UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ		Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

for the Fiscal Year Ended February 28, 2007

o		Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

for the Transition Period from                      to                     .

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)

     SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None

     SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: Class A common stock, $.01 par value of Emmis Communications Corporation; 6.25% Series A Cumulative Convertible Preferred Stock, $.01 par value of Emmis Communications Corporation.

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933. Yes o No þ

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes o No þ

     Indicate by check mark whether the registrant (1) has filed all documents and 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

     Large accelerated filer o            Accelerated filer þ            Non-accelerated filer 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 aggregate market value of the voting stock held by non-affiliates of the registrant, as of August 31, 2006, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $386,263,000.

     The number of shares outstanding of each of Emmis Communications Corporation’s classes of common stock, as of May 2, 2007, was:

32,595,311		Class A Common Shares, $.01 par value
4,930,267		Class B Common Shares, $.01 par value
0		Class C Common Shares, $.01 par value

DOCUMENTS INCORPORATED BY REFERENCE

Documents		Form 10-K Reference
Proxy Statement for 2007 Annual Meeting expected to be filed within 120 days		Part III

 

 

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

FORM 10-K

TABLE OF CONTENTS

		Page
PART I			4
Item 1. Business			4
Item 1A. Risk Factors			18
Item 1B. Unresolved Staff Comments			24
Item 2. Properties			24
Item 3. Legal Proceedings			26
Item 4. Submission of Matters to a Vote of Security Holders			27
Executive Officers of the Registrant			27
PART II			28
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			28
Item 6. Selected Financial Data			30
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation			32
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.			54
Item 8. Financial Statements and Supplementary Data			55
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			98
Item 9A. Controls and Procedures			98
Item 9B. Other Information			99
PART III			99
Item 10. Directors and Executive Officers of the Registrant			99
Item 11. Executive Compensation			99
Item 12. Security Ownership of Certain Beneficial Owners, and Management, and Related Stockholder Matters			99
Item 13. Certain Relationships and Related Transactions			99
Item 14. Principal Accountant Fees and Services			100
PART IV			100
Item 15. Exhibits and Financial Statement Schedules			100
Signatures			104
Employment Agreement - Paul W. Fiddick
Ratio of Earnings to Fixed Charges
Subsidiaries
Consent of Independent Registered Public Accountants
Powers of Attorney
Certification of Principal Executive Officer
Certification of Principal Financial Officer
Certification of Principal Executive Officer
Certification of Principal Financial Officer

FORWARD-LOOKING STATEMENTS

     This report includes or incorporates forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. You can identify these forward-looking statements by our use of words such as “intend,” “plan,” “may,” “will,” “project,” “estimate,” “anticipate,” “believe,” “expect,” “continue,” “potential,” “opportunity” and similar expressions, whether in the negative or affirmative. We cannot guarantee that we actually will achieve these plans, intentions or expectations. All statements regarding our expected financial position, business and financing plans are forward-looking statements.

     Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important facts in various cautionary statements in this report that we believe could cause our actual results to differ materially from forward-looking statements that we make. These include, but are not limited to, the following:

	•		material adverse changes in economic conditions in the markets of our Company;
	•		the ability of our stations and magazines to attract and retain advertisers;
	•		loss of key personnel;
	•		the ability of our stations to attract quality programming and our magazines to attract good editors, writers and photographers;
	•		uncertainty as to the ability of our stations to increase or sustain audience share for their programs and our magazines to increase or sustain subscriber demand;
	•		competition from other media and the impact of significant competition for advertising revenues from other media;
	•		future regulatory actions and conditions in the operating areas of our Company;
	•		the necessity for additional capital expenditures and whether our programming and other expenses increase at a rate faster than expected;
	•		increasingly hostile reaction of various individuals and groups, including the government, to certain content broadcast on radio and television stations in the United States;
	•		financial community and rating agency perceptions of our business, operations and financial condition and the industry in which we operate;
	•		the effects of terrorist attacks, political instability, war and other significant events;
	•		rapid changes in technology and standards in our industry;
	•		whether pending transactions, if any, are completed on the terms and at the times set forth, if at all;
	•		other risks and uncertainties inherent in the radio and television broadcasting and magazine publishing businesses.

The forward-looking statements do not reflect the potential impact of any future acquisitions, mergers or dispositions. We undertake no obligation to update or revise any forward-looking statements because of new information, future events or otherwise.

PART I

ITEM 1. BUSINESS.

GENERAL

     We are a diversified media company, principally focused on radio broadcasting. We operate the 9^th largest publicly traded radio portfolio in the United States based on total listeners. We own and operate seven FM radio stations serving the nation’s top three markets – New York, Los Angeles and Chicago. Additionally, we own and operate fourteen FM and two AM radio stations with strong positions in St. Louis, Austin (we have a 50.1% controlling interest in our radio stations located there), Indianapolis and Terre Haute, IN.

     Our operational focus is on maintaining our leadership position in broadcasting by continuing to enhance the operating performance of our broadcast properties. We have created top performing radio stations that rank, in terms of primary demographic target audience share, among the top ten stations in the New York and Los Angeles radio markets according to the Fall 2006 Arbitron Survey. We believe that this strong large-market radio presence and our diversity of station formats make us attractive to a broad base of radio advertisers and reduces our dependence on any one economic sector or specific advertiser.

     In addition to our domestic radio properties, we operate an international radio business, publish several city and regional magazines and operate television stations that are held for sale. Internationally, we own and operate a network of radio stations in the Flanders region of Belgium, own a national radio network in Slovakia, have a 59.5% interest in a national radio station in Hungary and have an approximate 60% interest in two national radio networks in Bulgaria. Our publishing operations consist of Texas Monthly, Los Angeles, Atlanta, Indianapolis Monthly, Cincinnati, Tu Ciudad, and Country Sampler and related magazines. We also own and operate two television stations located in New Orleans and Honolulu. The Company has previously announced that it intends to sell these television stations in the next three to twelve months and entered into an agreement to sell its television station in Honolulu on February 20, 2007. The operations of these television stations have been classified as discontinued operations. We also engage in various businesses ancillary to our broadcasting business, such as consulting, broadcast tower leasing and operating a news information radio network in Indiana.

BUSINESS STRATEGY

     We are committed to maintaining our leadership position in radio broadcasting, enhancing the performance of our radio and publishing properties, and distinguishing ourselves through the quality of our operations. Our strategy is focused on the following operating principles:

Develop Innovative Local Programming. We believe that knowledge of local markets and innovative programming developed to target specific demographic groups are the most important determinants of individual radio station success. We conduct extensive market research to identify underserved segments of our markets and to ensure that we are meeting the needs of our target audience. Utilizing the research results, we concentrate on providing a focused programming format carefully tailored to the demographics of our markets and our audiences’ preferences. As we look to invest in our core properties, we will continue to emphasize the development of innovative local programming. Our sales efforts focus on maximizing our net revenues from local advertising. Historically, local advertising revenues have been a more stable revenue source for the broadcast industry, and we believe local sales will continue to be less susceptible to economic swings than national sales.

Deliver Results to Advertisers. Realizing that the ultimate success of our business depends on our ability to deliver results for our advertisers, we seek to become marketing partners with our advertisers by offering innovative solutions for reaching and connecting with consumers. Radio broadcasting is a highly-targeted advertising medium and we are able to deliver niche audiences for advertisers in a cost-efficient manner. We believe that offering advertisers multiple points of contact with our audiences maximizes the strength of the advertiser’s message. To that end, we offer integrated marketing solutions to our advertisers that combine traditional on-air commercials with other multimedia consumer touch points including, among others, the Internet, other mobile technologies and on-site appearances. We will continue to explore and invest in new, effective means of delivering results for our advertisers.

Pursue Strategic Acquisitions. We have built our portfolio by selectively acquiring underdeveloped media properties in desirable markets at reasonable purchase prices where our experienced management team has been able to enhance value. We have been successful in acquiring these types of media properties and improving their operational performance, revenues and cash flow with our marketing focus and innovative programming expertise. We find underdeveloped properties particularly attractive because they offer greater potential for revenue and cash flow growth than mature properties through the application of our operational experience. We intend to continue to evaluate potential acquisitions of radio stations and publishing properties. We will also continue to explore acquisitions of businesses that have developed innovative new technologies that we believe will enhance our existing operations and other businesses that we believe both hold promise for long-term appreciation in value and leverage our strengths.

Encourage a Performance-Based, Entrepreneurial Management Approach. We believe that broadcasting and city/regional publishing are primarily local businesses and that much of their success is the result of the efforts of regional and local management and staff. We have attracted and retained an experienced team of broadcast and publishing professionals who understand the preferences, demographics and competitive opportunities of their particular markets. Our decentralized approach gives local management oversight of spending, long-range planning and resource allocation at their individual stations and publications, and our approach provides rewards for all employees. In addition, we encourage our managers and employees to own a stake in the Company, and most of our full-time employees have an equity ownership position in Emmis. We believe that our performance-based, entrepreneurial management approach has created a distinctive corporate culture, making Emmis a highly desirable employer in the media industry and significantly enhancing our ability to attract and retain experienced and highly motivated employees and management. In 2005, Fortune magazine recognized Emmis as one of the “100 Best Companies to Work For.”

RADIO STATIONS

     In the following table, “Market Rank by Revenue” is the ranking of the market revenue size of the principal radio market served by the station among all radio markets in the United States. Market revenue rankings are from BIA’s Investing in Radio 2007 (1^st Edition). “Ranking in Primary Demographic Target” is the ranking of the station within its designated primary demographic target among all radio stations in its market based on the Fall 2006 Arbitron Survey. A “t” indicates the station tied with another station for the stated ranking. “Station Audience Share” represents a percentage generally computed by dividing the average number of persons over age 12 listening to a particular station during specified time periods by the average number of such persons for all stations in the market area as determined by Arbitron.

								RANKING IN
		MARKET				PRIMARY		PRIMARY		STATION
STATION AND		RANK BY				DEMOGRAPHIC		DEMOGRAPHIC		AUDIENCE
MARKET		REVENUE		FORMAT		TARGET AGES		TARGET		SHARE
Los Angeles, CA		1
KPWR-FM				Hip-Hop		18-34		1		3.8
KMVN-FM				Rhythmic/Pop Contemporary		25-54		32t		0.7
New York, NY		2
WRKS-FM				Classic Soul/Today's R&B		25-54		5		4.0
WQHT-FM				Hip-Hop		18-34		3		3.6
WQCD-FM				Smooth Jazz		25-54		8t		3.2
Chicago, IL		3
WLUP-FM				Classic Rock		25-54		13t		2.0
WKQX-FM				Alternative Rock		18-34		13t		1.2
St. Louis, MO		22
KPNT-FM				Alternative Rock		18-34		4		2.4
KSHE-FM				Album Oriented Rock		25-54		2		5.0
KIHT-FM				Classic Hits		25-54		6		3.2
KFTK-FM				Talk		25-54		13		3.0
Indianapolis, IN		32
WIBC-AM				News/Talk/Sports		35-64		4		6.0
WYXB-FM				Soft Adult Contemporary		25-54		7t		4.3
WLHK-FM				Country		25-54		9		4.3
WNOU-FM				Contemporary Hit Radio		18-34		4t		3.7
Austin, TX		36
KLBJ-AM				News/Talk		25-54		5		5.0
KDHT-FM				Hip-Hop		18-34		5		3.8
KBPA-FM				Adult Hits		25-54		1		5.3
KLBJ-FM				Album Oriented Rock		25-54		6		2.9
KGSR-FM				Adult Album Alternative		25-54		9t		2.6
KROX-FM				Alternative Rock		18-34		6		2.3
Terre Haute, IN		233
WTHI-FM				Country		25-54		1		25.6
WWVR-FM				Classic Rock		25-54		2		7.0

In addition to our other domestic radio broadcasting operations, we own and operate Network Indiana, a radio network that provides news and other programming to nearly 70 affiliated radio stations in Indiana. Internationally, we own and operate a network of radio

stations in the Flanders region of Belgium, own a national radio network in Slovakia, have a 59.5% interest in a national top-ranked radio station in Hungary and have an approximate 60% interest in two national radio networks in Bulgaria. We also engage in various businesses ancillary to our broadcasting business, such as consulting and broadcast tower leasing.

     TELEVISION STATIONS

     On May 10, 2005, Emmis announced that it had engaged advisors to assist in evaluating strategic alternatives for its television assets. As of February 28, 2007, the Company has sold fourteen of its sixteen television stations including our station in Omaha that was being operated pursuant to a local programming and marketing agreement while awaiting FCC approval of the sale. Subsequent to February 28, 2007, the FCC granted its approval and the sale of KMTV-TV closed on March 27, 2007. The following discussion relates to the two remaining television stations, which are classified as discontinued operations in the accompanying financial statements. On February 20, 2007, Emmis entered into an agreement to sell KGMB-TV in Honolulu (and its satellite stations).

     In the following table, “DMA Rank” is estimated by the Nielsen Media Research, Inc. (“Nielsen”) as of January 2007. Rankings are based on the relative size of a station’s market among the 210 generally recognized Designated Market Areas (“DMAs”), as defined by Nielsen. “Number of Stations in Market” represents the number of television stations (“Reportable Stations”) designated by Nielsen as “local” to the DMA, excluding public television stations and stations which do not meet minimum Nielsen reporting standards (i.e., a weekly cumulative audience of less than 2.5%) for reporting in the Sunday through Saturday, 7:00 a.m. to 1:00 a.m. time period. “Station Rank” reflects the station’s rank relative to other Reportable Stations based upon the DMA rating as reported by Nielsen from 9:00 a.m. to midnight, Sunday through Saturday. A “t” indicates the station tied with another station for the stated ranking. “Station Audience Share” reflects an estimate of the share of DMA households viewing television received by a local commercial station in comparison to other local commercial stations in the market as measured from 9:00 a.m. to midnight, Sunday through Saturday.

NUMBER OF

STATION

TELEVISION

METROPOLITAN

DMA

AFFILIATION/

STATIONS

STATION

AUDIENCE

AFFILIATION

STATION

AREA SERVED

RANK

CHANNEL

IN MARKET(1)

RANK(1)

SHARE (1)

EXPIRATION

WVUE-TV

New Orleans, LA

54

Fox/8

8

3

8

March 5, 2006 (2)

KGMB-TV

Honolulu, HI

72

CBS/9

8

1

16

September 18, 2016

     Emmis also owns and operates two satellite stations that primarily re-broadcast the signal of KGMB-TV. A local station and its satellite stations are considered one station for FCC and multiple ownership purposes, provided that the stations are in the same market.

     KGMB-TV is affiliated with CBS. WVUE-TV is currently in negotiations with the Fox Network regarding an extension of its affiliation agreement which expired on March 5, 2006. Each affiliation agreement provides the affiliated television station with the right to rebroadcast all programs transmitted by the network with which the television station is affiliated. In return, CBS and FOX have the right to sell a substantial portion of the advertising time during such broadcasts. Emmis does not receive any network compensation payments for its two remaining television stations.

PUBLISHING OPERATIONS

     We publish the following magazines through our publishing division:

		Monthly
		Paid & Verified
		Circulation(a)
Regional Magazines:
Texas Monthly			301,000
Los Angeles Magazine			157,000
Atlanta Magazine			70,000
Indianapolis Monthly			45,000
Cincinnati Magazine			38,000
Tu Ciudad Magazine			(b	)
Specialty Magazines (c):
Country Sampler			340,000
Country Business			24,000

INTERNET AND NEW TECHNOLOGIES

     We believe that the development and explosive growth of the Internet present not only a challenge, but an opportunity for broadcasters and publishers. The primary challenge is increased competition for the time and attention of our listeners and readers. The opportunity is to further enhance the relationships we already have with our listeners and readers by expanding products and services offered by our stations and magazines. For that reason, we commenced an expansion of our Emmis Interactive group. Emmis Interactive will continue to develop our radio Internet presence. The goal of Emmis Interactive is to leverage multiple technology platforms to not only create a two-way dialogue with listeners, but to also address the needs of marketers seeking multimedia touch points with potential consumers.

COMMUNITY INVOLVEMENT

     We believe that to be successful, we must be integrally involved in the communities we serve. We see ourselves as community partners. To that end, each of our stations and magazines participates in many community programs, fundraisers and activities that benefit a wide variety of organizations. Charitable organizations that have been the beneficiaries of our contributions, marathons, walkathons, dance-a-thons, concerts, fairs and festivals include, among others, Big Brothers/Big Sisters, Coalition for the Homeless, the Hawaii Foodbank, Indiana Black Expo, the Children’s Wish Fund, the National Multiple Sclerosis Foundation and Special Olympics. The National Association of Broadcasters Education Foundation honored us with the Hubbard Award, honoring a broadcaster “for extraordinary involvement in serving the community.” Emmis was the second broadcaster to receive this prestigious honor, after the Hubbard family, for which the award is named. Last year, The Broadcasters’ Foundation honored Chairman and CEO Jeff Smulyan with its Golden Mike Award in recognition of his charitable efforts.

INDUSTRY INVOLVEMENT

     We have an active leadership role in a wide range of industry organizations. Our senior managers have served in various capacities with industry associations, including as directors of the National Association of Broadcasters, the Radio Advertising Bureau, the Radio Futures Committee, the Arbitron Advisory Council, and as founding members of the Radio Operators Caucus. Our chief executive officer has been honored with the National Association of Broadcasters’ “National Radio Award” and as Radio Ink’s “Radio Executive of the Year.” Our Radio Division President served as Chairman of the NAB’s Fall Radio Show in 2006 and will reprise that

role for the Fall Radio Show in 2007. At various times we have been voted Most Respected Broadcaster in polls of radio industry chief executive officers and managers, and our management and on-air personalities have won numerous industry awards.

COMPETITION

     Radio and television broadcasting stations compete with the other broadcasting stations in their respective market areas, as well as with other advertising media such as newspapers, cable, magazines, outdoor advertising, transit advertising, the Internet and direct mail marketing. Competition within the broadcasting industry occurs primarily in individual market areas, so that a station in one market (e.g., New York) does not generally compete with stations in other markets (e.g., Chicago). In each of our markets, our stations face competition from other stations with substantial financial resources, including stations targeting the same demographic groups. In addition to management experience, factors that are material to competitive position include the station’s rank in its market in terms of the number of listeners or viewers, authorized power, assigned frequency, audience characteristics, local program acceptance and the number and characteristics of other stations in the market area. We attempt to improve our competitive position with programming and promotional campaigns aimed at the demographic groups targeted by our stations. We also seek to improve our position through sales efforts designed to attract advertisers that have done little or no radio advertising by emphasizing the effectiveness of radio advertising in increasing the advertisers’ revenues. The policies and rules of the FCC permit certain joint ownership and joint operation of local stations. All of our radio stations take advantage of these joint arrangements in an effort to lower operating costs and to offer advertisers more attractive rates and services. Although we believe that each of our stations can compete effectively in its market, there can be no assurance that any of our stations will be able to maintain or increase its current audience ratings or advertising revenue market share.

     Although the broadcasting industry is highly competitive, barriers to entry exist. The operation of a broadcasting station in the United States requires a license from the FCC. Also, the number of stations that can operate in a given market is limited by the availability of the frequencies that the FCC will license in that market, as well as by the FCC’s multiple ownership rules regulating the number of stations that may be owned and controlled by a single entity and cross ownership rules which limit the types of media properties in any given market that can be owned by the same person or company.

     The broadcasting industry historically has grown in terms of total revenues despite the introduction of new technology for the delivery of entertainment and information, such as cable television, the Internet, MP3 players, satellite radio, satellite television, audio tapes and compact discs. We believe that radio’s portability in particular makes it less vulnerable than other media to competition from new methods of distribution or other technological advances. There can be no assurance, however, that the development or introduction in the future of any new media technology will not have an adverse effect on the radio industry.

ADVERTISING SALES

     Our stations and magazines derive their advertising revenue from local and regional advertising in the marketplaces in which they operate, as well as from the sale of national advertising. Local and most regional sales are made by a station’s or magazine’s sales staff. National sales are made by firms specializing in such sales which are compensated on a commission-only basis. We believe that the volume of national advertising revenue tends to adjust to shifts in a station’s audience share position more rapidly than does the volume of local and regional advertising revenue. During the year ended February 28, 2007, approximately 22% of our total advertising revenues were derived from national sales and 78% were derived from local and regional sales. For the year ended February 28, 2007, our radio stations derived a higher percentage of their advertising revenues from local and regional sales (83%) than our publishing entities (61%).

EMPLOYEES

     As of February 28, 2007 Emmis had approximately 1,300 full-time employees and approximately 400 part-time employees. We have approximately 190 employees at various radio and television stations represented by unions. We consider relations with our employees to be good.

INTERNET ADDRESS AND INTERNET ACCESS TO SEC REPORTS

     Our Internet address is www.emmis.com. Through our Internet website, free of charge, you may obtain copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. These reports will be available the same day we electronically file

such material with, or furnish such material to, the SEC. We have been making such reports available on the same day they are filed during the period covered by this report.

FEDERAL REGULATION OF BROADCASTING

     Radio broadcasting is subject to the jurisdiction of the Federal Communications Commission (the “FCC”) under the Communications Act of 1934, as amended [in part by the Telecommunications Act of 1996 (the “1996 Act”)] (the “Communications Act”). Radio broadcasting is prohibited except in accordance with a license issued by the FCC upon a finding that the public interest, convenience and necessity would be served by the grant of such license. The FCC has the power to revoke licenses for, among other things, false statements made in applications or willful or repeated violations of the Communications Act or of FCC rules. In general, the Communications Act provides that the FCC shall allocate broadcast licenses for radio stations in such a manner as will provide a fair, efficient and equitable distribution of service throughout the United States. The FCC determines the operating frequency, location and power of stations; regulates the equipment used by stations; and regulates numerous other areas of radio broadcasting pursuant to rules, regulations and policies adopted under authority of the Communications Act. The Communications Act, among other things, prohibits the assignment of a broadcast license or the transfer of control of an entity holding such a license without the prior approval of the FCC. Under the Communications Act, the FCC also regulates certain aspects of the operation of cable television systems and other electronic media that compete with broadcast stations.

     The following is a brief summary of certain provisions of the Communications Act and of specific FCC regulations and policies. Reference should be made to the Communications Act as well as FCC rules, public notices and rulings for further information concerning the nature and extent of federal regulation of radio stations. Other legislation has been introduced from time to time which would amend the Communications Act in various respects, and the FCC from time to time considers new regulations or amendments to its existing regulations. We cannot predict whether any such legislation will be enacted or whether new or amended FCC regulations will be adopted or what their effect would be on Emmis.

     LICENSE RENEWAL. Radio and television stations operate pursuant to broadcast licenses that are ordinarily granted by the FCC for maximum terms of eight years and are subject to renewal upon approval by the FCC. Our licenses currently have the following expiration dates, until renewed¹:

Continuing operations:
WIBC-AM (Indianapolis)		August 1, 2004		Renewal application pending
WLHK-FM (Indianapolis)		August 1, 2004		Renewal application pending
WNOU-FM (Indianapolis)		August 1, 2004		Renewal application pending
WTHI-FM (Terre Haute)		August 1, 2004		Renewal application pending
WWVR-FM (Terre Haute)		August 1, 2004		Renewal application pending
WYXB-FM (Indianapolis)		August 1, 2004		Renewal application pending
WKQX-FM (Chicago)		December 1, 2004		Renewal application pending
WLUP-FM (Chicago)		December 1, 2012
KFTK-FM (St. Louis)		February 1, 2013
KIHT-FM (St. Louis)		February 1, 2013
KPNT-FM (St. Louis)		February 1, 2005		Renewal application pending
KSHE-FM (St. Louis)		February 1, 2013
KBPA-FM (Austin)		August 1, 2013
KDHT-FM (Austin)		August 1, 2013
KGSR-FM (Austin)		August 1, 2013
KLBJ-AM (Austin)		August 1, 2013
KLBJ-FM (Austin)		August 1, 2013
KROX-FM (Austin)		August 1, 2013
KPWR-FM (Los Angeles)		December 1, 2013
KMVN-FM (Los Angeles)		December 1, 2013
WQCD-FM (New York)		June 1, 2014
WQHT-FM (New York)		June 1, 2014
WRKS-FM (New York)		June 1, 2014
Discontinued operations:
WVUE-TV (New Orleans)		June 1, 2013
KGMB-TV (Honolulu)		February 1, 2015
KGMD-TV (Hawaii)		February 1, 2015
KGMV-TV (Maui)		February 1, 2015

     Under the Communications Act, at the time an application is filed for renewal of a station license, parties in interest, as well as members of the public, may apprise the FCC of the service the station has provided during the preceding license term and urge the denial of the application. If such a petition to deny presents information from which the FCC concludes (or if the FCC concludes on its own motion) that there is a “substantial and material” question as to whether grant of the renewal application would be in the public interest under applicable rules and policy, the FCC may conduct a hearing on specified issues to determine whether the renewal application should be granted. The Communications Act provides for the grant of a renewal application upon a finding by the FCC that the licensee:

•		has served the public interest, convenience and necessity;
•		has committed no serious violations of the Communications Act or the FCC rules; and
•		has committed no other violations of the Communications Act or the FCC rules which would constitute a pattern of abuse.

     If the FCC cannot make such a finding, it may deny the renewal application, and only then may the FCC consider competing applications for the same frequency. In a vast majority of cases, the FCC renews a broadcast license even when petitions to deny have been filed against the renewal application.

     Petitions to deny have been filed against the renewal applications for WKQX and KPNT, and an informal objection has been filed against the renewal applications of the Company’s Indiana radio stations. See “PROGRAMMING AND OPERATION.”

     REVIEW OF OWNERSHIP RESTRICTIONS. The 1996 Act required the FCC to review all of its broadcast ownership rules every two years and to repeal or modify any of its rules that are no longer “necessary in the public interest.” Pursuant to recent congressional appropriations legislation, these reviews now must be conducted once every four years.

     On June 2, 2003, the FCC adopted its most recent broadcast ownership review decision, in which it modified several of its regulations governing the ownership of radio stations in local markets. On June 24, 2004, however, the United States Court of Appeals for the Third Circuit released a decision rejecting much of the Commission’s 2003 decision. While affirming the FCC in certain respects, the Third Circuit found fault with the proposed new limits on media combinations, remanded them to the agency for further proceedings and extended a stay on the implementation of the new rules that it had imposed in September 2003. As a result, the restrictions that were in place prior to the FCC’s 2003 decision generally continue to govern media transactions, pending completion of the agency proceedings on remand, possible legislative intervention and/or further judicial review. In July of 2006, the FCC commenced the remand ordered by the Court of Appeals with a Further Notice of Proposed Rulemaking (“Further Notice”). The Further Notice also serves to fulfill the FCC’s obligation under the 1996 Act, as amended, to review its media ownership rules every four years. The formal comment cycle in response to the Further Notice closed in January 2007, but a decision is not expected for some time.

     The discussion below reviews the changes contemplated in the FCC’s 2003 decision and the Third Circuit’s response to the revised ownership regulations that the Commission adopted, and the issues set forth in the recently-issued Further Notice.

     Local Radio Ownership:

     The local radio ownership rule limits the number of commercial radio stations that may be owned by one entity in a given radio market based on the number of radio stations in that market:

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if the market has 45 or more radio stations, one entity may own up to eight stations, not more than five of which may be in the same service (AM or FM);

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if the market has between 30 and 44 radio stations, one entity may own up to seven stations, not more than four of which may be in the same service;

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if the market has between 15 and 29 radio stations, a single entity may own up to six stations, not more than four of which may be in the same service; and

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if the market has 14 or fewer radio stations, one entity may own up to five stations, not more than three of which may be in the same service, however one entity may not own more than 50% of the stations in the market.

     Each of the markets in which our radio stations are located has at least 15 commercial radio stations.

     The FCC has also adopted rules with respect to so-called local marketing agreements, or “LMAs”, by which the licensee of one radio station provides programming for another licensee’s radio station in the same market and sells all of the advertising within that programming. Under these rules, an entity that owns one or more radio stations in a market and programs more than 15% of the broadcast time on another radio station in the same market pursuant to an LMA is generally required to count the LMA station toward its media ownership limits even though it does not own the station. As a result, in a market where we own one or more radio stations, we generally cannot provide programming under an LMA to another radio station in the market if we could not acquire that station under the local radio ownership rule.

     Although the FCC’s June 2, 2003 decision did not change the numerical caps under the local radio rule, the Commission adjusted the rule by deciding that both commercial and noncommercial stations could be counted in determining the number of stations in a radio market. The decision also altered the definition of the relevant local market for purposes of the rule. Further, the agency determined that in addition to LMAs, radio station Joint Sales Agreements (“JSAs”) would be attributable under the local ownership rule where the brokering party sells more than 15% of the brokered station’s advertising time per week and owns or has an attributable interest in another station in the same market. The Third Circuit upheld each of these changes to the local radio rule. In response to a rehearing request from the Commission, the court lifted its stay with respect to these modifications, allowing them to go into effect. However, the court questioned the FCC’s decision to maintain the pre-existing numerical caps listed above, and remanded them to the agency for further consideration.

     In response to the Third Circuit’s remand of the numerical radio caps, the Further Notice seeks comment on what the numerical limits should be. In addition, the FCC asks whether future limits should be based on market or audience share or, alternatively, the number of outlets or licenses held by an individual entity. The FCC also asks whether the existing sub-caps on the number of AM and FM stations that are built in to the current numerical limits should be retained.

     Cross-Media Ownership:

     Pre-Existing Radio/Television Cross-Ownership Rule: The FCC’s radio/television cross-ownership rule generally permits the common ownership of the following combinations in the same market, to the extent permitted under the FCC’s television duopoly rule:

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up to two commercial television stations and six commercial radio stations or one commercial television station and seven commercial radio stations in a market where at least 20 independent media voices will remain post-merger;

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up to two commercial television stations and four commercial radio stations in a market where at least 10 independent media voices will remain post-merger; and

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two commercial television stations and one commercial radio station in a market with less than 10 independent media voices that will remain post-merger.

For purposes of this rule, the FCC counts as “voices” commercial and non-commercial broadcast television and radio stations as well as some daily newspapers and cable operators. The Commission will consider permanent waivers of its revised radio/television cross-ownership rule only if one of the stations is a “failed station.”

     Pre-Existing Newspaper/Broadcast Cross-Ownership Rule: The FCC rules also prohibit common ownership of a daily newspaper and a radio or television station in the same local market.

     New Cross-Media Limits: The cross-media limits adopted in the June 2003 decision would replace both the newspaper/broadcast cross-ownership restriction and the radio/television cross-ownership limits as follows:

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In DMAs with three or fewer commercial and noncommercial television stations, the FCC will not permit cross-ownership between TV stations, radio stations, and daily newspapers.

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In DMAs with four to eight television stations, the FCC will permit parties to have one of the three following combinations: (a) one or more daily newspaper(s), one TV station, and up to 50% of the radio stations that would be permissible under the local radio ownership limits; (b) one or more daily newspaper(s) and as many radio stations as can be owned pursuant to the local radio ownership limits (but no television stations); or (c) two television stations (so long as ownership would be permissible under the local television ownership rule) and as many radio stations as the local radio ownership limits permit (but no daily newspapers).

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In DMAs with nine or more television stations, the FCC will permit any newspaper and broadcast cross-media combinations so long as they comply with the local television ownership rule and local radio ownership limits.

     The Third Circuit remanded the new cross-media limits to the Commission for further consideration, and the pre-existing radio/television and newspaper/broadcast cross-ownership rules were left in place in the meantime. The Further Notice seeks comment on a number of issues relating to cross-media ownership, including whether, and if so, how, the agency should attempt to measure the diversity of viewpoints available in local markets in regulating cross-media ownership. In addition, the Further Notice asks what, if any, limitations the FCC should maintain on newspaper/broadcast and radio/television cross-ownership. The absolute ban on newspaper/broadcast cross-ownership, and the pre-existing rule relating to radio-television cross-ownership, remain in effect in the interim.

     We cannot predict the ultimate outcome of the proceedings described above, future biennial reviews or other agency or legislative initiatives or the impact, if any, that they will have on our business.

     ALIEN OWNERSHIP. Under the Communications Act, no FCC license may be held by a corporation if more than one-fifth of its capital stock is owned or voted by aliens or their representatives, a foreign government or representative thereof, or an entity organized under the laws of a foreign country (collectively, “Non-U.S. Persons”). Furthermore, the Communications Act provides that no FCC license may be granted to an entity directly or indirectly controlled by another entity of which more than one-fourth of its capital stock is owned or voted by Non-U.S. Persons if the FCC finds that the public interest will be served by the denial of such license. The FCC staff has interpreted this provision to require an affirmative public interest finding to permit the grant or holding of a license, and such a finding has been made only in limited circumstances. The foregoing restrictions on alien ownership apply in modified form to other types of business organizations, including partnerships and limited liability companies. Our Second Amended and Restated Articles of Incorporation and Amended and Restated Code of By-Laws authorize the Board of Directors to prohibit such restricted alien ownership, voting or transfer of capital stock as would cause Emmis to violate the Communications Act or FCC regulations.

     ATTRIBUTION OF OWNERSHIP INTERESTS. In applying its ownership rules, the FCC has developed specific criteria in order to determine whether a certain ownership interest or other relationship with a Commission licensee is significant enough to be “attributable” or “cognizable” under its rules. Specifically, among other relationships, certain stockholders, officers and directors of a broadcasting company are deemed to have an attributable interest in the licenses held by that company, such that there would be a violation of the Commission’s rules where the broadcasting company and such a stockholder, officer or director together hold attributable interests in more than the permitted number of stations or a prohibited combination of outlets in the same market. The FCC’s regulations generally deem the following relationships and interests to be attributable for purposes of its ownership restrictions:

•

all officer and director positions in a licensee or its direct/indirect parent(s);

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voting stock interests of at least 5% (or 20%, if the holder is a passive institutional investor, i.e., a mutual fund, insurance company or bank);

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any equity interest in a limited partnership or limited liability company where the limited partner or member is “materially involved” in the media-related activities of the LP or LLC and has not been “insulated” from such activities pursuant to specific FCC criteria;

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equity and/or debt interests which, in the aggregate, exceed 33% of the total asset value of a station or other media entity (the “equity/debt plus policy”), if the interest holder supplies more than 15% of the station’s total weekly programming (usually pursuant to a time brokerage, local marketing or network affiliation agreement) or is a same-market media entity (i.e., broadcast company or newspaper).

     To assess whether a voting stock interest in a direct or indirect parent corporation of a broadcast licensee is attributable, the FCC uses a “multiplier” analysis in which non-controlling voting stock interests are deemed proportionally reduced at each non-controlling link in a multi-corporation ownership chain.

     Under existing FCC policy, in the case of corporations having a “single majority shareholder,” the interests of minority shareholders are generally not deemed attributable. Inasmuch as Jeffrey H. Smulyan’s voting interest in the Company currently exceeds 50%, this exemption appears to apply to the Company. The exemption may, however, be eliminated by the FCC. If the exemption is eliminated, or if Mr. Smulyan’s voting interest falls to or below 50%, then the interests of any minority shareholders that meet or exceed the thresholds described above will become attributable and will be combined with the Company’s interests for purposes of determining compliance with FCC ownership rules.

     Ownership-rule conflicts arising as a result of aggregating the media interests of the Company and its attributable shareholders could require divestitures by either the Company or the affected shareholders. Any such conflicts could result in Emmis being unable to obtain FCC consents necessary for future acquisitions. Conversely, Emmis’ media interests could operate to restrict other media investments by shareholders having or acquiring an interest in Emmis.

     ASSIGNMENTS AND TRANSFERS OF CONTROL. The Communications Act prohibits the assignment of a broadcast license or the transfer of control of a broadcast licensee without the prior approval of the FCC. In determining whether to grant such approval, the FCC considers a number of factors, including compliance with the various rules limiting common ownership of media properties, the “character” of the licensee and those persons holding attributable interests therein and compliance with the Communications Act’s limitations on alien ownership as well as other statutory and regulatory requirements. When evaluating an assignment or transfer of control application, the FCC is prohibited from considering whether the public interest might be served by an assignment of the broadcast license or transfer of control of the licensee to a party other than the assignee or transferee specified in the application.

     PROGRAMMING AND OPERATION. The Communications Act requires broadcasters to serve the “public interest.” Since the late 1970s, the FCC gradually has relaxed or eliminated many of the more formalized procedures it had developed to promote the broadcast of certain types of programming responsive to the needs of a station’s community of license. However, licensees continue to be required to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness.

     Federal law prohibits the broadcast of obscene material at any time and the broadcast of indecent material during specified time periods; these prohibitions are subject to enforcement action by the FCC. The agency recently has engaged in more aggressive enforcement of its indecency regulations than has generally been the case in the past. In addition to imposing more stringent fines, the Commission has indicated that it may begin license revocation procedures for “serious” violations of the indecency law. Furthermore, in June of 2006, Congress passed legislation that increased the per-violation maximum fine tenfold, from $32,500 to $325,000.

     In August of 2004, Emmis entered into a Consent Decree with the FCC, pursuant to which (i) the Company adopted a compliance plan intended to avoid future indecency violations, (ii) the Company admitted, solely for purposes of the Decree, that certain prior broadcasts were “indecent,” (iii) the Company agreed to make a voluntary payment of $300,000 to the U.S. Treasury, (iv) the FCC rescinded its prior enforcement actions against the Company based on allegedly indecent broadcasts, and agreed not to use against the Company any indecency violations based on complaints within the FCC’s possession as of the date of the Decree or “similar” complaints based on pre-Decree broadcasts, and (v) the FCC found that neither the alleged indecency violations nor the circumstances surrounding a civil suit filed by a WKQX announcer raised any substantial and material questions concerning the Company’s qualifications to hold FCC licenses. A petition requesting that the FCC reconsider its approval of the Decree was filed and, in October of 2006, denied by the FCC. The FCC’s decision approving the Decree, and its decision to deny reconsideration of that decision, were appealed to the United States Court of Appeals for the District of Columbia Circuit. The Court dismissed the appeal in March 2007; however, the appellants have the right to ask the court to reconsider its decision and/or request the United States Supreme Court to hear the case. If the Decree were to be invalidated, then any indecent broadcasts that may have occurred on the Company’s stations could be considered by the FCC, which could have an adverse impact on the Company’s FCC licenses. In addition, petitions have been filed against the license renewal applications of stations WKQX and KPNT, and an informal objection has been filed against the license renewals of the Company’s Indiana radio stations, in each case based primarily on the matters covered by the Decree. Consequently, any invalidation of the Decree could result in the petitions and objections being considered in connection with those and possibly other license renewals, which could have an adverse affect on the Company’s FCC licenses. Subsequent to the approval of the Consent Decree, the Company has received letters of inquiry from the FCC alleging additional violations of indecency rules. The broadcasts covered by these letters of inquiry are not covered by the Consent Decree and could result in the imposition of liability.

     In 2006, the FCC commenced an industry-wide inquiry into possible violations of sponsorship identification requirements and “payola” in the radio industry. Its initial inquiries were directed to four radio groups, and in April 2007, those groups entered into Consent Decrees with the FCC to resolve outstanding investigations and allegations. The Company has also received inquiries from the FCC, and is in the process of preparing responses.

     Stations also must pay regulatory and application fees and follow various rules promulgated under the Communications Act that regulate, among other things, political advertising, sponsorship identification, contest and lottery advertisements and technical operations, including limits on radio frequency radiation.

     Failure to observe FCC rules and policies can result in the imposition of various sanctions, including monetary fines, the grant of “short-term” (less than the maximum term) license renewals or, for particularly egregious violations, the denial of a license renewal application or the revocation of a license.

     ADDITIONAL DEVELOPMENTS AND PROPOSED CHANGES. The Commission has adopted rules implementing a new low power FM (“LPFM”) service. The FCC has begun accepting applications for LPFM stations and has granted some of those applications. We cannot predict whether any LPFM stations will interfere with the coverage of our radio stations.

     The FCC also has authorized two companies to launch and operate satellite digital audio radio service (“SDARS”) systems. Both companies—Sirius Satellite Radio, Inc. and XM Radio—are now providing nationwide service. In addition, Sirius and XM recently have launched channels providing local traffic and weather information in major cities. Broadcasters have objected to these local services, contending that the provision of local programming conflicts with the FCC’s intent to license satellite radio solely as a national service. XM and Sirius contend, in response, that the services are not in contravention of their FCC authorizations because the channels offering local information are being offered nationwide, not on a local basis. In February of 2007, XM and Sirius announced their intention to merge, assuming that regulatory approval can be obtained. We cannot predict the impact of SDARS on our radio stations’ listenership.

     In October 2002, the FCC issued an order selecting a technical standard for terrestrial digital audio broadcasting (“DAB,” also known as high definition radio or “HD Radio”). The in-band, on-channel (“IBOC”) technology chosen by the agency allows AM and FM radio broadcasters to introduce digital operations and permits existing stations to operate on their current frequencies in either full analog mode, full digital mode, or a combination of both (at reduced power). In March of 2005, the FCC announced that pending adoption of final rules, it would allow stations on an interim basis to broadcast multiple digital channels. In March 2007, the FCC adopted service rules for HD Radio. Significantly, the Commission decided to allow FM stations to broadcast digital multicast streams without seeking prior FCC authority, to provide datacasting services, to lease excess digital capacity to third parties, and to offer subscription services pursuant to requests for experimental authority. Under the new rules, FM stations may operate in the “extended hybrid mode,” which provides more flexibility for multicasting and datacasting services; and may use separate analog and digital antennas without seeking prior FCC authority. FM translators, FM boosters and low power FM stations may also broadcast digitally where feasible, and AM stations may now operate digitally during nighttime hours. The new rules mandate that broadcasters offering digital service provide at least one free over-the-air signal comparable in quality to their analog signal and that they simulcast their analog programming on their main digital stream, and prohibit broadcasters from operating exclusively in digital. The FCC declined either to set any mandatory deadline for broadcasters to convert to digital operations or to impose additional public interest obligations (beyond those that already apply to analog broadcasters) on digital broadcasters, although the FCC did adopt a Further Notice of Proposed Rulemaking seeking comment on whether additional public interest obligations are necessary.

     In January 2001, the D.C. Circuit concluded that the FCC’s Equal Employment Opportunity (“EEO”) regulations were unconstitutional. The FCC adopted new EEO rules in November 2002, which went into effect in March 2003.

     In March 2007, the Copyright Royalty Board (“CRB”) set royalty rates for non-interactive Internet streaming of sound recordings for 2006-2010. The new rates apply to all services that stream sound recordings on the Internet, including radio stations that simulcast their broadcast programming over the Internet. The new rates represent a substantial increase from the previous rates. The rates increase from 0.08 cents per-listener per-song in 2006 to 0.19 cents per-listener per-song in 2010. Further, in order to accurately calculate royalties, a webcaster will need to know how many listeners listened to each song it transmitted, information that had often not previously been tracked. Several parties to the rate-setting proceeding have filed petitions for rehearing at the CRB, which remain pending, and it is also possible that appeals may be filed in the United States Court of Appeals for the D.C. Circuit.

     Congress and the FCC have under consideration, and may in the future consider and adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, affect the operation, ownership and profitability of our broadcast stations, result in the loss of audience share and advertising revenues for our broadcast stations and/or affect our ability to acquire additional broadcast stations or finance such acquisitions. Such matters include, but are not limited to:

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proposals to impose spectrum use or other fees on FCC licensees;

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proposals to repeal or modify some or all of the FCC’s multiple ownership rules and/or policies;

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proposals to change rules relating to political broadcasting;

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technical and frequency allocation matters;

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AM stereo broadcasting;

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proposals to permit expanded use of FM translator stations;

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proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages;

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proposals to tighten safety guidelines relating to radio frequency radiation exposure;

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proposals permitting FM stations to accept formerly impermissible interference;

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proposals to reinstate holding periods for licenses;

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changes to broadcast technical requirements, including those relative to the implementation of SDARS and DAB;

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proposals to limit the tax deductibility of advertising expenses by advertisers;

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proposals to regulate violence in broadcasts; and

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proposals to charge royalties for sound recordings used in broadcasts.

     We cannot predict whether any proposed changes will be adopted, what other matters might be considered in the future, or what impact, if any, the implementation of any of these proposals or changes might have on our business.

     The foregoing is only a brief summary of certain provisions of the Communications Act and of specific FCC regulations. Reference should be made to the Communications Act as well as FCC regulations, public notices and rulings for further information concerning the nature and extent of federal regulation of broadcast stations.

GEOGRAPHIC FINANCIAL INFORMATION

     The Company’s segments operate primarily in the United States with one national radio station located in Hungary, a network of radio stations located in Belgium and national radio networks in Slovakia and Bulgaria. The following tables summarize relevant financial information by geographic area. Net revenues related to discontinued operations are excluded for all periods presented.

Net Revenues:		2005				2006				2007
Domestic		$	326,495			$	349,941			$	327,166
International			17,466				27,495				32,369
Total		$	343,961			$	377,436			$	359,535

Noncurrent Assets:		2005				2006				2007
Domestic		$	1,643,139			$	1,231,071			$	1,061,634
International			12,811				26,424				27,261
Total		$	1,655,950			$	1,257,495			$	1,088,895

ITEM 1A. RISK FACTORS.

     The risk factors listed below, in addition to those set forth elsewhere in this report, could affect the business and future results of the Company. Past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.

Decreased spending by advertisers or a decrease in our market ratings or market share can adversely affect our advertising revenues.

     We believe that advertising is a discretionary business expense. Spending on advertising tends to decline disproportionately during an economic recession or downturn as compared to other types of business spending. Consequently, a downturn in the United States economy would likely have an adverse effect on our advertising revenue and, therefore, our results of operations. A recession or downturn in the economy of any individual geographic market, particularly a major market such as Los Angeles or New York, in which we own and operate sizeable stations, could have a significant effect on us.

     Even in the absence of a general recession or downturn in the economy, an individual business sector (such as the automotive industry) that tends to spend more on advertising than other sectors might be forced to reduce its advertising expenditures if that sector experiences a downturn. If that sector’s spending represents a significant portion of our advertising revenues, any reduction in its advertising expenditures may affect our revenue.

We may lose audience share and advertising revenue to competing radio stations or other types of media competitors.

     We operate in highly competitive industries. Our radio stations compete for audiences and advertising revenue with other radio stations and station groups, as well as with other media. Shifts in population, demographics, audience tastes and other factors beyond our control could cause us to lose market share. Any adverse change in a particular market, or adverse change in the relative market positions of the stations located in a particular market, could have a material adverse effect on our revenue or ratings, could require increased promotion or other expenses in that market, and could adversely affect our revenue in other markets. Other radio broadcasting companies may enter the markets in which we operate or may operate in the future. These companies may be larger and have more financial resources than we have. Our radio stations may not be able to maintain or increase their current audience ratings and advertising revenue in the face of such competition.

     In addition, from time to time, other stations may change their format or programming, a new station may adopt a format to compete directly with our stations for audiences and advertisers, or stations might engage in aggressive promotional campaigns. These tactics could result in lower ratings and advertising revenue or increased promotion and other expenses and, consequently, lower earnings and cash flow for us. Any failure by us to respond, or to respond as quickly as our competitors, could also have an adverse effect on our business and financial performance.

     Because of the competitive factors we face, we cannot assure investors that we will be able to maintain or increase our current audience ratings and advertising revenue.

Our domestic radio operations are heavily concentrated in the New York and Los Angeles markets.

     Our radio operations in New York and Los Angeles account for approximately 50% of our domestic radio revenues. Our results from operations can be materially affected by a downturn in operations in either one of these markets.

We must respond to the rapid changes in technology, services and standards that characterize our industry in order to remain competitive.

     The radio broadcasting industries are subject to rapid technological change, evolving industry standards and the emergence of competition from new media technologies and services. We cannot assure you that we will have the resources to acquire new technologies or to introduce new services that could compete with these new technologies. Various new media technologies and services are being developed or introduced, including:

	-		satellite-delivered digital audio radio service, which has resulted in the introduction of new subscriber-based satellite radio services with numerous niche formats;
	-		audio programming by cable systems, direct-broadcast satellite systems, personal communications systems, Internet content providers and other digital audio broadcast formats;
	-		MP3 players and other personal audio systems that create new ways for individuals to listen to music and other content of their own choosing;
	-		in-band on-channel digital radio (i.e., HD digital radio), which provides multi-channel, multi-format digital radio services in the same bandwidth currently occupied by traditional AM and FM radio services;
	-		low-power FM radio, which could result in additional FM radio broadcast outlets; and

     We cannot predict the effect, if any, that competition arising from new technologies or regulatory change may have on the radio broadcasting industries or on our financial condition and results of operations. We also cannot ensure that our investments in HD digital radio and other technologies will produce the desired returns.

Our substantial indebtedness could adversely affect our financial health.

     We have a significant amount of indebtedness. At February 28, 2007, our total indebtedness was approximately $501.9 million, and our shareholders’ equity was approximately $237.2 million. Our substantial indebtedness could have important consequences to investors. For example, it could:

	-		make it more difficult for us to satisfy our obligations with respect to our indebtedness;
	-		increase our vulnerability to generally adverse economic and industry conditions;
	-		require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures and other general corporate purposes;
	-		result in higher interest expense in the event of increases in interest rates because some of our debt is at variable rates of interest;
	-		limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate;
	-		place us at a competitive disadvantage compared to our competitors that have less debt; and
	-		limit, along with the financial and other restrictive covenants in our credit facility and our other debt instruments, our ability to borrow additional funds. Failing to comply with those covenants could result in an event of default, which if not cured or waived, could have a material adverse effect on our businesses.

The terms of our indebtedness and the indebtedness of our direct and indirect subsidiaries may restrict our current and future operations, particularly our ability to respond to changes in market conditions or to take some actions.

     Our credit facility and our bond indenture impose significant operating and financial restrictions on us. These restrictions significantly limit or prohibit, among other things, our ability and the ability of our subsidiaries to incur additional indebtedness, issue preferred stock, incur liens, pay dividends, enter into asset sale transactions, merge or consolidate with another company, dispose of all or substantially all of our assets or make certain other payments or investments.

     These restrictions currently limit our ability to grow our business through acquisitions and could limit our ability to respond to market conditions or meet extraordinary capital needs. They also could restrict our corporate activities in other ways. These restrictions could adversely affect our ability to finance our future operations or capital needs.

To service our indebtedness and other obligations, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control.

     Our ability to make payments on and to refinance our indebtedness, to pay dividends and to fund capital expenditures will depend on our ability to generate cash in the future. This ability to generate cash, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Our businesses might not generate sufficient cash flow from operations. We might not be able to complete future offerings, and future borrowings might not be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure investors that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.

Our operating results have been and may again be adversely affected by acts of war and terrorism.

     Acts of war and terrorism against the United States, and the country’s response to such acts, may negatively affect the U.S. advertising market, which could cause our advertising revenues to decline due to advertising cancellations, delays or defaults in payment for advertising time, and other factors. In addition, these events may have other negative effects on our business, the nature and duration of which we cannot predict.

     For example, after the September 11, 2001 terrorist attacks, we decided that the public interest would be best served by the presentation of continuous commercial-free coverage of the unfolding events on our stations. This temporary policy had a material adverse effect on our advertising revenues and operating results for the month of September 2001. Future events like those of September 11, 2001 may cause us to adopt similar policies, which could have a material adverse effect on our advertising revenues and operating results.

     Additionally, the attacks on the World Trade Center on September 11, 2001 resulted in the destruction of the transmitter facilities that were located there. Although we had no transmitter facilities located at the World Trade Center, broadcasters that had facilities located in the destroyed buildings experienced temporary disruptions in their ability to broadcast. Since we tend to locate transmission facilities for stations serving urban areas on tall buildings or other significant structures, such as the Empire State Building in New York, further terrorist attacks or other disasters could cause similar disruptions in our broadcasts in the areas affected. If these disruptions occur, we may not be able to locate adequate replacement facilities in a cost-effective or timely manner or at all. Failure to remedy disruptions caused by terrorist attacks or other disasters and any resulting degradation in signal coverage could have a material adverse effect on our business and results of operations.

We may not be able to complete the disposition of our remaining two television stations.

     In May 2005, we announced that we had engaged advisors to assist us in evaluating strategic alternatives for our television assets. As of February 28, 2007, we have sold fourteen of our original sixteen television stations, including our station in Omaha that was being operated under local programming and marketing agreement pending FCC approval of the sale, which was granted subsequent to February 28, 2007. On February 20, 2007, we entered into an agreement to sell KGMB-TV in Honolulu (and its satellite stations). The transaction contains customary representations, warranties and covenants, and is subject to standard closing conditions, including but not limited to approvals by the FCC. We expect to close this transaction in the first half of the calendar year. We have not sold WVUE-TV in New Orleans. We remain committed to selling WVUE-TV, but we cannot guarantee that we will find a buyer willing to pay an acceptable price.

     Additionally, WVUE-TV was adversely affected by Hurricane Katrina in August 2005, which caused significant damage to the New Orleans area and our facilities at WVUE-TV. This has complicated the sales process for the station.

To continue to grow our business, we may require significant additional capital.

     The continued development, growth and operation of our businesses may require substantial capital. In particular, additional acquisitions may require large amounts of capital. We intend to fund our growth, including acquisitions, if any, with cash generated from operations, borrowings under our new credit facility and proceeds from future issuances of debt and equity, both public and private. Our ability to raise additional debt or equity financing is subject to market conditions, our financial condition and other factors. If we cannot obtain financing on acceptable terms when needed, our results of operations and financial condition could be adversely impacted.

Our ability to grow through acquisitions may be limited by competition for suitable properties or other factors we cannot control.

     We intend to selectively pursue acquisitions of radio stations, publishing properties and other businesses we believe hold promise for long-term appreciation in value, when appropriate, in order to grow. To be successful with this strategy, we must be effective at quickly evaluating markets, obtaining financing on satisfactory terms and obtaining the necessary regulatory approvals, sometimes including, as discussed below, approvals of the FCC and the Department of Justice. We also must accomplish these tasks at reasonable costs. The radio industry in particular has rapidly consolidated. In general, we compete with many other buyers for radio stations as well as publishing properties. These other buyers may be larger and have more resources. We cannot predict whether we will be successful in buying stations or publishing properties, or whether we will be successful with any station or publishing property we acquire. Our strategy is generally to buy underperforming properties and use our experience to improve their performance. Thus, the benefits

resulting from the properties we buy may not manifest themselves immediately, and we may need to pay large initial costs for these improvements.

If we are not able to obtain regulatory approval for future acquisitions, our growth may be impaired.

     Although part of our growth strategy is the acquisition of additional radio stations, we may not be able to complete all the acquisitions that we agree to make. Station acquisitions are subject to the approval of the FCC and, potentially, other regulatory authorities. Also, the FCC sometimes undertakes review of transactions to determine whether they would result in excessive concentration, even where the transaction complies with the numerical ownership limits. Specifically, the staff has had a policy of ‘‘flagging’’ for closer scrutiny the anticompetitive impact of any transactions that will put one owner in a position to earn 50% or more of the market’s radio advertising revenues or will result in the two largest owners receiving 70% or more of those revenues. While the FCC has noted ‘‘flagging’’ in public notices in the past, current transactions may be ‘‘flagged’’ internally by the FCC without public notice. As discussed below, the FCC’s new rules with respect to media ownership are under court review. We cannot predict how the FCC’s approval process will change based on the outcome of the FCC’s media ownership proceeding or whether such changes would adversely impact us.

     Additionally, since the passage of the Telecommunications Act of 1996, the U.S. Department of Justice has become more involved in reviewing proposed acquisitions of radio stations and radio station networks. The Justice Department is particularly concerned when the proposed buyer already owns one or more radio stations in the market of the station it is seeking to buy. The Justice Department has challenged a number of radio broadcasting transactions. Some of those challenges ultimately resulted in consent decrees requiring, among other things, divestitures of certain stations. In general, the Justice Department has more closely scrutinized radio broadcasting acquisitions that result in local market shares in excess of 40% of radio advertising revenue.

We may not be able to integrate acquired stations successfully, which could affect our financial performance.

     Our ability to operate our Company effectively depends, in part, on our success in integrating acquired stations into our operations. These efforts may impose significant strains on our management and financial resources. The pursuit and integration of acquired stations will require substantial attention from our management and will limit the amount of time they can devote to other important matters. Successful integration of acquired stations will depend primarily on our ability to manage our combined operations. If we fail to successfully integrate acquired stations or manage our growth or if we encounter unexpected difficulties during expansion, it could have a negative impact on the performance of acquired stations as well as on our Company as a whole.

An accounting principle that affects the accounting treatment of goodwill and FCC licenses could cause future losses due to asset impairment.

     In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 142, ‘‘Goodwill and Other Intangible Assets,’’ that requires companies to cease amortizing goodwill and certain other indefinite-lived intangible assets, including broadcast licenses. Under SFAS 142, goodwill and some indefinite-lived intangibles will not be amortized into results of operations, but instead will be tested for impairment at least annually, with impairment being measured as the excess of the carrying value of the goodwill or intangible over its fair value. In addition, goodwill and intangible assets will be tested more often for impairment as circumstances warrant. Intangible assets that have finite useful lives will continue to be amortized over their useful lives and will be measured for impairment in accordance with SFAS 144, ‘‘Accounting for the Impairment or Disposal of Long-Lived Assets.’’ After initial adoption, any impairment losses under SFAS 142 or 144 will be recorded as operating expenses. In connection with the adoption of SFAS 142 effective March 1, 2002, we recorded an impairment loss of $148.6 million, net of tax, related to our television division that is reflected in loss from discontinued operations and an impairment loss of $18.8 million related to radio stations and a publishing entity that is reflected as the cumulative effect of an accounting change. The adoption of this accounting standard reduced our amortization of goodwill and intangibles by approximately $54.6 million in the year ended February 28, 2003. We also incurred a $12.4 million impairment loss related to our television division in the fiscal year ended February 29, 2004 as a result of our annual SFAS 142 review. We incurred a $37.4 million impairment in the fiscal year ended February 28, 2006 ($31.4 million relating to our radio assets and $6.0 million related to our publishing assets) related to SFAS 142. Our future impairment reviews could result in additional write-downs.

One shareholder controls a majority of the voting power of our common stock, and his interest may conflict with investors’.

     As of April 30, 2007, our Chairman of the Board of Directors, Chief Executive Officer and President, Jeffrey H. Smulyan, beneficially owned shares representing approximately 69.6% of the outstanding combined voting power of all classes of our common

stock, as calculated pursuant to Rule 13d-3 of the Exchange Act. He therefore is in a position to exercise substantial influence over the outcome of most matters submitted to a vote of our shareholders, including the election of directors.

The FCC has recently begun more vigorous enforcement of its indecency rules against the broadcast industry, which could have a material adverse effect on our business.

     The FCC’s rules prohibit the broadcast of obscene material at any time and indecent material between the hours of 6 a.m. and 10 p.m. Broadcasters risk violating the prohibition on the broadcast of indecent material because of the FCC’s broad definition of such material, coupled with the spontaneity of live programming.

     Congress has dramatically increased the penalties for broadcasting obscene, indecent or profane programming and potentially subject broadcasters to license revocation, renewal or qualification proceedings in the event that they broadcast indecent material. In addition, the FCC’s heightened focus on the indecency regulatory scheme, against the broadcast industry generally, may encourage third parties to oppose our license renewal applications or applications for consent to acquire broadcast stations.

     In August of 2004, Emmis entered into a Consent Decree with the FCC, pursuant to which (i) the Company adopted a compliance plan intended to avoid future indecency violations, (ii) the Company admitted, solely for purposes of the Decree, that certain prior broadcasts were “indecent,” (iii) the Company agreed to make a voluntary payment of $300,000 to the U.S. Treasury, (iv) the FCC rescinded its prior enforcement actions against the Company based on allegedly indecent broadcasts and agreed not to use against the Company any indecency violations based on complaints within the FCC’s possession as of the date of the Decree or “similar” complaints based on pre-Decree broadcasts, and (v) the FCC found that neither the alleged indecency violations nor the circumstances surrounding a civil suit filed by a WKQX announcer raised any substantial and material questions concerning the Company’s qualifications to hold FCC licenses. Certain individuals and groups appealed the FCC’s adoption of the consent decree and have challenged applications for renewal of the licenses of certain of the Company’s stations based primarily on the matters covered by the decree. The petition was denied by the FCC on October 17, 2006. The petitioners appealed the FCC’s decision to the United States Court of Appeals for the District of Columbia Circuit. On March 29, 2007, the Court dismissed the case. If the petitioners elect to further pursue the matter, a petition for rehearing is due by May 14, 2007 and a certified petition is due by July 27, 2007. If the Court of Appeals or Untied States Supreme Court were to invalidate the decree, then any indecent broadcasts that may have occurred on the Company’s stations could be considered by the FCC, which could have an adverse impact on the Company’s FCC licenses. In addition, petitions have been filed against the license renewal applications of stations WKQX and KPNT, and an informal objection has been filed against the license renewals of the Company’s Indiana radio stations, in each case based primarily on the matters covered by the Decree. Consequently, any invalidation of the Decree could result in the petitions and objections being considered in connection with those and possibly other license renewals. Subsequent to the approval of the Consent Decree, the Company has received letters of inquiry from the FCC alleging additional violations of indecency rules. The broadcasts covered by these letters of inquiry are not covered by the Consent Decree and could result in the imposition of liability.

     The Communications Act provides that the FCC must renew a broadcast license if (i) the station involved has served the ‘‘public interest, convenience and necessity’’ and (ii) there have been no ‘‘serious violations’’ of the Act or FCC rules, and no ‘‘other violations’’ of the Act or rules which ‘‘taken together, would constitute a pattern of abuse.’’ If the Commission were to determine that indecency or other violations by one or more of our stations fall within either or both of those definitions, the agency could (x) grant the license renewal applications of the stations with burdensome conditions, such as requirements for periodic reports, (y) grant the applications for less than the full eight-year term in order to allow an early reassessment of the stations, or (z) order an evidentiary hearing before an administrative law judge to determine whether renewal of the stations’ licenses should be denied. If a station’s license renewal were ultimately denied, the station would be required to cease operation permanently. As a result of these developments, we have implemented measures to reduce the risk of broadcasting indecent material in violation of the FCC’s rules. These and other future modifications to our programming to reduce the risk of indecency violations could have an adverse effect on our competitive position.

Our need to comply with comprehensive, complex and sometimes unpredictable federal regulations could have an adverse effect on our businesses.

     We are dependent on licenses from the FCC, which regulates the radio and television broadcasting industries in the United States. The radio and television broadcasting industries in the United States are subject to extensive and changing regulation by the FCC. Among other things, the FCC is responsible for the following:

	-		assigning frequency bands for broadcasting;
	-		determining the particular frequencies, locations and operating power of stations;
	-		issuing, renewing, revoking and modifying station licenses;
	-		determining whether to approve changes in ownership or control of station licenses;
	-		regulating equipment used by stations; and
	-		adopting and implementing regulations and policies that directly affect the ownership, operation, programming and employment practices of stations.

     The FCC has the power to impose penalties for violation of its rules or the applicable statutes. While in the vast majority of cases licenses are renewed by the FCC, we cannot be sure that any of our United States stations’ licenses will be renewed at their expiration date. Even if our licenses are renewed, we cannot be sure that the FCC will not impose conditions or qualifications that could cause problems in our businesses.

     The FCC regulations and policies also affect our growth strategy because the FCC has specific regulations and policies about the number of stations, including radio and television stations, and daily newspapers that an entity may own in any geographic area. As a result of these rules, we may not be able to acquire more properties in some markets.

     FCC regulations also limit the ability of non-U.S. persons to own our capital stock and to participate in our affairs, which could limit our ability to raise equity. Our articles of incorporation contain provisions which place restrictions on the ownership, voting and transfer of our capital stock in accordance with the law.

     Finally, a number of federal rules governing broadcasting have changed significantly in recent years and additional changes may occur, particularly with respect to the rules governing digital audio broadcasting, satellite radio services, multiple ownership and attribution. We cannot predict the effect that these regulatory changes may ultimately have on our operations.

Any changes in current FCC ownership regulations may negatively impact our ability to compete or otherwise harm our business operations.

     In June of 2003, the FCC substantially modified its rules governing ownership of broadcast stations. The new rules (i) allow, for the first time in many years, common ownership of broadcast stations and daily newspapers in most markets, (ii) generally allow common ownership of television and radio stations within a given market, and (iii) change the definition of ‘‘market’’ for purposes of the rules restricting the number of radio stations that may be commonly owned within a given market. The new rules were appealed in federal court, and in September of 2003, the court stayed the effectiveness of the new rules, pending a decision in the appeal. As a result of the stay, the former ownership rules were reinstated. We cannot predict the outcome of the appeal.

     We cannot predict the impact of these developments on our business. In particular, we cannot predict the outcome of the FCC’s media ownership proceeding or its effect on our ability to acquire broadcast stations in the future or to continue to own and freely transfer stations that we have already acquired.

     In 2003, we acquired a controlling interest in five FM stations and one AM station in the Austin, Texas market. Under the method of defining radio markets contained in the new ownership rules, it appears that we would be permitted to own or control only four FM stations in the Austin market (ownership of one AM station would continue to be allowed). The new rules do not require divestiture of existing non-conforming station combinations, but do provide that such clusters may be transferred only to defined small business entities. Consequently, if the new rules go into effect and we wish to sell our interest in the Austin stations, we will have to either sell to an entity that meets the FCC definition or exclude at least one FM station from the transaction.

Our business strategy and our ability to operate profitably depends on the continued services of our key employees, the loss of whom could materially adversely affect our business.

     Our ability to maintain our competitive position depends to a significant extent on the efforts and abilities of our senior management team and certain key employees. Although our executive officers are typically under employment agreements, their managerial, technical and other services would be difficult to replace if we lose the services of one or more of them or other key personnel. Our business could be seriously harmed if one of them decides to join a competitor or otherwise competes directly or indirectly against us.

     Our radio stations employ or independently contract with several on-air personalities and hosts of syndicated radio programs with significant loyal audiences in their respective broadcast areas. These on-air personalities are sometimes significantly responsible for the ranking of a station and, thus, the ability of the station to sell advertising. These individuals may not remain with our radio stations and may not retain their audiences.

Our current and future operations are subject to certain risks that are unique to operating in a foreign country.

     We currently have several international operations, including operations in Hungary, Slovakia, Belgium and Bulgaria. Therefore, we are exposed to risks inherent in international business operations. We may pursue opportunities to buy additional broadcasting properties in other foreign countries. The risks of doing business in foreign countries include the following:

	-		changing regulatory or taxation policies;
	-		currency exchange risks;
	-		changes in diplomatic relations or hostility from local populations;
	-		seizure of our property by the government or restrictions on our ability to transfer our property or earnings out of the foreign country;
	-		potential instability of foreign governments, which might result in losses against which we are not insured; and
	-		difficulty of enforcing agreements and collecting receivables through some foreign legal systems.

     Broadcast licenses in many foreign countries do not generally confer the same renewal expectancy as U.S. radio stations broadcast licenses.

Our failure to comply under the Sarbanes-Oxley Act of 2002 could cause a loss of confidence in the reliability of our financial statements.

     We have undergone a comprehensive effort to comply with Section 404 of the Sarbanes-Oxley Act of 2002. This effort included documenting and testing our internal controls. As of February 28, 2007, we did not identify any material weaknesses in our internal controls as defined by the Public Company Accounting Oversight Board. In future years, there are no assurances that we will not have material weaknesses that would be required to be reported or that we will be able to comply with the reporting deadline requirements of Section 404. A reported material weakness or the failure to meet the reporting deadline requirements of Section 404 could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements. This loss of confidence could cause a decline in the market price of our stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 2. PROPERTIES.

     The following table sets forth information as of February 28, 2007 with respect to offices, studios and broadcast towers of stations and publishing operations currently owned by Emmis. Management believes that the properties are in good condition and are suitable for Emmis’ operations.

