UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

AMENDMENT NO. 1

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

(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)

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  þ  No  o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes  þ  No  o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes  o  No  þ

     The number of shares outstanding of each of Emmis Communications Corporation’s classes of common stock, as of October 1, 2005, was:

31,988,859		Shares of Class A Common Stock, $.01 Par Value
4,879,784		Shares of Class B Common Stock, $.01 Par Value
0		Shares of Class C Common Stock, $.01 Par Value

 

 

Explanatory Note

          The sole purpose of this amendment to our quarterly report on Form 10-Q for the fiscal quarter ended August 31, 2005 is to restate our classification of our Series A Cumulative Convertible Preferred Stock as mezzanine, outside of permanent equity, on our balance sheet. The restatement has no impact on the statements of operations, the statements of cash flows, or any balance sheet items except for shareholders’ 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. As previously disclosed, the impact of the reclassification in the balance sheet was a reduction in shareholders’ equity by $143,750,000 and the reflection of that amount in mezzanine between liabilities and shareholders’ equity. For additional information, see our Current Report on Form 8-K, filed on April 19, 2006.

INDEX

		Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements			3
Condensed Consolidated Statements of Operations for the three-month and six-month periods ended August 31, 2004 and 2005			3
Condensed Consolidated Balance Sheets as of February 28, 2005 and August 31, 2005			5
Condensed Consolidated Statements of Cash Flows for the six-month periods ended August 31, 2004 and 2005			7
Notes to Condensed Consolidated Financial Statements			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			29
Item 3. Quantitative and Qualitative Disclosures about Market Risk			42
Item 4. Controls and Procedures			42
PART II — OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds			43
Item 4. Submission of Matters to a Vote of Security Holders			43
Item 6. Exhibits			44
Signatures			45
Statement re: Computation of Ratio of Earnings to Fixed Charges
Certification of Principal Executive Officer
Certification of Principal Financial Officer
Certification of Principal Executive Officer
Certification of Principal Financial Officer

PART I — FINANCIAL INFORMATION

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

(Unaudited)

(In thousands, except per share data)

		Three Months Ended								Six Months Ended
		August 31,								August 31,
		2004				2005				2004				2005
NET REVENUES		$	97,119			$	107,892			$	181,724			$	203,094
OPERATING EXPENSES:
Station operating expenses, excluding noncash compensation			58,026				65,889				110,782				127,110
Corporate expenses, excluding noncash compensation			7,616				6,483				16,036				13,601
Noncash compensation			2,729				2,695				5,962				5,895
Depreciation and amortization			3,591				4,346				8,209				8,239
Total operating expenses			71,962				79,413				140,989				154,845
OPERATING INCOME			25,157				28,479				40,735				48,249
OTHER INCOME (EXPENSE):
Interest expense			(8,151	)			(18,341	)			(21,653	)			(28,586	)
Loss on debt extinguishment			(273	)			—				(97,248	)			—
Other income (expense), net			55				198				354				118
Total other income (expense)			(8,369	)			(18,143	)			(118,547	)			(28,468	)
INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTEREST AND DISCONTINUED OPERATIONS			16,788				10,336				(77,812	)			19,781
PROVISION (BENEFIT) FOR INCOME TAXES			6,260				4,529				(7,147	)			8,635
MINORITY INTEREST EXPENSE, NET OF TAX			788				1,634				1,382				2,419
NET INCOME (LOSS) FROM CONTINUING OPERATIONS			9,740				4,173				(72,047	)			8,727
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX			5,556				4,257				13,773				10,081
NET INCOME (LOSS)			15,296				8,430				(58,274	)			18,808
PREFERRED STOCK DIVIDENDS			2,246				2,246				4,492				4,492
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS		$	13,050			$	6,184			$	(62,766	)		$	14,316

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

     In the three-month periods ended August 31, 2004 and 2005, $1.6 million and $0.9 million respectively, of our noncash compensation was attributable to our radio and publishing entities, while $1.1 million and $1.8 million was attributable to corporate. In the six-month periods ended August 31, 2004 and 2005, $3.8 million and $2.2 million respectively, of our noncash compensation was attributable to our radio and publishing entities, while $2.2 million and $3.7 million was attributable to corporate.

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(Unaudited)
(In thousands, except per share data)

		Three Months Ended								Six Months Ended
		August 31,								August 31,
		2004				2005				2004				2005
Basic net income (loss) available to common shareholders:
Continuing operations		$	0.13			$	0.05			$	(1.37	)		$	0.09
Discontinued operations, net of tax			0.10				0.10				0.25				0.20
Net income (loss) available to common shareholders		$	0.23			$	0.15			$	(1.12	)		$	0.29
Basic weighted average common shares outstanding			56,060				40,893				55,959				48,769
Diluted net income (loss) available to common shareholders:
Continuing operations		$	0.13			$	0.05			$	(1.37	)		$	0.09
Discontinued operations, net of tax			0.10				0.10				0.25				0.20
Net income (loss) available to common shareholders		$	0.23			$	0.15			$	(1.12	)		$	0.29
Diluted weighted average common shares outstanding			56,230				41,434				55,959				49,266

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

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

(In thousands, except share data)

