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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended August 31, 2003

NOT APPLICABLE
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  ý      No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 126-2 of the Act).

Yes  ý      No o

        The number of shares outstanding of each of Emmis Communications Corporation’s classes of common stock, as of October 1, 2003, was:

        Emmis Operating Company had 1,000 shares of common stock outstanding as of October 1, 2003 and all of these shares are owned by Emmis Communications Corporation.

INDEX

Page

INDEPENDENT ACCOUNTANTS' REVIEW REPORT...................................................................  4

PART I  - FINANCIAL INFORMATION

     Item 1.  Financial Statements.......................................................................  5

       Emmis Communications Corporation and Subsidiaries:

           Condensed Consolidated Statements of Operations for the three
                and six months ended August 31, 2002 and 2003............................................  5

           Condensed Consolidated Balance Sheets
                as of February 28, 2003 and August 31, 2003..............................................  7

           Condensed Consolidated Statements of Cash Flows
                for the six months ended August 31, 2002 and 2003........................................  9

       Emmis Operating Company and Subsidiaries:

           Condensed Consolidated Statements of Operations for the three
                and six months ended August 31, 2002 and 2003...........................................  11

           Condensed Consolidated Balance Sheets
                as of February 28, 2003 and August 31, 2003.............................................  12

           Condensed Consolidated Statements of Cash Flows
                for the six months ended August 31, 2002 and 2003.......................................  14

       Notes to Condensed Consolidated Financial Statements.............................................  16

     Item 2.  Management's Discussion and Analysis of
                Financial Condition and Results of Operations...........................................  37

     Item 3.  Quantitative and Qualitative Disclosures
                about Market Risk.......................................................................  48

     Item 4.  Controls and Procedures...................................................................  48

PART II  - OTHER INFORMATION

     Item 4.  Submission of Matters to a Vote of Security Holders.......................................  50

     Item 6.  Exhibits and Reports on Form 8-K..........................................................  51

     Signatures   ......................................................................................  53

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT

The Board of Directors and ShareholdersEmmis
Communications Corporation and Subsidiaries

We have reviewed the accompanying condensed consolidated balance sheet of Emmis Communications Corporation and Subsidiaries as of August 31, 2003, and the related condensed consolidated statements of operations and cash flows for the three-month and six-month periods ended August 31, 2003 and 2002. We have also reviewed the accompanying condensed consolidated balance sheet of Emmis Operating Company (a wholly owned subsidiary of Emmis Communications Corporation) and Subsidiaries as of August 31, 2003, and the related condensed consolidated statements of operations and cash flows for the three-month and six-month periods ended August 31, 2003 and 2002. These financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States.

We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of Emmis Communications Corporation and Subsidiaries as of February 28, 2003, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for the year then ended. We have also audited, in accordance with auditing standards generally accepted in the United States, the accompanying consolidated balance sheet of Emmis Operating Company and Subsidiaries as of February 28, 2003, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for the year then ended. In our report dated April 11, 2003, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheets of Emmis Communications Corporation and Subsidiaries and Emmis Operating Company and Subsidiaries as of February 28, 2003, is fairly stated, in all material respects, in relation to the consolidated balance sheets from which it was derived.

PART I – FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS

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

See independent accountants’ review report and accompanying notes.

        In the three months ended August 31, 2002 and 2003, $4.8 million and $4.3 million, respectively of our noncash compensation was attributable to our stations, while $1.0 million and $1.1 million, respectively was attributable to corporate. In the six months ended August 31, 2002 and 2003, $9.5 million and $10.0 million, respectively of our noncash compensation was attributable to our stations, while $1.6 million and $2.5 million, respectively was attributable to corporate.

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

See independent accountants’ review report and accompanying notes.

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

See independent accountants’ review report and accompanying notes.

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

See independent accountants’ review report and accompanying notes.

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

See independent accountants’ review report and accompanying notes.

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

See independent accountants’ review report and accompanying notes.

EMMIS OPERATING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands)

See independent accountants’ review report and accompanying notes.

        In the three months ended August 31, 2002 and 2003, $4.8 million and $4.3 million, respectively of our noncash compensation was attributable to our stations, while $1.0 million and $1.1 million, respectively was attributable to corporate. In the six months ended August 31, 2002 and 2003, $9.5 million and $10.0 million, respectively of our noncash compensation was attributable to our stations, while $1.6 million and $2.5 million, respectively was attributable to corporate.

EMMIS OPERATING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)

See independent accountants’ review report and accompanying notes.