EXPIRATION

YEAR PLACED

OWNED OR

DATE

PROPERTY

IN SERVICE

LEASED

OF LEASE

Corporate and Publishing Headquarters/

1998

Owned

—

WLHK-FM/ WIBC-AM/WNOU-FM/ WYXB-FM/ Indianapolis Monthly One Emmis Plaza 40 Monument Circle Indianapolis, IN

WLHK-FM Tower

1985

Owned

—

WNOU-FM Tower

1979

Owned

—

WIBC-AM Tower

1966

Owned

—

EXPIRATION

YEAR PLACED

OWNED OR

DATE

PROPERTY

IN SERVICE

LEASED

OF LEASE

WYXB-FM Tower

2003

Owned

—

KFTK-FM/KIHT-FM/KPNT-FM/KSHE-FM

1998

Leased

December 2007

800 St. Louis Union Station St. Louis, MO

KFTK-FM Tower

1987

Leased

August 2009 with option to March 2023

KIHT-FM Tower

1995

Leased

August 2010

KPNT-FM Tower

1987

Owned

—

KSHE-FM Tower

1985

Leased

August 2010

KPNT-FM/KFTK-FM Tower

2002

Leased

January 2009 with option to January 2029

KFTK-FM/KIHT-FM/KPNT-FM/KSHE-FM Tower

2004

Leased

March 2012 with option to March 2032

KFTK-FM Tower

1997

Owned

—

KPWR-FM

1988

Leased

October 2017

KMVN-FM

2002

Leased

October 2017

2600 West Olive Ave, 8th Floor Burbank, CA

KPWR-FM Tower

1993

Leased

October 2012

KMVN-FM tower

1998

Leased

May 2013

WQHT-FM/WRKS-FM/WQCD-FM

1996

Leased

January 2013

395 Hudson Street, 7th Floor New York, NY

WQHT-FM Additional Studio

2006

Leased

June 2012

151 West 25th New York, NY

WQHT-FM Tower

1984

Leased

October 2018

WRKS-FM Tower

1984

Leased

November 2020

WQCD-FM Tower

1984

Leased

February 2022

WKQX-FM/WLUP-FM

2000

Leased

December 2015 with 5 year option

230 Merchandise Mart Plaza Chicago, IL

WKQX-FM Tower

1975

Leased

September 2009

WLUP-FM Tower

1977

Leased

September 2009

KLBJ-AM/FM/KDHT-FM/KGSR-FM/KROX-FM/

KBPA-FM 8309 N. IH 35 Austin, TX

1998

Leased

March 2008

KLBJ-AM Tower

1963

Owned

—

KLBJ-FM Tower

1972

Leased

July 2008

KDHT-FM Tower

1986

Owned

—

KGSR-FM Tower

1997

Owned

—

KROX-FM Tower

1999

Leased

September 2008

KBPA-FM Tower

1985

Leased

August 2010

Atlanta Magazine Office

2003

Leased

July 2013

260 Peachtree St, Suite 300 Atlanta, GA

Cincinnati Magazine

1996

Leased

May 2007

705 Central Ave., Suite 175 Cincinnati, OH

Texas Monthly

1989

Leased

August 2009

701 Brazos, Suite 1600 Austin, TX

WTHI-FM/WWVR-FM

1954

Owned

—

918 Ohio Street Terre Haute, IN

WTHI-FM Tower

1954

Owned

—

WWVR-FM Tower

1966

Owned

—

WVUE-TV

1972

Owned

—

1025 South Jefferson Davis Highway New Orleans, LA

WVUE-TV Tower

1963

Owned

—

Los Angeles Magazine 5900 Wilshire Blvd., Suite 1000 Los Angeles, CA

2000

Leased

November 2010

EXPIRATION

YEAR PLACED

OWNED OR

DATE

PROPERTY

IN SERVICE

LEASED

OF LEASE

Tu Ciudad 5900 Wilshire Blvd., Suite 2100 Los Angeles, CA

2005

Leased

June 2011

Country Sampler 707 Kautz Road St. Charles, IL

1988

Owned

—

RDS/Co-Opportunities 324 Campus Lane, Suite B Fairfield, CA

1989

Leased

March 2010

Emmis West (Corporate) 3500 West Olive Avenue, Suite 1450 Burbank, CA

2004

Leased

February 20141

Slager Radio 1011 Budapest Fo u. 14-18

2005

Leased

March 2010

Slager Tower

1998

Leased

October 2009

Emmis Belgium Assesteenweg 65 B-1740 Ternat

2003

Leased

April 2013

BeOneTower

2004

Owned

—

D, Expres

2004

Leased

January 2010

Lamacska cesta 3 841 04 Bratislava

D. Expres Tower (Various)

Various 1999-2005

Leased

Various 2007-2019

FM+ Group & Pleven Plus AD

2005

Owned

—

51 Jerusalem Blvd Miadost – 1 Sofia, Bulgaria

KGMB-TV 1534 Kapiolani Blvd. Honolulu, HI

1952

Owned

—

KGMB-TV Tower

1962

Owned

—

ITEM 3. LEGAL PROCEEDINGS.

     The Company is a party to various legal proceedings arising in the ordinary course of business. In the opinion of management of the Company, however, there are no legal proceedings pending against the Company likely to have a material adverse effect on the Company.

     During the Company’s fiscal quarter ended November 30, 2004, Emmis entered into a consent decree with the Federal Communications Commission to settle all outstanding indecency-related matters. Terms of the agreement call for Emmis to make a voluntary contribution of $0.3 million to the U.S. Treasury, with the FCC terminating all then-current indecency-related inquiries and fines against Emmis. Certain individuals and groups appealed the FCC’s adoption of the consent decree and have challenged applications for renewal of the licenses of certain of the Company’s stations based primarily on the matters covered by the decree. On March 29, 2007, the United States Court of Appeals for the District of Columbia Circuit dismissed the appeal of the petitioners. If the petitioners elect to further pursue the matter, a petition for rehearing is due by May 14, 2007 and a certified petition is due by July 27, 2007. The challenges to the license renewal applications are currently pending before the Commission; Emmis does not expect the challenges to result in any changes to the consent decree or in the denial of any license renewals. See “Federal Regulation of Broadcasting” for further discussion.

     On May 7, 2007, the Company received a letter of inquiry and request for information from the FCC related to sponsorship identification practices at certain of our ratio stations as part of an industry-wide investigation by the FCC. The Company will

cooperate with the FCC in this investigation and will produce documents and other information requested by the FCC. The Company has not yet determined what effect the inquiry will have, if any, on its financial position, results of operations or cash flows.

     In January 2005, a third party threatened claims against our radio station in Hungary seeking damages of approximately $4.6 million. Emmis has investigated the matter, and based on information gathered to date, Emmis believes the claims are without merit. Litigation has not been initiated and Emmis intends to defend itself vigorously in the matter.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     At the annual meeting of shareholders held on February 13, 2007, the following matters received the following votes:

(i)

Election of Class A Director

Nominee		For				Withheld
Susan B. Bayh			22,589,062				6,082,569

(ii)

Election of other than Class A Director

Nominee		For				Withheld
Gary L. Kaseff			73,905,611				4,064,857

(iii)

Ratify the selection of Ernst & Young LLP as our independent registered public accounting firm

For		Against				Abstain
77,672,286			239,772				58,408

(iv)

Approval of shareholder proposal regarding adoption of a recapitalization plan

For		Against				Abstain				Broker Non-Vote
16,259,869			50,386,583				943,142				10,380,880

EXECUTIVE OFFICERS OF THE REGISTRANT

     Listed below is certain information about the executive officers of Emmis or its affiliates who are not directors or nominees to be directors.

				AGE AT		YEAR FIRST
				FEBRUARY 28,		ELECTED
NAME		POSITION		2007		OFFICER
Richard F. Cummings		Radio Division President		57		1984
Michael Levitan		Executive Vice President of Human Resources		49		2002
Gary A. Thoe		Publishing Division President		50		1998
Paul W. Fiddick		International Division President		57		2002
Patrick M. Walsh		Chief Financial Officer and Treasurer		39		2006

     Set forth below is the principal occupation for the last five years of each executive officer of the Company or its affiliates who is not also a director.

     Richard F. Cummings was the Program Director of our first radio station in Indianapolis from 1981 to March 1984, when he became the National Program Director and a Vice President of Emmis. He became Executive Vice President of Programming in 1988 and became Radio Division President in December 2001.

     Michael Levitan was the Senior Vice President of Human Resources from September 2000 to March 2004 when he became the Executive Vice President of Human Resources. Prior to joining Emmis, Mr. Levitan served as Director of Human Resources for Apple Computer and as Executive Director of Organizational Effectiveness and Assistant to the President of Cummins Engine.

     Gary A. Thoe has been employed as President of Emmis Publishing since February 1998. Prior to February 1998, Mr. Thoe served as President and part owner of Mayhill Publications, Inc.

     Paul W. Fiddick has been employed as President of Emmis International since September 2002. Prior to joining Emmis, Mr. Fiddick served as Assistant Secretary for Administration of the U.S. Department of Agriculture from November 1999 until May 2001.

     Patrick M. Walsh has been employed as Chief Financial Officer and Treasurer since September 2006. Prior to joining Emmis, Mr. Walsh served as Senior Vice President and Chief Financial Officer of iBiquity Digital Corporation. His prior experience includes tenures at McKinsey and Company, General Motors and Deloitte LLP. Mr. Walsh is a Certified Public Accountant.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

MARKET INFORMATION FOR OUR COMMON STOCK

     Emmis’ Class A common stock is traded in the over-the-counter market and is quoted on the National Association of Securities Dealers Automated Quotation (NASDAQ) Global Select Market under the symbol EMMS. There is no established public trading market for Emmis’ Class B common stock or Class C common stock.

     The following table sets forth the high and low bid prices of the Class A common stock for the periods indicated.

QUARTER ENDED		HIGH				LOW
May 2005			19.99				15.29
August 2005			24.18				17.29
November 2005			24.49				18.86
February 2006			21.10				16.32
May 2006			18.51				11.86
August 2006			16.77				10.85
November 2006			13.22				8.33
February 2007			8.92				8.00

HOLDERS

     At May 2, 2007, there were 5,604 record holders of the Class A common stock, and there was one record holder of the Class B common stock.

DIVIDENDS

     On November 2, 2006, the Company’s Board of Directors declared a special one-time dividend of $4.00 per common share to shareholders of record as of November 12, 2006. The dividend was paid November 22, 2006, which reduced shareholders’ equity by $150.2 million. Emmis intends to retain future earnings for use in its business and does not anticipate paying any dividends on shares of its common stock in the foreseeable future.

SHARE REPURCHASES

     Emmis made no purchases of its equity securities during the fourth quarter of its fiscal year ended February 28, 2007.

PERFORMANCE GRAPH

     The following Performance Graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Form 10-K into any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate this performance graph by reference, and shall not otherwise be deemed filed under such Acts.

     The following line graph compares the yearly percentage change in the cumulative total shareholder return on the Class A common stock with the cumulative total return of the Nasdaq Stock Market Index and the cumulative total return of the Nasdaq Telecommunications Stock Market Index (an index containing performance data of radio, telephone, telegraph, television and cable television companies) from February 28, 2002, to the fiscal year ended February 28, 2007. The performance graph assumes that an investment of $100 was made in the Class A common stock and in each index on February 28, 2002 and that all dividends were reinvested.

		Feb 2002				Feb 2003				Feb 2004				Feb 2005				Feb 2006				Feb 2007
Emmis		$	100			$	74			$	94			$	70			$	61			$	46
Nasdaq Stock Market (U.S.)		$	100			$	78			$	117			$	119			$	134			$	142
Nasdaq Telecommunications		$	100			$	73			$	103			$	108			$	108			$	142

ITEM 6. SELECTED FINANCIAL DATA

     Emmis Communications Corporation

      FINANCIAL HIGHLIGHTS

			YEAR ENDED FEBRUARY 28 (29)
						(in thousands, except per share data)
		2003				2004				2005				2006				2007
OPERATING DATA:
Net revenues		$	291,612			$	318,946			$	343,961			$	377,436			$	359,535
Station operating expenses			190,196				206,538				222,294				252,034				256,019
Corporate expenses			24,850				29,378				35,336				36,871				30,432
Depreciation and amortization			13,408				15,062				15,634				17,099				13,338
Impairment losses and other (1)			—				—				—				35,681				—
(Gain) loss on disposal of assets			(1,081	)			78				795				94				4
Operating income			64,239				67,890				69,902				35,657				59,742
Interest expense			103,459				62,950				39,690				70,586				43,160
Loss on debt extinguishment (2)			13,506				—				97,248				6,952				13,435
Other income (loss), net			4,686				(795	)			2,196				3,040				(22	)
Income (loss) before income taxes, discontinued operations minority interest and cumulative effect of accounting change			(48,040	)			4,145				(64,840	)			(38,841	)			3,125
Loss from continuing operations			(35,078	)			(2,362	)			(67,045	)			(25,521	)			(3,467	)
Discontinued operations (3)			(110,616	)			4,618				65,677				383,292				117,048
Net income (loss) (4)			(164,468	)			2,256				(304,368	)			357,771				113,581
Net income (loss) available to common shareholders			(173,452	)			(6,728	)			(313,352	)			348,787				104,597
Net income (loss) per share available to common shareholders:
Basic:
Continuing operations		$	(0.83	)		$	(0.21	)		$	(1.35	)		$	(0.80	)		$	(0.33	)
Discontinued operations, net of tax			(2.09	)			0.09				1.17				8.93				3.14
Cumulative effect of accounting change, net of tax			(0.35	)			—				(5.40	)			—				—
Net income (loss) available to common shareholders		$	(3.27	)		$	(0.12	)		$	(5.58	)		$	8.13			$	2.81
Diluted:
Continuing operations		$	(0.83	)		$	(0.21	)		$	(1.35	)		$	(0.80	)		$	(0.33	)
Discontinued operations, net of tax			(2.09	)			0.09				1.17				8.93				3.14
Cumulative effect of accounting change, net of tax			(0.35	)			—				(5.40	)			—				—
Net income (loss) available to common shareholders		$	(3.27	)		$	(0.12	)		$	(5.58	)		$	8.13			$	2.81
Cash dividends declared per common share		$	—			$	—			$	—			$	—			$	4.00
Weighted average common shares outstanding:
Basic			53,014				54,716				56,129				42,876				37,265
Diluted			53,014				54,716				56,129				42,876				37,265

		FEBRUARY 28 (29),
		(Dollars in thousands)
		2003				2004				2005				2006				2007
BALANCE SHEET DATA:
Cash (5)		$	16,079			$	19,970			$	16,054			$	140,822			$	20,747
Working capital			28,024				10,532				51,144				33,303				59,028
Net intangible assets (6)			689,858				830,779				943,141				916,925				916,518
Total assets			2,165,413				2,300,569				1,823,035				1,512,701				1,207,904
Long-term credit facility, senior subordinated debt, senior discount notes and liquidation preference of preferred stock			1,338,539				1,367,929				1,317,558				808,174				638,338
Shareholders’ equity			704,705				748,946				452,592				271,729				237,195

		YEAR ENDED FEBRUARY 28 (29),
		(Dollars in thousands)
		2003				2004				2005				2006				2007
OTHER DATA:
Cash flows from (used in):
Operating activities		$	95,149			$	118,165			$	121,907			$	70,508			$	27,882
Investing activities			106,301				(146,359	)			54,542				859,843				309,224
Financing activities			(191,733	)			32,085				(181,069	)			(804,677	)			(458,608	)
Capital expenditures			9,810				9,381				10,201				12,132				5,301
Cash paid for taxes			887				1,143				286				5,045				6,866

(1)		The loss in the fiscal year ended February 28, 2006 resulted from our annual SFAS No. 142 review.
(2)		Loss on debt extinguishment in the fiscal years ended February 28, 2006 and 2007 relates to the write-off of deferred debt fees associated with early debt extinguishments. Loss on debt extinguishment in the fiscal years ended February 28, 2003 and 2005 relates to the write-off of deferred debt fees and redemption premiums paid for the early retirement of outstanding debt obligations.
(3)		The loss from discontinued operations in the fiscal year ended February 28, 2003 includes a charge of $148.6 million, net of tax, to reflect the cumulative effect of an accounting change on our discontinued operations in connection with our adoption of SFAS No. 142, Goodwill and Other Intangible Assets. The gain from discontinued operations in the fiscal year ended February 28, 2005 principally relates to the gain on the exchange of three radio stations in Phoenix for a radio station in Chicago which totaled $33.6 million, net of tax. The gain from discontinued operations in the fiscal year ended February 28, 2006 principally related to the gain of sale on our television stations, which totaled $367.0 million, net of tax. The gain from discontinued operations in the fiscal year ended February 28, 2007 principally relates to the gains recorded on our sale of WKCF-TV, WBPG-TV, WRDA-FM and KKFR-FM, which totaled $110.0 million, net of tax.
(4)		In addition to the items described above, the net loss in the fiscal year ended February 28, 2003 includes a charge of $18.8 million, net of tax, to reflect the cumulative effect of an accounting change on our continuing operations in connection with our adoption of SFAS No. 142. The net loss in the fiscal year ended February 28, 2005 includes a charge of $303.0 million, net of tax, to reflect the cumulative effect of an accounting change in connection with our adoption of Emerging Issues Task Force (EITF) Topic D-108, Use of the Residual Method to Value Acquired Assets other than Goodwill.
(5)		The February 28, 2006 balance includes $121.4 million of cash received from television station asset sales used to redeem senior floating rate notes and senior discount notes in March 2006.
(6)		Excludes intangibles of two Argentina radio stations sold in May 2004, three Phoenix radio stations exchanged in January 2005, a radio station in St. Louis sold in May 2006, a radio station in Phoenix sold in July 2006, fourteen television stations sold at various dates in 2005 and 2006 and two remaining television stations that are classified as assets held for sale as of February 28, 2007.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

GENERAL

     The following discussion pertains to Emmis Communications Corporation and its subsidiaries (collectively, “Emmis” or the “Company”).

     We own and operate radio and publishing properties located primarily in the United States. We also own and operate two television stations located in Honolulu and New Orleans. In the quarter ended August 31, 2005, we classified our television assets as held for sale (see Note 1k to the accompanying consolidated financial statements for more discussion). The results of operations of our television division have been classified as discontinued operations in the accompanying consolidated financial statements. Our revenues are mostly affected by the advertising rates our entities charge, as advertising sales represent more than 80% of our consolidated revenues. These rates are in large part based on our entities’ ability to attract audiences/subscribers in demographic groups targeted by their advertisers. Radio stations’ ratings are measured principally four times a year by Arbitron Inc. Because audience ratings in a station’s local market are critical to the station’s financial success, our strategy is to use market research, advertising and promotion to attract and retain audiences in each station’s chosen demographic target group.

     Our revenues vary throughout the year. As is typical in the broadcasting industry, our revenues and operating income are usually lowest in our fourth fiscal quarter.

     In addition to the sale of advertising time for cash, stations typically exchange advertising time for goods or services, which can be used by the station in its business operations. These barter transactions are recorded at the estimated fair value of the product or service received. We generally confine the use of such trade transactions to promotional items or services for which we would otherwise have paid cash. In addition, it is our general policy not to pre-empt advertising spots paid for in cash with advertising spots paid for in trade.

     The following table summarizes the sources of our revenues for each of the past three years. All revenues generated by our international radio properties are included in the “Local” category. The category “Non Traditional” principally consists of ticket sales and sponsorships of events our stations and magazines conduct in their local markets. The category “Other” includes, among other items, revenues generated by the websites of our entities and barter.

		Year ended February 28,
		2005				% of Total				2006				% of Total				2007				% of Total
Net revenues:
Local		$	222,018				64.5	%		$	246,620				65.3	%		$	234,558				65.2	%
National			57,347				16.7	%			64,894				17.2	%			64,943				18.1	%
Political			954				0.3	%			102				0.0	%			241				0.1	%
Publication Sales			18,762				5.5	%			17,656				4.7	%			13,776				3.8	%
Non Traditional			28,688				8.3	%			28,718				7.6	%			22,191				6.2	%
Other			16,192				4.7	%			19,446				5.2	%			23,826				6.6	%
Total net revenues		$	343,961							$	377,436							$	359,535

     A significant portion of our expenses varies in connection with changes in revenue. These variable expenses primarily relate to costs in our sales department, such as salaries, commissions and bad debt. Our costs that do not vary as much in relation to revenue are mostly in our programming and general and administrative departments, such as talent costs, syndicated programming fees, utilities and office salaries. Lastly, our costs that are highly discretionary are costs in our marketing and promotions department, which we primarily incur to maintain and/or increase our audience and market share.

KNOWN TRENDS AND UNCERTAINTIES

     Domestic radio revenue growth has been anemic for several years. Management believes this is principally the result of four factors: (1) lack of inventory and pricing discipline by radio operators, (2) a more focused newspaper advertising sales force that has slowed the market share gains radio was making vis-à-vis newspapers, (3) the emergence of new media, such as Internet advertising and cable interconnects, which are gaining advertising share against radio and other traditional media, and (4) the perception of investors and advertisers that satellite radio and MP3 players diminish the effectiveness of radio advertising.

     The radio industry has begun several initiatives to address these issues, most notable of which is the rollout of HD Radio ^TM. HD Radio offers listeners advantages over standard analog broadcasts, including improved sound quality and additional channels. To make the rollout of HD Radio more efficient, a consortium of broadcasters representing a majority of the radio stations in nearly all of our markets have agreed to work together to coordinate the programming on secondary channels in each radio market to ensure a more diverse consumer offering and to accelerate the rollout of HD Radio receivers, particularly in automobiles. We currently utilize HD Radio digital technology on most of our FM stations and plan to complete the build-out of HD Radio capabilities at most of our remaining FM stations in fiscal 2008. It is unclear what impact HD Radio will have on the markets in which we operate.

     Arbitron Inc., the supplier of ratings data for United States radio markets, has developed technology to passively collect data for its ratings service. The Personal People Meter ^TM (PPM ^TM) is a small, pager-sized device that does not require any active manipulation by the end user and is capable of automatically measuring radio, television, Internet, satellite radio and satellite television signals that are encoded for the service by the broadcaster. The PPM offers a number of advantages over the traditional diary ratings collection system including ease of use, more reliable ratings data and shorter time periods between when advertising runs and when audience listening or viewing habits can be reported. To date, more than ten radio broadcasters, including Emmis, have signed long-term contracts to use the PPM service. This service will begin in the New York market in the fall of 2007, with the Los Angeles and Chicago markets following in 2008. It is unclear what impact the introduction of the PPM will have on ratings in the markets in which we operate.

     Our three radio stations in New York trailed the performance of their peers during the year ended February 28, 2007. For the year ended February 28, 2007, our New York radio stations’ net revenues were down 16.5%, whereas the independent accounting firm Miller, Kaplan, Arase & Co., LLP (“Miller Kaplan”) reported that net revenues of the New York market in total were down 5.7%. We believe we trailed the performance of our peers in New York principally due to turnover in key management positions at our New York stations and deterioration in ratings at each of our three radio stations. We believe that we have solidified our management positions in New York, but ratings continue to be weak, which will continue to impair revenues in our upcoming fiscal year.

     Our two radio stations in Los Angeles have also trailed the performance of their peers during the year ended February 28, 2007. For the year ended February 28, 2007, our Los Angeles radio stations’ net revenues were down 19.8%, whereas Miller Kaplan reported that net revenues of the Los Angeles market in total were down 2.2%. KPWR-FM trailed the performance of its peers due to an increase in the number of competitors with similar formats. This competition eroded KPWR-FM’s ratings and negatively impacted revenues. Recent ratings have improved for KPWR-FM and revenues are beginning to rebound. KMVN-FM (formerly KZLA-FM) changed its format from Country to Rhythmic/Pop Contemporary in August 2006. Given the drastic nature of format differences, the Company expected station ratings and revenues to be negatively affected immediately after the format switch, but expected ratings and revenues to rebound and eventually surpass those under the Country format. As of February 28, 2007, ratings and revenues results since the format change have not met the Company’s expectations. We intend to invest additional resources in promoting the station in the next fiscal year and expect to see a recovery in ratings and revenues in the second half of fiscal 2008.

     Emmis is in the process of divesting all its television stations. The decision to sell its television stations stemmed from the Company’s desire to reduce its debt, coupled with the Company’s view that its television stations needed to be aligned with a company with more significant financial resources and a singular focus on American television challenges, including the growth of digital video recorders and the industry’s relationship with cable and satellite providers. As of February 28, 2007, Emmis has sold fourteen of its sixteen television stations, receiving gross proceeds of approximately $1.14 billion. On February 20, 2007, Emmis entered into an agreement to sell one of the remaining television stations, KGMB-TV (and its satellite stations). The transaction is expected to close in the first half of calendar 2007. Emmis expects to sell its remaining television station, WVUE-TV, in the next three to twelve months.

     As part of our business strategy, we continually evaluate potential acquisitions of radio stations, publishing properties and other businesses that we believe hold promise for long-term appreciation in value and leverage our strengths.

CRITICAL ACCOUNTING POLICIES

     Critical accounting policies are defined as those that encompass significant judgments and uncertainties, and potentially derive materially different results under different assumptions and conditions. We believe that our critical accounting policies are those described below.

     Impairment of Goodwill and Indefinite-lived Intangibles

          The annual impairment tests for goodwill and indefinite-lived intangibles under SFAS No. 142 require us to make certain assumptions in determining fair value, including assumptions about the cash flow growth rates of our businesses. Additionally, the fair values are significantly impacted by macro-economic factors, including market multiples at the time the impairment tests are performed. Accordingly, we may incur additional impairment charges in future periods under SFAS No. 142 to the extent we do not achieve our expected cash flow growth rates, or to the extent that market values decrease.

     Allocations for Purchased Assets

          We typically engage an independent appraisal firm to value assets acquired in a material acquisition. We use the appraisal report to help us allocate the purchase price of the acquisition among different categories of assets. To the extent that purchased assets are not allocated appropriately, depreciation and amortization expense could be materially different.

     Deferred Taxes and Effective Tax Rates

          We estimate the effective tax rates and associated liabilities or assets for each legal entity in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”. These estimates are based upon our interpretation of United States and local tax laws as they apply to our legal entities and our overall tax structure. Audits by local tax jurisdictions, including the United States Government, could yield different interpretations from our own and cause the Company to owe more taxes than originally recorded. We utilize experts in the various tax jurisdictions to evaluate our position and to assist in our calculation of our tax expense and related liabilities.

     Insurance Claims and Loss Reserves

          The Company is self-insured for most healthcare claims, subject to stop-loss limits. Claims incurred but not reported are recorded based on historical experience and industry trends, and accruals are adjusted when warranted by changes in facts and circumstances. The Company had $2.2 million and $1.4 million accrued for employee healthcare claims as of February 28, 2006 and 2007, respectively. The decrease in accrued employee healthcare claims is mostly due to a smaller workforce as a result of our television station sales. The Company also maintains large deductible programs (ranging from $250 thousand to $500 thousand per occurrence) for workers compensation claims, automotive liability losses and media liability.

     Valuation of Stock Options

          The Company determines the fair value of its employee stock options at the date of grant using a Black-Scholes option-pricing model. The Black-Scholes option pricing model was developed for use in estimating the value of exchange-traded options that have no vesting restrictions and are fully transferable. The Company’s employee stock options have characteristics significantly different than these traded options. In addition, option pricing models require the input of highly subjective assumptions, including the expected stock price volatility and expected term of the options granted. The Company relies heavily upon historical data for its stock price when determining expected volatility, but each year the Company reassesses whether or not historical data is representative of expected results.

ACQUISITIONS, DISPOSITIONS AND INVESTMENTS

     During the three year period ended February 28, 2007, we acquired a national radio network in Slovakia and a controlling interest in two national radio networks in Bulgaria for an aggregate cash purchase price of $17.0 million. We also disposed of two international radio stations, one television production company, fourteen television stations, two domestic radio stations and we exchanged three domestic radio stations for one domestic radio station, collectively receiving gross cash proceeds of $1.32 billion. A recap of the material transactions completed during the three years ended February 28, 2007 is summarized hereafter. These transactions impact the comparability of operating results year over year.

     On February 20, 2007, Emmis entered into a definitive agreement to sell the assets of KGMB-TV in Honolulu, HI, together with its satellite stations, to HITV Operating Co, Inc., a wholly owned portfolio company of MCG Capital Corporation, for $40.0 million in cash. The transaction contains customary representations, warranties and covenants, and is subject to standard closing conditions, including but not limited to approval by the FCC. Emmis expects to close this transaction in the first half of the calendar year.

     On October 31, 2006, Emmis sold land and the associated building formerly occupied by WKCF-TV to Goodlife Broadcasting, Inc. for $3.0 million in cash. In connection with the sale, Emmis recorded a gain on sale of approximately $0.3 million, net of tax, which is included in discontinued operations in the accompanying consolidated statements of operations.

     On August 31, 2006, Emmis closed on its sale of WKCF-TV in Orlando, FL to Hearst-Argyle Television Inc. for $217.5 million in cash. Emmis used a portion of the proceeds to repay outstanding debt obligations. In connection with the sale, Emmis recorded a gain on sale of $93.4 million, net of tax, which is included in discontinued operations in the accompanying consolidated statements of operations.

     On July 11, 2006, Emmis closed on its sale of KKFR-FM in Phoenix, AZ to Bonneville International Corporation for $77.5 million in cash and also sold certain tangible assets to Riviera Broadcast Group LLC for $0.1 million in cash. Emmis used the proceeds to repay outstanding debt obligations. In connection with the sale, Emmis recorded a gain on sale of $11.3 million, net of tax, which is included in discontinued operations in the accompanying consolidated statements of operations.

     On July 7, 2006, Emmis closed on its sale of WBPG-TV in Mobile, AL – Pensacola, FL to LIN Television Corporation for $3.0 million in cash. LIN Television Corporation had been operating WBPG-TV under a Local Programming and Marketing Agreement since November 30, 2005. Emmis used the proceeds to repay outstanding debt obligations. In connection with the sale, Emmis recorded a gain on sale of approximately $1.1 million, net of tax, which is included in discontinued operations in the accompanying consolidated statements of operations.

     On May 5, 2006, Emmis closed on its sale of WRDA-FM in St. Louis, MO to Radio One, Inc. for $20.0 million in cash. Emmis used the proceeds to repay outstanding debt obligations. In connection with the sale, Emmis recorded a gain on sale of approximately $4.2 million, net of tax, which is included in discontinued operations in the accompanying consolidated statements of operations.

     On January 27, 2006, Emmis sold substantially all of the assets of television stations KOIN in Portland, OR, and KHON in Honolulu, HI (plus satellite stations), and also sold the stock of the corporation that owns KSNW in Wichita, KS (plus satellite stations) and KSNT in Topeka, KS, to SJL Broadcast Group, LLC for $253.0 million in cash and a $6.0 million note receivable. Emmis recorded a gain on sale of $88.2 million, net of tax, which is reflected in discontinued operations in the accompanying consolidated statements of operations. Emmis used the proceeds to repay outstanding debt obligations.

     On December 5, 2005, Emmis sold substantially all of the assets of television stations WFTX in Ft. Myers, FL and KGUN in Tucson, AZ, and the tangible assets and many of the intangible assets (excluding, principally, the FCC license) of KMTV in Omaha, NE to Journal Communications for $225.0 million in cash. Emmis recorded a gain on sale of $92.6 million, net of tax, which is reflected in discontinued operations in the accompanying statements of operations. Emmis used the proceeds to repay outstanding debt obligations. Due to Journal’s existing radio station ownership in the Omaha market, we retained the FCC license for KMTV and Journal provided programming for the station under a local marketing agreement. Journal made no monthly payments to Emmis under the LMA, but reimbursed Emmis for substantially all of Emmis’ costs to operate the station. In March 2007, Journal divested two radio stations and the FCC consented to the transfer of the license. Emmis closed on the sale of KMTV on March 27, 2007 for $10.0 million in cash.

     On November 30, 2005, Emmis sold substantially all of the assets of television station WSAZ in Huntington/Charleston, WV to Gray Television for $186.0 million in cash. Also on November 30, 2005, Emmis sold substantially all of the assets of four television stations (plus satellite stations) to LIN Television Corporation (WALA in Mobile, AL/Pensacola, FL, WTHI in Terre Haute, IN, WLUK in Green Bay, WI, and KRQE in Albuquerque, NM) for $248.0 million in cash. In connection with these sales to Gray Television and LIN, Emmis recorded a gain on sale of $186.2 million, net of tax, which is reflected in discontinued operations in the accompanying consolidated statements of operations. Emmis also entered into a LMA with LIN for WBPG in Mobile, AL/Pensacola, FL. Emmis transferred to LIN all of the assets of WBPG except the FCC license, the WB affiliation agreement and a tower lease. LIN paid $9.0 million of the agreed-upon $12.0 million value of WBPG on November 30, 2005. The Company received $0.2 million per year payable in monthly installments related to this LMA. Pursuant to the LMA, LIN began programming the station on November 30, 2005 and recorded all of the revenues and expenses of the station. Emmis closed on the sale of WBPG-TV on July 7, 2006 and received the final $3.0 million in cash. In connection with this sale, Emmis recorded a gain on sale of $1.1 million, net of tax, which is reflected in discontinued operations in the accompanying consolidated statements of operations.

     On November 14, 2005, Emmis acquired a 66.5% (economic and voting) majority ownership in Radio FM Plus AD, a national network of radio stations in Bulgaria for a cash purchase price of approximately $3.3 million. This acquisition allowed Emmis to expand its international radio portfolio within Emmis’ Euro-centric international acquisition strategy. The acquisition was financed with cash on hand. The Company has recorded $0.5 million of goodwill, none of which is deductible for income tax purposes. Consistent with the Company’s other foreign subsidiaries, Radio FM Plus reports on a fiscal year ending December 31, which Emmis consolidates into its fiscal year ending February 28 (29). On December 29, 2006, Emmis acquired control of a second radio network in Bulgaria for $1.1 million in cash. This radio network had previously been accounted for as a 40% equity investment. Substantially all of the purchase price was allocated to the international broadcast license, which is being amortized over six years. The company also recorded $0.2 million of goodwill, none of which is deductible for income tax purposes.

     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 in Europe and enter one of the world’s fastest growing economies. The acquisition was financed through borrowings under the credit facility. The Company has recorded $1.9 million of goodwill, none of which is deductible for income tax purposes. The operating results from March 10, 2005 through December 31, 2005 are included in the accompanying 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).

     On January 14, 2005, Emmis completed its exchange with Bonneville International Corporation (“Bonneville”) whereby Emmis swapped three of its radio stations in Phoenix, AZ (KTAR-AM, KMVP-AM and KKLT-FM) for Bonneville’s WLUP-FM located in Chicago, IL and $74.8 million in cash including payments for working capital items. Emmis used the cash to repay amounts outstanding under its senior credit facility. Emmis has long sought a second radio station in Chicago to complement its existing station in the market, WKQX-FM. This transaction achieves that goal by marrying the heritage alternative rock format (WKQX) with the heritage classic rock format (WLUP). Emmis began programming WLUP-FM and Bonneville began programming KTAR-AM, KMVP-AM and KKLT-FM under LMAs on December 1, 2004. The assets and liabilities of the three radio stations in Phoenix and their results of operations have been classified as discontinued operations in the accompanying consolidated financial statements. These three radio stations had historically been included in the radio reporting segment. The Company recorded $13.0 million of goodwill associated with the asset swap, but none of this goodwill is deductible for income tax purposes.

     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. In connection with the sale, Emmis recorded a loss from discontinued operations of $10.0 million in fiscal 2004. In fiscal 2005, Emmis recorded income from discontinued operations of $4.2 million, consisting of operational losses of $0.5 million, offset by tax benefits of $4.7 million. The Argentine peso substantially devalued relative to the U.S. dollar early in 2002. The $10.0 million loss in fiscal 2004 was primarily attributable to the devaluation of the peso and resulting non-cash write-off of cumulative currency translation adjustments. Votionis had historically been included in the radio reporting segment.

RESULTS OF OPERATIONS

YEAR ENDED FEBRUARY 28, 2006 COMPARED TO YEAR ENDED FEBRUARY 28, 2007

Net revenue pro forma reconciliation:

     Since March 1, 2005, we have acquired radio networks in Slovakia and Bulgaria. The results of our television division, radio station sold in Phoenix and radio station sold in St. Louis have been included in discontinued operations and are not included in reported results below. The following table reconciles actual results to pro forma results.

		Year ended February 28,
		2006				2007				$ Change				% Change
		(amounts in thousands)
Reported net revenues
Radio		$	290,600			$	271,929			$	(18,671	)			-6.4	%
Publishing			86,836				87,606				770				0.9	%
Total			377,436				359,535				(17,901	)			-4.7	%
Plus: Net revenues from stations acquired
Radio			2,383				—
Publishing			—				—
Total			2,383				—
Less: Net revenues from stations disposed
Radio			—				—
Publishing			—				—
Total			—				—
Pro forma net revenues
Radio			292,983				271,929				(21,054	)			-7.2	%
Publishing			86,836				87,606				770				0.9	%
Total		$	379,819			$	359,535			$	(20,284	)			-5.3	%

For further disclosure of segment results, see Note 14 to the accompanying consolidated financial statements. For additional pro forma results, see Note 9 to the accompanying consolidated financial statements. Consistent with management’s review of the Company, the pro forma results above include the impact of all material consummated acquisitions and dispositions through February 28, 2007.

Net revenues discussion:

     Radio net revenues decreased principally as a result of declining revenues in our New York and Los Angeles markets. On a pro forma basis (assuming the purchases of radio networks in Slovakia and Bulgaria had occurred on the first day of the pro forma periods presented above), radio net revenues for the year ended February 28, 2007 would have decreased $21.0 million, or 7.2%. We typically monitor the performance of our stations against the aggregate performance of the markets in which we operate based on reports for the periods prepared by the independent accounting firm Miller Kaplan. For the year ended February 28, 2007, on a pro forma basis, net revenues of our domestic radio stations were down 8.9%, whereas Miller Kaplan reported that net revenues of our domestic radio markets were down 2.3%. As previously discussed, we underperformed the markets in which we operate principally due to continuing challenges in our Los Angeles and New York markets. We have had significant ratings and revenue declines at our New York and Los Angeles stations. Additionally, in August 2006, we changed the format of KMVN-FM (formerly KZLA-FM) from Country to Rhythmic/Pop Contemporary. This format change has continued to negatively impact net revenues. Market weakness and our stations’ weakness has led us to discount our rates charged to advertisers. In fiscal 2007, our average unit rate was down 14.3% and our number of units sold was up 0.2%. Our New York and Los Angeles stations account for approximately 50% of our domestic radio revenues.

     Publishing net revenues increased mostly due to the introduction of new city guides in Atlanta and Cincinnati. Also, Tu Ciudad produced one additional issue during the year ended February 28, 2007 as compared to the same period of the prior year. These gains are partially offset by declines in revenue associated with our decision to cease unprofitable operations at Country Sampler and Emmis Books.

     On a consolidated basis, pro forma net revenues for the year ended February 28, 2007 decreased $20.3 million, or 5.3% due to the effect of the items described above.

Station operating expenses pro forma reconciliation:

     Since March 1, 2005, we have acquired radio networks in Slovakia and Bulgaria. The results of our television division, radio station sold in Phoenix and radio station sold in St. Louis have been included in discontinued operations and are not included in reported results below. The following table reconciles actual results to pro forma results.

		Year ended February 28,
		2006				2007				$ Change				% Change
		(amounts in thousands)
Reported station operating expenses
Radio		$	171,957			$	176,686			$	4,729				2.8	%
Publishing			80,077				79,333				(744	)			-0.9	%
Total			252,034				256,019				3,985				1.6	%
Plus: Station operating expenses from stations acquired:
Radio			2,160				—
Publishing			—				—
Total			2,160				—
Less: Station operating expenses from stations disposed:
Radio			—				—
Publishing			—				—
Total			—				—
Pro forma station operating expenses
Radio			174,117				176,686				2,569				1.5	%
Publishing			80,077				79,333				(744	)			-0.9	%
Total		$	254,194			$	256,019			$	1,825				0.7	%

     For further disclosure of segment results, see Note 14 to the accompanying consolidated financial statements. For additional pro forma results, see Note 9 to the accompanying consolidated financial statements. Consistent with management’s review of the Company, the pro forma results above include the impact of all material consummated acquisitions and dispositions through February 28, 2007.

Station operating expenses discussion:

     Radio station operating expenses increased principally due to increased promotional spending, particularly in New York and Los Angeles. Additionally, a portion of the increase relates to higher programming costs associated with certain on-air talent contracts and severances recorded in association with the format change at KMVN-FM, as previously discussed. The additional operating expenses are partially offset by lower sales-related costs due to the decline in revenues as discussed above. In fiscal 2008, we expect to incur approximately $4 million of costs associated with an expansion of Emmis Interactive, consisting primarily of increased headcount.

     Publishing operating expenses decreased slightly principally due to operating cost savings due to the elimination of certain specialty magazines of Country Sampler. These savings were partially offset by severance expenses associated with the elimination of the specialty magazines and by a $0.9 million inventory write-down related to our Emmis Books operation.

     On a consolidated basis, pro forma station operating expenses increased $1.8 million, or 0.7% due to the effect of the items described above.

Corporate expenses:

		For the years ended February 28,
		2006				2007				$ Change				% Change
		(As reported, amounts in thousands)
Corporate expenses		$	36,871			$	30,432			$	(6,439	)			(17.5	)%

     In the year ended February 28, 2006, we incurred approximately $6.1 million of corporate bonus and severance payments associated with the sale of thirteen of our sixteen television stations. Savings generated in the year ended February 28, 2007 by these headcount reductions were offset by approximately $2.5 million of costs related to the Company’s evaluation of the CEO’s bid to take the Company private and approximately $1.9 million of costs in connection with a special dividend paid on November 22, 2006.

Depreciation and amortization:

		For the years ended February 28,
		2006				2007				$ Change				% Change
		(As reported, amounts in thousands)
Depreciation and amortization:
Radio		$	10,244			$	9,988			$	(256	)			(2.5	)%
Publishing			713				697				(16	)			(2.2	)%
Corporate			6,142				2,653				(3,489	)			(56.8	)%
Total depreciation and amortization		$	17,099			$	13,338			$	(3,761	)			(22.0	)%

     The decrease in corporate depreciation and amortization relates to corporate equipment and furniture and fixtures becoming fully depreciated in the fourth quarter of fiscal 2006.

Operating income:

		For the years ended February 28,
		2006				2007				$ Change				% Change
		(As reported, amounts in thousands)
Operating income:
Radio		$	78,723			$	85,251			$	6,528				8.3	%
Publishing			45				7,576				7,531				16735.6	%
Corporate			(43,111	)			(33,085	)			10,026				(23.3	)%
Total operating income		$	35,657			$	59,742			$	24,085				67.5	%