						August 31,
						2005
		February 28,				(As Restated)
		2005				(See Note 3)
		(Note 1)				(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	16,054			$	26,777
Accounts receivable, net of allowance for doubtful accounts of $1,530 and $2,164, respectively			63,353				82,736
Prepaid expenses			14,713				16,923
Other			6,676				4,405
Current assets — discontinued operations			63,662				56,480
Total current assets			164,458				187,321
PROPERTY AND EQUIPMENT, NET			63,302				64,570
INTANGIBLE ASSETS (Note 2):
Indefinite-lived intangibles			893,491				893,491
Goodwill			106,808				106,681
Other intangibles, net			12,970				19,140
Total intangible assets			1,013,269				1,019,312
DEFERRED TAX ASSETS			65,228				58,734
OTHER ASSETS, NET			43,955				45,290
NONCURRENT ASSETS — DISCONTINUED OPERATIONS			472,823				461,859
Total assets		$	1,823,035			$	1,837,086

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

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(In thousands, except share data)

						August 31,
						2005
		February 28,				(As Restated)
		2005				(See Note 3)
		(Note 1)				(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts Payable		$	19,909			$	22,497
Current maturities of long-term debt			7,688				7,583
Accrued salaries and commissions			10,293				8,067
Accrued interest			9,582				16,375
Deferred revenue			13,453				13,796
Other			5,700				5,816
Current liabilities — discontinued operations			49,316				38,228
Total current liabilities			115,941				112,362
LONG-TERM DEBT, NET OF CURRENT MATURITIES			1,173,808				1,571,012
OTHER LONG-TERM DEBT, NET OF CURRENT MATURITIES			5,422				4,600
OTHER NONCURRENT LIABILITIES			1,811				1,944
MINORITY INTEREST			48,021				49,082
NONCURRENT LIABILITIES — DISCONTINUED OPERATIONS			25,440				18,989
Total liabilities			1,370,443				1,757,989
COMMITMENTS AND CONTINGENCIES
Series A cumulative convertible preferred stock, $0.01 par value; $50.00 liquidation value; authorized 10,000,000 shares; issued and outstanding 2,875,000 shares at August 31, 2005			—				143,750
SHAREHOLDERS’ EQUITY:
Series A cumulative convertible preferred stock, $0.01 par value; $50.00 liquidation value; authorized 10,000,000 shares; issued and outstanding 2,875,000 shares at February 28, 2005			29				—
Class A common stock, $.01 par value; authorized 170,000,000 shares; issued and outstanding 51,621,958 shares at February 28, 2005 and 31,954,296 shares at August 31, 2005			516				320
Class B common stock, $.01 par value; authorized 30,000,000 shares; issued and outstanding 4,850,762 shares at February 28, 2005 and 4,879,784 shares at August 31, 2005			48				49
Additional paid-in capital			1,041,128				512,237
Accumulated deficit			(589,354	)			(575,038	)
Accumulated other comprehensive income (loss)			225				(2,221	)
Total shareholders’ equity			452,592				(64,653	)
Total liabilities and shareholders’ equity		$	1,823,035			$	1,837,086

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

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

		Six Months Ended August 31,
		2004				2005
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	(58,274	)		$	18,808
Adjustments to reconcile net income (loss) to net cash provided by operating activities —
Discontinued operations			(13,773	)			(10,081	)
Depreciation and amortization			9,299				9,340
Accretion of interest on senior discount notes and amortization of related debt costs			5,632				81
Minority interest expense			1,382				2,419
Provision for bad debts			1,251				1,490
Provision (benefit) for deferred income taxes			(7,147	)			8,635
Noncash compensation			5,962				5,895
Loss on debt extinguishment			97,248				—
Other			689				(2,401	)
Changes in assets and liabilities —
Account receivable			(13,868)				(18,747	)
Prepaid expenses and other current assets			1,880				1,987
Other assets			(6,696	)			2,210
Accounts payable and accrued liabilities			(4,029	)			5,787
Deferred revenue			(1,022	)			343
Other liabilities			(565	)			(3,191	)
Net cash provided by operating activities — discontinued operations			29,450				24,863
Net cash provided by operating activities			47,419				47,438
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			(4,683	)			(5,226	)
Cash paid for acquisitions			—				(12,563	)
Proceeds from sale of assets, net			7,300				—
Deposits and other			(48	)			(60	)
Net cash used in investing activities — discontinued operations			(9,128	)			(6,051	)
Net cash used in investing activities			(6,559	)			(23,900	)

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

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
(Dollars in thousands)

		Six Months Ended August 31,
		2004				2005
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt			(1,305,530	)			(87,875	)
Proceeds from long-term debt			1,371,500				485,000
Premiums paid to redeem outstanding debt obligations			(72,810	)			—
Purchases of the Company’s Class A Common Stock			—				(396,737	)
Proceeds from exercise of stock options			1,753				2,925
Preferred stock dividends paid			(4,492	)			(4,492	)
Settlement of tax withholding obligations on stock issued to employees			(740	)			(1,105	)
Debt related costs			(11,922	)			(10,531	)
Net cash used in financing activities			(22,241	)			(12,815	)
INCREASE IN CASH AND CASH EQUIVALENTS			18,619				10,723
CASH AND CASH EQUIVALENTS:
Beginning of period			19,970				16,054
End of period		$	38,589			$	26,777
SUPPLEMENTAL DISCLOSURES:
Cash paid for —
Interest		$	29,031			$	34,268
Income taxes			271				33
Noncash financing transactions-
Value of stock issued to employees under stock compensation program and to satisfy accrued incentives			11,956				9,747
ACQUISITION OF D.EXPRES (SLOVAKIA):
Fair value of assets acquired						$	16,208
Cash paid							12,563
Liabilities recorded						$	3,645

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

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS UNLESS INDICATED OTHERWISE, EXCEPT SHARE DATA)
August 31, 2005

(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, the condensed consolidated interim financial statements included herein have been prepared, without audit, by Emmis Communications Corporation (“ECC”) and its subsidiaries (collectively, “our,” “us,” “Emmis” or the “Company”). As permitted under the applicable rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures normally included in financial statements prepared in conformity with U.S. generally accepted accounting principles 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, 2005. 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) necessary to present fairly the consolidated financial position of Emmis at August 31, 2005 and the results of its operations for the three-month and six-month periods ended August 31, 2004 and 2005 and its cash flows for the six-month periods ended August 31, 2004 and 2005.

Stock-Based Compensation

     The Company accounts for its stock-based award plans in accordance with Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations, under which compensation expense is recorded to the extent that the market price on the grant date of the underlying stock exceeds the exercise price. The required unaudited pro forma net income and pro forma earnings per share as if the stock-based awards had been accounted for using the provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” are as follows:

		Three Months Ended August 31,								Six Months Ended August 31,
		2004				2005				2004				2005
		(Unaudited)								(Unaudited)
Net Income (Loss) Available to Common Shareholders:
As Reported		$	13,050			$	6,184			$	(62,766	)		$	14,316
Plus: Reported stock-based employee compensation costs, net of tax			1,691				1,590				3,654				3,478
Less: Stock-based employee compensation costs, net of tax, if fair value method had been applied to all awards			4,080				3,292				8,432				6,881
Pro Forma		$	10,661			$	4,482			$	(67,544	)		$	10,913
Basic EPS:
As Reported		$	0.23			$	0.15			$	(1.12	)		$	0.29
Pro Forma		$	0.19			$	0.11			$	(1.21	)		$	0.22
Diluted EPS:
As Reported		$	0.23			$	0.15			$	(1.12	)		$	0.29
Pro Forma		$	0.19			$	0.11			$	(1.21	)		$	0.22

Advertising Costs

     The Company defers the costs of major advertising campaigns for which future benefits are demonstrated. These costs are amortized over the shorter of the estimated period benefited (generally six months) or the remainder of the fiscal year. The Company had deferred $1.1 million and $0.4 million of these costs as of August 31, 2004 and 2005, respectively.

Basic and Diluted Net Income Per Common Share

     Basic net income per common share is computed by dividing net income available 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 August 31, 2004 and 2005 consisted of stock options and the 6.25% Series A cumulative convertible preferred stock. Neither the 6.25% Series A cumulative convertible preferred stock nor the stock options are included in the calculation of diluted net income per common share for the six-month period ended August 31, 2004 as the effect of their conversion to common stock would be antidilutive. Weighted average shares excluded from the calculation of diluted net income per share that would result from the conversion of the 6.25% Series A cumulative convertible preferred stock and the conversion of stock options amounted to approximately 3.9 million shares for the six-month period ended August 31, 2004. The 6.25% Series A cumulative convertible preferred stock was excluded from the calculation of diluted net income per common share for the three-month period ended August 31, 2004 and the three-month and six-month periods ended August 31, 2005 as the effect of its conversion to 3.7 million shares, 4.8 million shares and 4.8 million shares, respectively, would be antidilutive.

Discontinued Operations

Television Division

     On May 10, 2005, Emmis announced that it had engaged advisors to assist in evaluating strategic alternatives for its television assets. The decision to explore strategic alternatives for the Company’s television assets stemmed from the Company’s desire to lower its debt, coupled with the Company’s view that its television stations needed to be aligned with a company that was larger and more singularly focused on the challenges of American television, including digital video recorders and the industry’s relationship with cable and satellite providers. In the quarter ended August 31, 2005, the Company entered into definitive agreements to sell nine of its sixteen television stations (see Note 3). It subsequently entered into a definitive

agreement to sell an additional four stations (see Note 9) and expects to enter into agreements to sell the remaining stations in the next three to twelve months. The Company concluded its television assets were held for sale in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“Statement No. 144”) and the results of operations of the television division have been classified as discontinued operations in the accompanying condensed consolidated financial statements. The television division had historically been presented as a separate reporting segment of Emmis. The following table summarizes certain operating results for the television division for all periods presented:

		Three Months Ended August 31,								Six Months Ended August 31,
		2004				2005				2004				2005
Net revenues		$	61,403			$	60,253			$	129,837			$	126,825
Station operating expenses, excluding noncash compensation			38,053				39,814				77,843				81,050
Noncash compensation			1,258				480				3,000				1,380
Depreciation and amortization			7,474				4,852				15,292				12,319
Interest expense			6,935				7,470				13,129				14,255
Pre-tax income			7,305				6,784				19,800				16,646
Provision for income taxes			2,986				2,787				8,101				6,825

     Net assets related to our television division are classified as discontinued operations in the accompanying consolidated balance sheets as follows:

		February 28, 2005				August 31, 2005
Current assets:
Accounts receivable, net		$	43,634			$	42,634
Current portion of TV program rights			16,562				10,449
Prepaid expenses			1,849				1,674
Other			1,617				1,723
Total current assets			63,662				56,480
Noncurrent assets:
Property and equipment, net			130,016				122,979
Intangibles, net			335,341				334,993
Other noncurrent assets			7,466				3,887
Total noncurrent assets			472,823				461,859
Total assets		$	536,485			$	518,339
Current liabilities:
Accounts payable and accrued expenses		$	8,686			$	5,967
Current portion of TV program rights			30,910				23,253
Accrued salaries and commissions			6,141				5,396
Deferred revenue			882				856
Other			2,697				2,756
Total current liabilities			49,316				38,228
Noncurrent liabilities:
Other long-term debt, net of current maturities			6				1
TV program rights payable, net of current portion			18,634				12,719
Other noncurrent liabilities			6,800				6,269
Total noncurrent liabilities			25,440				18,989
Total liabilities		$	74,756			$	57,217

     Certain debt would be required to be repaid as a result of the disposition of the Company’s television assets. The Company has allocated interest expense associated with this portion of debt to the television operations in accordance with Emerging Issues Task Force Issue 87-24 “Allocation of Interest to Discontinued Operations,” as modified.

     Our television station in New Orleans, Louisiana, WVUE, was significantly affected by Hurricane Katrina and the subsequent flooding of New Orleans. The flooding of New Orleans caused significant property damage at WVUE. Although the extent of the damage is still undetermined, Emmis believes that it is fully insured for all property losses resulting from Katrina and subsequent flooding. Since Emmis believes recovery of insurance proceeds under its relevant policies is probable, no adjustments to the carrying values of WVUE property were made as of August 31, 2005. Additionally, the Company recorded a $1.3 million reserve against WVUE accounts receivable due to the impact of the flooding on the local economy. The charge is reflected in the three-month and six-month periods ending August 31, 2005 in the preceding table. WVUE did not broadcast its signal for an extended period of time as a result of Katrina and the general disruption of the local economy will negatively affect ongoing advertising revenue. The Company maintains business interruption insurance and expects to be reimbursed for lost net income as a result of Katrina. However, unlike property and casualty, Emmis does not accrue for business interruption insurance proceeds. Business interruption insurance proceeds will only be recognized upon receipt. The Company estimates that the negative revenue impact of the hurricane will be approximately $4 million for its quarter ended November 30, 2005.

Phoenix

     On January 14, 2005, Emmis completed its exchange with Bonneville International Corporation (“Bonneville”) whereby Emmis swapped three of its radio stations in Phoenix (KTAR-AM, KMVP-AM and KKLT-FM) for Bonneville’s WLUP-FM located in Chicago and $74.8 million in cash, including payments for working capital items. The results of operations of the three radio stations in Phoenix have been classified as discontinued operations in the accompanying condensed consolidated financial statements. These three radio stations had historically been included in the radio reporting segment. The following table summarizes certain operating results for the three Phoenix stations for all periods presented:

		Three Months Ended August 31,								Six Months Ended August 31,
		2004				2005				2004				2005
Net revenues		$	8,260			$	—			$	16,253			$	—
Station operating expenses, excluding noncash compensation			5,829				(440	)			11,203				(440	)
Noncash compensation			138				—				313				—
Depreciation and amortization			196				—				391				—
Pre-tax income			2,097				440				4,346				440
Provision for income taxes			860				180				1,782				180

Votionis

     On May 12, 2004, Emmis sold to its minority partners for $7.3 million in cash its entire 75% interest in Votionis, S.A. (“Votionis”), which owns and operates two radio stations in Buenos Aires, Argentina. The results of operations of Votionis have been classified as discontinued operations in the accompanying condensed consolidated financial statements. Votionis was historically included in the radio reporting segment. The following table summarizes certain operating results for Votionis for the three–month and six-month periods ended August 31, 2004:

		Three Months Ended				Six Months Ended
		August 31, 2004				August 31, 2004
Net revenues		$	—			$	1,693
Station operating expenses, excluding noncash compensation			—				2,019
Depreciation and amortization			—				164
Pre-tax income (loss)			—				(490	)
Provision (benefit) for income taxes			—				—

     Votionis’ operating results were reported on a calendar year and consolidated into the Company’s fiscal year for reporting purposes. Accordingly, the results for its calendar quarter ended March 31, 2004 were consolidated into Emmis’ fiscal quarter ended May 31, 2004. However, the quarter ended May 31, 2004, includes the results of Votionis from January 1, 2004 to May 12, 2004, as the results of operations of Votionis for the period April 1, 2004 through May 12, 2004 were immaterial.

Note 2. Intangible Assets and Goodwill

     Indefinite-lived Intangibles

     Under the guidance in Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“Statement No. 142”), the Company’s FCC licenses are considered indefinite-lived intangibles. These assets, which the Company determined were its only indefinite-lived intangibles, are not subject to amortization, but are tested for impairment at least annually. As of February 28, 2005 and August 31, 2005, the carrying amounts of the Company’s FCC licenses were $893.5 million. This amount is entirely attributable to our radio division.

     When performing its annual impairment tests, the Company generally uses an enterprise valuation approach to assess possible impairment of FCC licenses, whereby an estimated market multiple is applied to the station operating income generated by each reporting unit. Market multiples are determined based on information available regarding publicly traded peer companies, recently completed or contemplated transactions within the industry, and reporting units’ competitive position in their respective markets. Appropriate allocation is then made to the tangible assets and definite-lived intangible assets, with the residual amount representing the implied fair value of our indefinite-lived intangible assets. To the extent the carrying amount of the indefinite-lived intangible exceeds this implied fair value, the Company obtains an independent appraisal for the respective FCC licenses, and any carrying amount in excess of appraised value is recorded in the statement of operations. In the case of radio, the Company determined the reporting unit to be all of our stations in a local market, and in the case of television, the Company determined the reporting unit to be each individual station. The Company performed impairment tests at December 1, 2002, 2003 and 2004. The December 1, 2002 and 2004 tests resulted in no impairment charge, but the December 1, 2003 test resulted in a $12.4 million impairment charge related to two of our television stations. The required annual impairment tests may result in future periodic write-downs.

     Goodwill

     Statement No. 142 requires the Company to test goodwill for impairment at least annually using a two-step process. The first step is a screen for potential impairment, while the second step measures the amount of impairment. The Company completed the two-step impairment test at December 1, 2002, 2003 and

2004, which resulted in no impairment charge. Consistent with the Company’s approach to assessing possible impairment of its FCC licenses, the enterprise valuation approach was used to determine the fair value of each of the Company’s reporting units. In the case of publishing, the Company determined the reporting unit to be each individual magazine. As of February 28, 2005 and August 31, 2005, the carrying amount of the Company’s goodwill was $106.8 million and $106.7 million, respectively. As of February 28, 2005 approximately $48.6 million and $58.2 million of our goodwill was attributable to our radio and publishing divisions, respectively. As of August 31, 2005 approximately $48.5 million and $58.2 million of our goodwill was attributable to our radio and publishing divisions, respectively. The required annual impairment tests may result in future periodic write-downs.

     Definite-lived intangibles

     The Company’s definite-lived intangible assets consist primarily of foreign broadcasting licenses, subscription lists, favorable office leases, customer lists and non-compete agreements, all of which are amortized over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The following table presents the weighted-average remaining life, gross carrying amount and accumulated amortization for each major class of definite-lived intangible asset at February 28, 2005 and August 31, 2005:

						February 28, 2005												August 31, 2005
		Weighted Average				Gross								Net				Gross								Net
		Useful Life				Carrying				Accumulated				Carrying				Carrying				Accumulated				Carrying
		(in years)				Amount				Amortization				Amount				Amount				Amortization				Amount
Foreign Broadcasting Licenses			7.4			$	24,443			$	13,486			$	10,957			$	32,252			$	14,662			$	17,590
Favorable Office Leases			6.4				689				179				510				689				233				456
Customer Lists			1.0				3,610				3,054				556				3,610				3,372				238
Non-Compete Agreements			1.3				5,738				5,681				57				5,738				5,699				39
Other			24.6				1,515				625				890				1,523				706				817
TOTAL						$	35,995			$	23,025			$	12,970			$	43,812			$	24,672			$	19,140

     Total amortization expense from definite-lived intangibles for the three–month periods ended August 31, 2004 and 2005 was $0.5 million and $1.0 million, respectively. Total amortization expense from definite-lived intangibles for the six–month periods ended August 31, 2004 and 2005 was $2.1 million and $1.7 million, respectively. The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangibles:

YEAR ENDED FEBRUARY 28 (29),
2006		$	3,455
2007			3,161
2008			3,065
2009			3,065
2010			1,967

Note 3. Significant Events

Dutch Tender Offer and Related Financing Activities

     On May 16, 2005, Emmis launched a “Dutch Auction” tender offer (the “Tender Offer”) to purchase up to 20.25 million shares of its Class A common stock for a price not greater than $19.75 per share nor less than $17.25 per share. The Tender Offer expired on June 13, 2005, and on June 20, 2005 Emmis purchased 20.25 million shares of its Class A common stock at a price of $19.50 per share, for an aggregate purchase price of $394.9 million, and incurred related fees and expenses of approximately $1.8 million.

     In connection with the Tender Offer, on June 6, 2005, Emmis Operating Company amended its credit facility to (i) permit the Tender Offer and related transactions, (ii) reset financial covenants, and (iii) allow for payments on Emmis Communications Corporation’s floating rate senior notes discussed below. In order to finance the aggregate purchase price of the Tender Offer and to pay related fees and expenses, totaling $396.7 million, on June 13, 2005 Emmis Operating Company borrowed $100 million under the revolving portion of its amended credit facility and Emmis issued $300 million of its floating rate senior notes in a private placement (the “Interim Notes”). On June 21, 2005, Emmis issued $350 million of its floating rate senior notes (“the Notes”) in exchange for (i) the $300 million aggregate principal amount of Interim Notes issued on June 13, 2005, and (ii) $50 million in cash. The Interim Notes were retired on June 21, 2005. Emmis used approximately $40 million of the cash proceeds from the notes transactions to repay borrowings it had incurred under its revolving credit facility on June 13, 2005, approximately $10.5 million of cash proceeds from the notes transactions to pay debt issuance fees and approximately $2.8 million for interest and other.

     The Notes will mature on June 15, 2012. Interest on the Notes will accrue at a floating rate per annum, reset quarterly, equal to LIBOR plus 5.875% (approximately 9.3% at August 31, 2005). The applicable margin to LIBOR will increase by 0.5% on each of June 15, 2006, December 15, 2006, and June 15, 2007. Interest payment dates are March 15, June 15, September 15 and December 15, commencing September 15, 2005.

     Emmis may redeem all or a portion of the Notes at the redemption prices set forth below plus accrued and unpaid interest beginning on December 15 of the years indicated below:

Year		Percentage
2005			100.0	%
2006			102.0	%
2007			101.0	%
2008 and thereafter			100.0	%

     The Notes are unsecured obligations of Emmis and will rank pari passu with all future senior indebtedness (as defined) and senior in right of payment to future subordinated indebtedness (as defined). The Notes are subordinated to all indebtedness and liabilities (as defined) of ECC’s subsidiaries, including bank debt and subordinated debt of Emmis Operating Company.

     The indenture governing the Notes contains covenants limiting Emmis’ ability to, among other things, (1) incur additional indebtedness, (2) pay dividends or make other distributions to stockholders, (3) purchase or redeem capital stock or subordinated indebtedness, (4) make certain investments, (5) engage in certain transactions with affiliates, and (6) sell all or substantially all of the assets of Emmis and its subsidiaries, or consolidate or merge with or into other companies.

     On August 9, 2005, Emmis exchanged the $350.0 million aggregate principal amount of the Notes for a new series of notes registered under the Securities Act. The terms of the new series of notes are identical to the terms of the Notes.

     In connection with the Tender Offer, on May 16, 2005, Emmis filed Articles of Correction with the Indiana Secretary of State to correct the anti-dilution adjustment provisions of its outstanding convertible preferred stock. The same day, Emmis also filed a related lawsuit in Indiana state court. On June 1, 2005, Emmis entered into settlement agreements with certain holders of its outstanding convertible preferred stock. The settlement resulted in the amendment of Emmis’ Articles of Incorporation to (a) revise the anti-dilution provisions of its convertible preferred stock so that a special anti-dilution formula would apply to the Tender Offer and a more customary anti-dilution formula would apply to all future tender and exchange offers

triggering an adjustment; and (b) grant the holders of Emmis’ convertible preferred stock the right to require Emmis to redeem their shares on the first anniversary of a going private transaction in which Jeffrey H. Smulyan and his affiliates participate that is not otherwise a change of control under the terms of the convertible preferred stock. As a result of the Tender Offer, the conversion price of the convertible preferred stock has been reduced from $39.0625 to $30.10 per share of Emmis’ Class A common stock.

     As a result of the redemption right given to the holders of the preferred stock, the Company has reclassified in the restated August 31, 2005 condensed consolidated balance sheets the liquidation preference of the preferred stock from equity to mezzanine. The restatement has no impact on the statements of operations, the statements of cash flows, or any balance sheet items except for shareholders’ 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 impact of the restatement on the accompanying condensed consolidated balance sheet as of August 31, 2005 is to reduce shareholders’ equity by $143.8 million and to reflect that amount in mezzanine between liabilities and shareholders’ equity.

Television Division Dispositions

     On August 19, 2005, Emmis signed definitive agreements to sell (A) five television stations (plus regional satellite stations) to LIN Television Corporation (WALA and WBPG in Mobile, AL/Pensacola, FL; WTHI in Terre Haute, IN; WLUK in Green Bay, WI; and KRQE in Albuquerque, NM) for $260 million, (B) three television stations to Journal Communications (WFTX in Ft. Myers FL; KMTV in Omaha, NE; and KGUN in Tucson, AZ) for $235 million, and (C) one television station (WSAZ in Huntington/Charleston, WV) to Gray Television for $186 million. Closing of the sales is subject to customary conditions, including approval from the Federal Communications Commission and other regulatory agencies. Emmis expects the sales to close by February 28, 2006, the end of its current fiscal year, and plans to use the proceeds to repay outstanding debt obligations.

Acquisition of Radio Network in Slovakia

     On March 10, 2005, Emmis completed its acquisition of D.EXPRES, a.s., a Slovakian company that owns and operates Radio Expres, a national radio network in Slovakia, for a cash purchase price of approximately $12.6 million. This acquisition allowed Emmis to expand its international portfolio on the European continent and enter one of the world’s fastest growing economies. The acquisition was financed through borrowings under the credit facility. The operating results from March 10, 2005 through June 30, 2005 are included in the accompanying condensed consolidated financial statements. Consistent with the Company’s other foreign subsidiaries, Radio Expres reports on a fiscal year ending December 31, which Emmis consolidates into its fiscal year ending February 28 (29). The preliminary purchase price allocation is as follows:

Asset Description		Amount				Asset Lives
Accounts receivable		$	2,126			Less than one year
Other current assets			1,486			Less than one year
Broadcasting equipment			2,649			5 years
International broadcast license			9,787			94 months
Investment and other long-term assets			160			14 months
Less: current liabilities			(3,645	)
Total purchase price		$	12,563

Note 4. Pro Forma Financial Information

     Unaudited pro forma summary information is presented below for the three-month and six-month periods ended August 31, 2004 and 2005, assuming the acquisition (and related net debt repayments associated with the Phoenix disposition) of (i) WLUP-FM in January 2005 and (ii) D.EXPRES in Slovakia in March 2005 had occurred on the first day of the pro forma periods presented below.

     Preparation of the pro forma summary information was based upon assumptions deemed appropriate by the Company’s management. The pro forma summary information presented below is not necessarily indicative of the results that actually would have occurred if the transactions indicated above had been consummated at the beginning of the periods presented, and is not intended to be a projection of future results.

		Three Months Ended August 31,								Six Months Ended August 31,
		2004				2005				2004				2005
		(Pro Forma)				(Historical)				(Pro Forma)
Net revenues		$	102,432			$	107,892			$	191,512			$	203,976
Net income (loss) from continuing operations		$	11,395			$	4,173			$	(69,347	)		$	8,213
Net income (loss) available to common shareholders from continuing operations		$	9,149			$	1,927			$	(73,839	)		$	3,721
Net income (loss) per share available to common shareholders from continuing operations:
Basic		$	0.16			$	0.05			$	(1.32	)		$	0.08
Diluted		$	0.16			$	0.05			$	(1.32	)		$	0.08
Weighted average shares outstanding:
Basic			56,060				40,893				55,959				48,769
Diluted			56,230				41,434				55,959				49,266

Six-month period ended August 31, 2004 includes a $97.3 million loss on debt extinguishment related to debt refinancing activity.

Note 5. Comprehensive Income (Loss)

     Comprehensive income (loss) was comprised of the following for the three-month and six-month periods ended August 31, 2004 and 2005:

		Three Months Ended								Six Months Ended
		August 31,								August 31,
		2004				2005				2004				2005
Net income (loss)		$	15,296			$	8,430			$	(58,274	)		$	18,808
Translation adjustment			(710	)			(1,154	)			101				(2,446	)
Total comprehensive income (loss)		$	14,586			$	7,276			$	(58,173	)		$	16,362

Note 6. Segment Information

     Subsequent to the reclassification of television to discontinued operations, the Company’s operations are aligned into two business segments: Radio and Publishing and Other. These business segments are consistent with the Company’s management of these businesses and its financial reporting structure. Corporate represents expense not allocated to reportable segments.

     The Company’s segments operate primarily in the United States with one radio station located in Hungary, nine radio stations located in Belgium and a radio network in Slovakia. The following table summarizes the net revenues and long-lived assets of our international properties included in our condensed consolidated financial statements.

		Net Revenues								Net Revenues								Long-lived Assets
		Three Months Ended August 31,								Six Months Ended August 31,								As of August 31,
		2004				2005				2004				2005				2004				2005
Hungary		$	4,825			$	5,554			$	7,715			$	9,502			$	8,113			$	6,350
Belgium			—				263				—				421				4,082				3,550
Slovakia			N/A				2,494				N/A				2,933				N/A				11,984

     We sold our controlling interest in two radio stations in Argentina in May 2004. Results from operations for these two stations have been classified as discontinued operations in the six-month period ended August 31, 2004.

     In the quarter ended August 31, 2005, Emmis concluded its television assets were held for sale in accordance with Statement No. 144. Accordingly, the results of operations of the television division have been classified as discontinued operations in the accompanying condensed consolidated financial statements (see Note 1) and excluded from the segment disclosures below.

     The accounting policies as described in the summary of significant accounting policies included in the Company’s Annual Report filed on Form 10-K for the year ended February 28, 2005 and in Note 1 to these condensed consolidated financial statements, are applied consistently across segments.

Three Months Ended						Publishing
August 31, 2005		Radio				and Other				Corporate				Consolidated
						(Unaudited)
Net revenues		$	87,098			$	20,794			$	—			$	107,892
Station operating expenses, excluding noncash compensation			46,723				19,166				—				65,889
Corporate expenses, excluding noncash compensation			—				—				6,483				6,483
Noncash compensation			655				200				1,840				2,695
Depreciation and amortization			2,553				175				1,618				4,346
Operating income (loss)		$	37,167			$	1,253			$	(9,941	)		$	28,479
Assets — continuing operations		$	1,103,869			$	85,883			$	128,995			$	1,318,747
Assets — discontinued operations			—				—				518,339				518,339
Total Assets		$	1,103,869			$	85,883			$	647,334			$	1,837,086

Three Months Ended						Publishing
August 31, 2004		Radio				and Other				Corporate				Consolidated
						(Unaudited)
Net revenues		$	78,176			$	18,943			$	—			$	97,119
Station operating expenses, excluding noncash compensation			41,233				16,793				—				58,026
Corporate expenses, excluding noncash compensation			—				—				7,616				7,616
Noncash compensation			1,156				484				1,089				2,729
Depreciation and amortization			1,813				209				1,569				3,591
Operating income (loss)		$	33,974			$	1,457			$	(10,274	)		$	25,157
Assets — continuing operations		$	967,951			$	82,175			$	95,986			$	1,146,112
Assets — discontinued operations			—				—				1,156,571				1,156,571
Total Assets		$	967,951			$	82,175			$	1,252,557			$	2,302,683

Six Months Ended						Publishing
August 31, 2005		Radio				and Other				Corporate				Consolidated
						(Unaudited)
Net revenues		$	162,198			$	40,896			$	—			$	203,094
Station operating expenses, excluding noncash compensation			89,098				38,012				—				127,110
Corporate expenses, excluding noncash compensation			—				—				13,601				13,601
Noncash compensation			1,655				550				3,690				5,895
Depreciation and amortization			4,640				355				3,244				8,239
Operating income (loss)		$	66,805			$	1,979			$	(20,535	)		$	48,249
Assets — continuing operations		$	1,103,869			$	85,883			$	128,995			$	1,318,747
Assets — discontinued operations			—				—				518,339				518,339
Total Assets		$	1,103,869			$	85,883			$	647,334			$	1,837,086

Six Months Ended						Publishing
August 31, 2004		Radio				and Other				Corporate				Consolidated
						(Unaudited)
Net revenues		$	144,886			$	36,838			$	—			$	181,724
Station operating expenses, excluding noncash compensation			77,550				33,232				—				110,782
Corporate expenses, excluding noncash compensation			—				—				16,036				16,036
Noncash compensation			2,637				1,145				2,180				5,962
Depreciation and amortization			4,654				427				3,128				8,209
Operating income (loss)		$	60,045			$	2,034			$	(21,344	)		$	40,735
Assets — continuing operations		$	967,951			$	82,175			$	95,986			$	1,146,112
Assets — discontinued operations			—				—				1,156,571				1,156,571
Total Assets		$	967,951			$	82,175			$	1,252,557			$	2,302,683

Note 7. Financial Information for Subsidiary Guarantors and Subsidiary Non-Guarantors of Emmis

     Included in long-term debt, net of current maturities, is $375 million of senior subordinated notes and $350 million of senior floating rate notes. Both notes are fully and unconditionally guaranteed, jointly and severally, by certain direct and indirect subsidiaries of Emmis (the “Subsidiary Guarantors”). As of February 28, 2005, subsidiaries holding Emmis’ interest in its radio stations in Austin, Texas, Hungary and Belgium, as well as certain other subsidiaries (such as those conducting joint ventures with third parties), did not guarantee the senior subordinated notes or the senior floating rate notes (the “Subsidiary Non-Guarantors”). As of August 31, 2005, the Subsidiary Non-Guarantors consisted of subsidiaries holding Emmis’ interest in its radio stations in Austin, Texas, Hungary, Slovakia and Belgium, as well as certain other subsidiaries (such as those conducting joint ventures with third parties). The claims of creditors of the Subsidiary Non-Guarantors have priority over the rights of Emmis to receive dividends or distributions from such subsidiaries.

     Presented below is condensed consolidating financial information for the Emmis Communications Corporation (ECC) Parent Company Only (issuer of the senior floating rate notes), Emmis Operating Company (EOC) Parent Company Only (issuer of the senior subordinated notes), the Subsidiary Guarantors and the Subsidiary Non-Guarantors as of February 28, 2005 and August 31, 2005 and for the three-month and six-month periods ended August 31, 2004 and 2005. Emmis uses the equity method in both of its Parent Company Only information with respect to investments in subsidiaries.

Emmis Communications Corporation
As of August 31, 2005
Condensed Consolidating Balance Sheet
(Unaudited)

		ECC Parent
		Company																Eliminations
		Only				EOC Parent								Subsidiary				and				Consolidated
		(As Restated)				Company				Subsidiary				Non-				Consolidating				(As Restated)
		(See Note 3)				Only				Guarantors				Guarantors				Entries				(See Note 3)
CURRENT ASSETS:
Cash and cash equivalents		$	—			$	14,253			$	4,632			$	9,175			$	(1,283	)		$	26,777
Accounts receivable, net			—				—				70,615				12,121				—				82,736
Prepaid expenses			—				378				14,988				1,557				—				16,923
Other			—				1,348				2,580				477				—				4,405
Current assets — discontinued operations			—				—				56,480				—				—				56,480
Total current assets			—				15,979				149,295				23,330				(1,283	)			187,321
Property and equipment, net			—				26,842				27,434				10,294				—				64,570
Intangible assets, net			—				—				862,254				157,058				—				1,019,312
Investment in affiliates			795,015				1,536,201				—				—				(2,331,216	)			—
Deferred tax assets			61,217				(2,483	)			—				—				—				58,734
Other assets, net			8,295				41,165				12,070				1,606				(17,846	)			45,290
Noncurrent assets — discontinued operations			—				—				461,859				—				—				461,859
Total assets		$	864,527			$	1,617,704			$	1,512,912			$	192,288			$	(2,350,345	)		$	1,837,086
CURRENT LIABILITIES:
Accounts payable		$	—			$	7,508			$	7,690			$	17,712			$	(10,413	)		$	22,497
Current maturities of other long-term debt			—				6,750				—				1,205				(372	)			7,583
Accrued salaries and commissions			—				1,030				6,476				561				—				8,067
Accrued interest			—				16,375				—				—				—				16,375
Deferred revenue			—				—				13,796				—				—				13,796
Other			1,123				2,834				963				896				—				5,816
Current liabilities — discontinued operations			—				—				38,228				—				—				38,228
Total current liabilities			1,123				34,497				67,153				20,374				(10,785	)			112,362
Long-term debt, net of current maturities			351,325				1,219,687				—				—				—				1,571,012
Other long-term debt, net of current maturities			—				—				36				12,908				(8,344	)			4,600
Other noncurrent liabilities			—				1,487				422				35				—				1,944
Minority Interest			—				—				—				49,082				—				49,082
Noncurrent liabilities — discontinued operations			—				—				18,989				—				—				18,989
Total liabilities			352,448				1,255,671				86,600				82,399				(19,129	)			1,757,989
PREFERRED STOCK			143,750				—				—				—				—				143,750
SHAREHOLDERS’ EQUITY:
Common stock			369				795,015				—				—				(795,015	)			369
Additional paid-in capital			512,237				—				—				4,393				(4,393	)			512,237
Subsidiary investment			—				—				1,033,233				130,465				(1,163,698	)			—
Retained earnings/(accumulated deficit)			(144,277	)			(430,761	)			393,079				(20,698	)			(372,381	)			(575,038	)
Accumulated other comprehensive income (loss)			—				(2,221	)			—				(4,271	)			4,271				(2,221	)
Total shareholders’ equity			368,329				362,033				1,426,312				109,889				(2,331,216	)			(64,653	)
Total liabilities and shareholders’ equity		$	864,527			$	1,617,704			$	1,512,912			$	192,288			$	(2,350,345	)		$	1,837,086