EMMIS OPERATING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(Dollars in thousands, except share data)

See independent accountants’ review report and accompanying notes.

EMMIS OPERATING COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)

See independent accountants’ review report and accompanying notes.

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

See independent accountants’ review report and accompanying notes.

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
AND EMMIS OPERATING COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS UNLESS INDICATED OTHERWISE, EXCEPT SHARE DATA)
August 31, 2003

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Preparation of Interim Financial Statements

        Pursuant to the rules and regulations of the Securities and Exchange Commission, the condensed consolidated interim financial statements included herein have been prepared, without audit, by Emmis Communications Corporation (“ECC”) and its subsidiaries (collectively, “our,” “us,” “Emmis” or the “Company”) and by Emmis Operating Company and its subsidiaries (collectively “EOC”). Unless otherwise noted, all disclosures contained in the Notes to Condensed Consolidated Financial Statements in this Form 10-Q apply to Emmis and EOC. As permitted under the applicable rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations; however, Emmis believes that the disclosures are adequate to make the information presented not misleading. The condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report for Emmis and EOC filed on Form 10-K for the year ended February 28, 2003. The Company’s results are subject to seasonal fluctuations. Therefore, results shown on an interim basis are not necessarily indicative of results for a full year.

        In the opinion of Emmis and EOC, respectively, the accompanying condensed consolidated interim financial statements contain all material adjustments (consisting only of normal recurring adjustments) necessary to present fairly the consolidated financial position of Emmis and EOC at August 31, 2003 and the results of their operations for the three and six months ended August 31, 2002 and 2003 and their cash flows for the six months ended August 31, 2002 and 2003.

Stock-Based Compensation

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

        The fair value for these options was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted average assumptions for options vesting in 2002 and 2003:

Advertising Costs

        The Company defers the costs of major advertising campaigns for which future benefits are demonstrated. These costs are amortized over the shorter of the estimated period benefited (generally six months) or the remainder of the fiscal year. The Company had an immaterial amount and $1.1 million of these costs deferred as of August 31, 2002 and 2003, respectively.

Basic and Diluted Net Income Per Common Share

     Emmis

        Basic net income per common share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted net income per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted. Potentially dilutive securities at August 31, 2002 and 2003 consisted of stock options and the 6.25% Series A cumulative convertible preferred stock. Neither the 6.25% Series A cumulative convertible preferred stock nor the stock options are included in the calculation of diluted net income per common share for the three and six months ended August 31, 2002 as the effect of their conversion to common stock would be antidilutive. Weighted average shares excluded from the calculation of diluted net income per share that would result from the conversion of the 6.25% Series A cumulative convertible preferred stock and the conversion of stock options amounted to approximately 3.8 million and 4.0 million shares for the three and six months ended August 31, 2002, respectively. The 6.25% Series A cumulative convertible preferred stock was excluded from the calculation of diluted net income per common share for the three and six months ended August 31, 2003 as the effect of its conversion to common stock of 3.7 million shares would be antidilutive.

     EOC

        Because EOC is a wholly-owned subsidiary of Emmis, disclosure of earnings per share for EOC is not required.

Cost Method Investments

        Each quarter, the Company assesses impairment on its cost method investments. During the quarter ended August 31, 2003, Emmis reduced the carrying value of one of its cost method investments from $1.0 million to zero as the decline in the value of the investment, as determined by management, was deemed to be other than temporary. This expense is reflected in other income (expense), net in the accompanying condensed consolidated statements of operations.

Recent Accounting Pronouncements

        On March 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 145, Rescission of SFAS Nos. 4, 44, and 64, Amendment of SFAS No. 13, and Technical Corrections (SFAS No. 145”). SFAS No. 145 rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that Statement, and SFAS No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. SFAS No. 145 also rescinds SFAS No. 44, Accounting for Leases, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS No. 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. This pronouncement requires gains and losses related to debt transactions to be classified in income from continuing operations. Although we did not have any gains or losses from debt transactions in the current year, ECC had recorded an extraordinary loss of $8.8 million, net of tax, and $11.1 million, net of tax, in the three and six months ended August 31, 2002, respectively, and EOC had recorded an extraordinary loss of $0.5 million, net of tax, and $2.9 million, net of tax, in the three and six months ended August 31, 2002, respectively, in connection with debt extinguishments. Accordingly, we retroactively reclassified the losses of $9.9 million and $13.5 million, respectively, for ECC and $0.8 million and $4.4 million, respectively, for EOC to include them in income from continuing operations.

        On March 1, 2003, the Company adopted Financial Accounting Standards Board Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“FIN 45”). FIN 45 applies to contracts or indemnification agreements that contingently require the guarantor to make payments to the guaranteed party based on changes in an underlying obligation that is related to an asset, liability, or an equity security of the guaranteed party. FIN 45‘s disclosure requirements were effective for financial statements of interim or annual periods ending after December 15, 2002. FIN 45‘s initial recognition and initial measurement provisions were applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year-end. The Company adopted the disclosure requirements of FIN 45 for its fiscal 2003 annual report. Adoption of the initial recognition and initial measurement requirements of FIN 45 did not materially impact the Company’s financial position, results of operations or applicable disclosures.

        On January 1, 2003, the Financial Accounting Standards Board issued Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”). FIN 46 addresses consolidation of business enterprises of variable interest entities. FIN 46 is effective immediately for all variable interest entities created after January 31, 2003 and for the first fiscal year or interim period beginning after June 15, 2003 for variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The Company has not acquired any variable interest entities subsequent to January 31, 2003 and will therefore adopt FIN 46 for its quarterly report for the period ending November 30, 2003. The Company is currently evaluating the impact, if any, of this pronouncement on its future consolidated results of operations and consolidated balance sheets.

        In May 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity (SFAS No. 150”). SFAS No. 150 requires financial instruments within its scope to be classified as a liability (or an asset in some circumstances). Many of these instruments were previously classified as equity. SFAS 150 is effective for our quarter ended November 30, 2003. The Company is currently evaluating the impact, if any, of this pronouncement on its future consolidated results of operations and consolidated balance sheets.

Note 2. Intangible Assets and Goodwill

     Indefinite-lived Intangibles

        Under the guidance in Statement of Financial Accounting Standards No. 142 (“Statement No. 142”), the Company’s FCC licenses are considered indefinite-lived intangibles. These assets are not subject to amortization, but are tested for impairment at least annually. As of August 31, 2003 and February 28, 2003, the carrying amounts of the Company’s FCC licenses were $1,620.2 million and $1,508.9 million, respectively. The increase is attributable to the acquisitions discussed in Note 4.

        In accordance with Statement No. 142, the Company tested these indefinite-lived intangible assets for impairment as of March 1, 2002 by comparing their fair value to their carrying value at that date. The Company recognized impairment on its FCC licenses of approximately $145.0 million, net of $88.8 million in tax benefit, which is recorded as a component of the cumulative effect of accounting change during the three months ended May 31, 2002. Approximately $14.8 million of the charge, net of tax, related to our radio segment and $130.2 million of the charge, net of tax, related to our television segment. The fair value of our FCC licenses used to calculate the impairment charge was determined by management, using an enterprise valuation approach. Enterprise value was determined by applying an estimated market multiple to the broadcast cash flow generated by each reporting unit. Market multiples were determined based on information available regarding publicly traded peer companies, recently completed or contemplated transactions within the industry, and reporting units’ competitive position in their respective markets. Appropriate allocation was made to the tangible assets with the residual amount representing the estimated fair value of our indefinite lived intangible assets and goodwill. To the extent the carrying amount of the indefinite-lived intangible exceeded its fair value, the difference was recorded in the statement of operations, as described above. In the case of radio, the Company determined the reporting unit to be all of our stations in a local market, and in the case of television and publishing, the Company determined the reporting unit to be each individual station or magazine. Throughout our fiscal year ended February 2002, unfavorable economic conditions persisted in the industries in which the Company engages. These conditions caused customers to reduce the amount of advertising dollars spent on the Company’s media inventory as compared to prior periods, adversely impacting the cash flow projections used to determine the fair value of each reporting unit and public trading multiples of media stocks, resulting in the write-off of a portion of the carrying amount of our FCC licenses. The required impairment tests may result in future periodic write-downs, but the annual impairment test for fiscal 2003, completed in the fourth quarter, did not result in any further write-downs.

     Goodwill

        Statement No. 142 requires the Company to test goodwill for impairment at least annually using a two-step process. The first step is a screen for potential impairment, while the second step measures the amount of impairment. The Company completed the two-step impairment test during the quarter ended May 31, 2002. As a result of this test, the Company recognized impairment of approximately $22.4 million, net of $13.8 million in tax benefit, as a component of the cumulative effect of an accounting change during the three months ended May 31, 2002. Approximately $18.5 million of the charge, net of tax, related to our television segment and $3.9 million of the charge, net of tax, related to our publishing segment. Consistent with the Company’s approach to determining the fair value of our FCC licenses, the enterprise valuation approach was used to determine the fair value of each of the Company’s reporting units, and a portion of the carrying value of our goodwill was written-off due to reductions in cash flow and public trading multiples of media stocks resulting from the unfavorable economic conditions that reduced advertising expenditures throughout our fiscal 2002. As of August 31, 2003 and February 28, 2003, the carrying amount of the Company’s goodwill was $162.8 million and $139.0 million, respectively. The increase is attributable to the acquisitions discussed in Note 4. The required impairment tests may result in future periodic write-downs, but the annual impairment test for fiscal 2003, completed in the fourth quarter, did not result in any further write-downs.

     Definite-lived intangibles

        The Company’s definite-lived intangible assets consist primarily of foreign broadcasting licenses, subscription lists, lease rights, customer lists and non-compete agreements, all of which are amortized over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The following table presents the gross carrying amount and accumulated amortization for each major class of definite-lived intangible asset at February 28, 2003 and August 31, 2003:

        Total amortization expense from definite-lived intangibles for the three months ended August 31, 2002 and 2003 was $1.7 million and $1.5 million, respectively. Total amortization expense from definite-lived intangibles for the six months ended August 31, 2002 and 2003 was $3.6 million and $3.1 million, respectively. The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangibles recorded on our books as of August 31, 2003:

        As acquisitions and/or dispositions occur in the future, amortization expense will vary from the above table.

Note 3. Significant Events

WBPG-TV Acquisition

        Effective March 1, 2003, the Company acquired substantially all of the assets of television station WBPG-TV in Mobile, AL – Pensacola, FL from Pegasus Communications Corporation for a cash purchase price of approximately $11.7 million, including transaction costs of $0.2 million. This acquisition will allow the Company to achieve duopoly efficiencies in the market, such as lower programming acquisition costs and consolidation of general and administrative functions, since Emmis already owns the Fox-affiliated television station in the market, WALA. The acquisition was financed through borrowings under the credit facility and was accounted for as a purchase. The Company recorded $0.2 million of goodwill, all of which is deductible for income tax purposes.

        For this transaction, the aggregate purchase price, including transaction costs of $0.2 million, was allocated as follows based upon a preliminary appraisal. Material changes to the purchase price allocation are not expected.

Sale of Mira Mobile

        Effective June 5, 2003, Emmis sold its mobile television production company, Mira Mobile Television, to Shooters Production Services, Inc. for $3.9 million in cash, plus payments for working capital. Emmis received $3.3 million of the purchase price at closing and received a promissory note due October 31, 2005 for the remaining $0.6 million. Emmis had acquired this business in connection with the Lee acquisition in October 2000. The book value of the long-lived assets as of May 31, 2003 was $3.1 million and the operating performance of Mira Mobile was not material to the Company. Emmis recorded a gain on the sale of these assets of approximately $0.9 million in the accompanying condensed consolidated statements of operations.

Credit Facility Amendment

        On June 6, 2003, EOC amended its credit facility to allow for the acquisition of the controlling interest in the Austin partnership, as described below. Specifically, the amendment increased the amount of Investments (as defined in the credit facility) that EOC could make to allow for the investment in the partnership. In addition to permitting the Austin acquisition, the amendment provided additional room under certain financial covenants applicable to the Revolver, Term A loan and Term B loan. More specifically, required decreases in senior leverage and total leverage ratios were delayed from November 30, 2003 to June 1, 2004.

Austin Radio Acquisition

        On July 1, 2003, Emmis effectively acquired a controlling interest of 50.1% in a partnership that owns six radio stations in the Austin, Texas metropolitan area for a cash purchase price of approximately $106.4 million, including transaction costs of $1.0 million. These six stations are KLBJ-AM, KLBJ-FM, KDHT-FM, (formerly KXMG-FM), KROX-FM, KGSR-FM and KEYI-FM. This acquisition allowed Emmis to diversify its radio portfolio and participate in another large, high-growth radio market. The acquisition was financed through borrowings under the credit facility and was accounted for as a purchase. The Company recorded $23.6 million of goodwill, all of which is deductible for income tax purposes. In addition, Emmis has the option, but not the obligation, to purchase its 49.9% partner’s entire interest in the partnership after a period of approximately five years based on an 18-multiple of trailing 12-month cash flow.

        For this transaction, the aggregate purchase price, including transaction costs of $1.0 million, was allocated as follows based upon a preliminary appraisal. Material changes to the purchase price allocation are not expected.

Note 4. Pro Forma Financial Information