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Emmis Communications Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: October 11, 2012 11:00AM
Emmis Communications Corp. (EMMS) filed Quarterly Report for the period ended 2012-08-31. Emmis Communications Corporation has a market cap of $79.9 million; its shares were traded at around $2.08 with and P/S ratio of 0.3.
Highlight of Business Operations:As previously mentioned, we derive approximately 70% of our net revenues from advertising sales. Our radio stations derive a higher percentage of their advertising revenues from local sales than our publishing entities. In the six-month period ended August 31, 2012, local sales, excluding political revenues, represented approximately 83% and 61% of our advertising revenues for our radio and publishing divisions, respectively.
No customer represents more than 10% of our consolidated net revenues. Our top ten categories for radio represent approximately 62% of our radio divisions total advertising net revenues for the six-month periods ended August 31, 2011 and 2012. The automotive industry was the largest category for our radio division for the six-month periods ended August 31, 2011 and 2012, representing approximately 10% and 11% of our radio net revenues, respectively.
Radio net revenues decreased in the three-month and six-month periods ended August 31, 2012 as compared to the same period of the prior year principally due to the July 15, 2011 commencement of a Local Marketing Agreement (LMA) related to the Merlin Stations and the ultimate sale of a controlling interest in these stations on September 1, 2011. As Emmis retained a noncontrolling equity ownership in the Merlin Stations, they have not been classified as discontinued operations. Also, the operating results for 98.7FM (formerly known as WRKS-FM in New York) as an adult urban station through April 30, 2012 and the LMA fee revenue recognized since April 30, 2012 have not been classified as discontinued operations. Excluding the Merlin Stations and 98.7FM (WRKS), radio net revenues would have increased $0.6 million or 1.6% and $1.4 million or 1.9% for the three-month and six-month periods ended August 31, 2012, respectively.
We typically monitor the performance of our domestic stations against the aggregate performance of the markets in which we operate based on reports for the periods prepared by Miller Kaplan. Miller Kaplan reports are generally prepared on a gross revenues basis and exclude revenues from barter arrangements. Miller Kaplan reported gross revenues for our domestic radio markets decreased 0.4% for the six-month period ended August 31, 2012 as compared to the same period of the prior year. Excluding the Merlin Stations, our gross revenues as reported to Miller Kaplan increased 2.7% for the six-month period ended August 31, 2012 as compared to the same period of the prior year. For the six-month period ending August 31, 2012, our gross revenues exceeded the market average in New York, Los Angeles and Indianapolis, but trailed market performance in St. Louis and Austin. Miller Kaplan does not report gross revenue market data for our Terre Haute market. For the six-month period ended August 31, 2012 as compared to the same period of the prior year, our average rate per minute for our domestic radio stations was down 3.1%, and our minutes sold were up 5.1%.
Cash provided by investing activities was $4.8 million and $90.6 million for the six-month period ended August 31, 2011 and 2012, respectively. During the six-month period ended August 31, 2012, the Company sold KXOS-FM in Los Angeles for $85.5 million in cash and received $10.0 million for the intellectual property of WRKS-FM in New York. Partially offsetting the proceeds of asset sales during the six-month period ended August 31, 2012 is cash used by the Company for investment purposes of $4.0 million, $3.5 million of which related to the Companys investment in Courseload, Inc., a company that provides online access to textbooks and other material. During the six-month period ended August 31, 2011, the Company sold its Flint Peak, California tower for $5.8 million. The proceeds related to the Flint Peak tower sale and the KXOS-FM sale are classified as cash provided by discontinued operations in the accompanying condensed consolidated statements of cash flows.
Stocks Discussed: EMMS,