (1,746) Other assets (258) (131) Accounts payable and accrued liabilities (2,533) (10,581) Deferred revenue 1,477 1,253 Income taxes (124) (115) Other liabilities (333) (743) Net cash provided by (used in) operating activities 2,069 (10,258) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (402) (397) Other 23 — Net cash used in investing activities (379) (397) -8- Table of Contents EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES