10-Q

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, 2006

EMMIS COMMUNICATIONS CORPORATION

(Exact name of registrant as specified in its charter)

INDIANA
(State of incorporation or organization)

0-23264
(Commission file number)

35-1542018
(I.R.S. Employer Identification No.)

ONE EMMIS PLAZA
40 MONUMENT CIRCLE, SUITE 700
INDIANAPOLIS, INDIANA 46204
(Address of principal executive offices)

(317) 266-0100
(Registrant’s Telephone Number,
Including Area Code)

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No 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 þ      Accelerated filer o      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 number of shares outstanding of each of Emmis Communications Corporation’s classes of common stock, as of October 2, 2006, was:

32,376,944	Shares of Class A Common Stock, $.01 Par Value
4,929,881	Shares of Class B Common Stock, $.01 Par Value
0	Shares of Class C Common Stock, $.01 Par Value

INDEX

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements	3
Condensed Consolidated Statements of Operations for the three-month and six-month periods ended August 31, 2005 and 2006	3
Condensed Consolidated Balance Sheets as of February 28, 2006 and August 31, 2006	5
Condensed Consolidated Statements of Cash Flows for the six-month periods ended August 31, 2005 and 2006	7
Notes to Condensed Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3. Quantitative and Qualitative Disclosures about Market Risk	50
Item 4. Controls and Procedures	50
PART II — OTHER INFORMATION
Item 6. Exhibits	51
Signatures	52

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)

	Three Months Ended						Six Months Ended
	August 31,						August 31,
	2005			2006			2005			2006
NET REVENUES	$	104,654		$	99,909		$	197,035		$	189,696
OPERATING EXPENSES:
Station operating expenses		64,877			66,383			125,608			130,019
Corporate expenses		7,958			8,292			16,561			15,179
Depreciation and amortization		4,257			3,223			8,053			6,498
(Gain) loss on disposal of assets		(8	)		3			45			3
Total operating expenses		77,084			77,901			150,267			151,699
OPERATING INCOME		27,570			22,008			46,768			37,997
OTHER INCOME (EXPENSE):
Interest expense		(18,341	)		(11,554	)		(28,586	)		(24,116	)
Loss on debt extinguishment		—			(537	)		—			(3,380	)
Other income (expense), net		190			442			163			785
Total other income (expense)		(18,151	)		(11,649	)		(28,423	)		(26,711	)
INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND DISCONTINUED OPERATIONS		9,419			10,359			18,345			11,286
PROVISION FOR INCOME TAXES		4,159			4,533			8,047			4,558
MINORITY INTEREST EXPENSE, NET OF TAX		1,634			1,551			2,419			2,722
NET INCOME FROM CONTINUING OPERATIONS		3,626			4,275			7,879			4,006
INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX		4,804			108,007			10,929			116,930
NET INCOME		8,430			112,282			18,808			120,936
PREFERRED STOCK DIVIDENDS		2,246			2,246			4,492			4,492
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	6,184		$	110,036		$	14,316		$	116,444

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

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

	Three Months Ended				Six Months Ended
	August 31,				August 31,
	2005		2006		2005		2006
Basic net income (loss) available to common shareholders:
Continuing operations	$	0.03	$	0.05	$	0.07	$	(0.01	)
Discontinued operations, net of tax		0.12		2.90		0.22		3.14
Net income (loss) available to common shareholders	$	0.15	$	2.95	$	0.29	$	3.13
Basic weighted average common shares outstanding		40,893		37,242		48,769		37,184
Diluted net income (loss) available to common shareholders:
Continuing operations	$	0.03	$	0.05	$	0.07	$	(0.01	)
Discontinued operations, net of tax		0.12		2.90		0.22		3.14
Net income (loss) available to common shareholders	$	0.15	$	2.95	$	0.29	$	3.13
Diluted weighted average common shares outstanding		41,434		37,346		49,266		37,184

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

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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

	February 28,		August 31,
	2006		2006
	(Note 1)		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	140,822	$	194,690
Accounts receivable, net		65,374		75,195
Prepaid expenses		16,605		16,554
Other		10,172		3,865
Current assets — discontinued operations		22,233		13,863
Total current assets		255,206		304,167
PROPERTY AND EQUIPMENT, NET		64,561		61,328
INTANGIBLE ASSETS (Note 3):
Indefinite-lived intangibles		819,338		819,338
Goodwill		77,413		77,413
Other intangibles, net		20,174		18,232
Total intangible assets		916,925		914,983
OTHER ASSETS, NET		45,093		41,956
NONCURRENT ASSETS — DISCONTINUED OPERATIONS		230,916		87,179
Total assets	$	1,512,701	$	1,409,613

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

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

	February 28,			August 31,
	2006			2006
	(Note 1)			(Unaudited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts Payable	$	25,258		$	17,992
Current maturities of long-term debt		129,175			382,748
Accrued salaries and commissions		11,857			8,395
Accrued interest		9,561			8,145
Deferred revenue		13,581			13,104
Income taxes		53			5,515
Other		5,987			4,550
Current liabilities — discontinued operations		26,431			10,056
Total current liabilities		221,903			450,505
LONG-TERM DEBT, NET OF CURRENT MATURITIES		664,424			143,250
OTHER LONG-TERM DEBT, NET OF CURRENT MATURITIES		3,520			3,334
OTHER NONCURRENT LIABILITIES		3,296			27,944
MINORITY INTEREST		48,465			50,180
DEFERRED INCOME TAXES		127,228			177,241
NONCURRENT LIABILITIES — DISCONTINUED OPERATIONS		28,386			18,842
Total liabilities		1,097,222			871,296
COMMITMENTS AND CONTINGENCIES
SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK, $0.01 PAR VALUE; $50.00 LIQUIDATION PREFERENCE; AUTHORIZED 10,000,000 SHARES; ISSUED AND OUTSTANDING 2,875,000 SHARES AT FEBRUARY 28, 2006 AND AUGUST 31, 2006		143,750			143,750
SHAREHOLDERS’ EQUITY:
Class A common stock, $.01 par value; authorized 170,000,000 shares; issued and outstanding 32,164,397 shares at February 28, 2006 and 32,346,416 shares at August 31, 2006		322			323
Class B common stock, $.01 par value; authorized 30,000,000 shares; issued and outstanding 4,879,774 shares at February 28, 2006 and 4,929,881 shares at August 31, 2006		49			49
Additional paid-in capital		513,879			520,065
Accumulated deficit		(240,567	)		(124,123	)
Accumulated other comprehensive loss		(1,954	)		(1,747	)
Total shareholders’ equity		271,729			394,567
Total liabilities and shareholders’ equity	$	1,512,701		$	1,409,613

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

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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)

	Six Months Ended August 31,
	2005			2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	18,808		$	120,936
Adjustments to reconcile net income to net cash
provided by operating activities —
Discontinued operations		(10,929	)		(116,930	)
Depreciation and amortization		9,154			7,265
Accretion of interest on senior discount notes and amortization of related debt costs		81			8
Minority interest expense		2,419			2,722
Provision for bad debts		1,435			1,447
Provision for deferred income taxes		8,014			(26,013	)
Noncash compensation		5,522			4,531
Loss on debt extinguishment		—			3,380
Other		45			3
Changes in assets and liabilities —
Accounts receivable		(18,340	)		(11,356	)
Prepaid expenses and other current assets		1,982			1,794
Other assets		1,002			(1,276	)
Accounts payable and accrued liabilities		6,377			(10,444	)
Deferred revenue		307			(477	)
Income taxes		—			29,997
Other liabilities		(2,908	)		(3,607	)
Net cash provided by operating activities — discontinued operations		25,566			11,467
Net cash provided by operating activities		48,535			13,447
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(5,189	)		(1,157	)
Cash paid for acquisitions		(12,563	)		—
Deposits and other		(60	)		302
Net cash provided by (used in) investing activities — discontinued operations		(6,453	)		314,050
Net cash provided by (used in) investing activities		(24,265	)		313,195

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

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

	Six Months Ended August 31,
	2005			2006
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt		(87,875	)		(282,088	)
Proceeds from long-term debt		485,000			14,500
Premiums paid to redeem outstanding debt obligations		—			(88	)
Purchases of the Company’s Class A Common Stock		(396,737	)		—
Proceeds from exercise of stock options and employee stock purchases		2,925			150
Preferred stock dividends paid		(4,492	)		(4,492	)
Settlement of tax withholding obligations on stock issued to employees		(1,105	)		(716	)
Debt related costs		(10,531	)		—
Other		—			23
Net cash used in financing activities		(12,815	)		(272,711	)
Effect of exchange rate on cash and cash equivalents		(732	)		(63	)
INCREASE IN CASH AND CASH EQUIVALENTS		10,723			53,868
CASH AND CASH EQUIVALENTS:
Beginning of period		16,054			140,822
End of period	$	26,777		$	194,690
SUPPLEMENTAL DISCLOSURES:
Cash paid for —
Interest	$	34,268		$	24,757
Income taxes		33			574
Noncash financing transactions —
Value of stock issued to employees under stock compensation program and to satisfy accrued incentives		9,747			5,643
ACQUISITION OF D.EXPRES (SLOVAKIA):
Fair value of assets acquired	$	16,208
Cash paid		12,563
Liabilities recorded	$	3,645

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

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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS UNLESS INDICATED OTHERWISE, EXCEPT SHARE DATA)
August 31, 2006

(Unaudited)

Note 1. Summary of Significant Accounting Policies

Preparation of Interim Financial Statements

     Pursuant to the rules and regulations of the Securities and Exchange Commission, the condensed consolidated interim financial statements included herein have been prepared, without audit, by Emmis Communications Corporation (“ECC”) and its subsidiaries (collectively, “our,” “us,” “Emmis” or the “Company”). As permitted under the applicable rules and regulations of the Securities and Exchange Commission, certain information and footnote disclosures normally included in financial statements prepared in conformity with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations; however, Emmis believes that the disclosures are adequate to make the information presented not misleading. The condensed consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the notes thereto included in the Annual Report for Emmis filed on Form 10-K for the year ended February 28, 2006. The Company’s results are subject to seasonal fluctuations. Therefore, results shown on an interim basis are not necessarily indicative of results for a full year.

     In the opinion of Emmis, the accompanying condensed consolidated interim financial statements contain all material adjustments (consisting only of normal recurring adjustments) necessary to present fairly the consolidated financial position of Emmis at August 31, 2006 and the results of its operations for the three-month and six-month periods ended August 31, 2005 and 2006 and its cash flows for the six-month periods ended August 31, 2005 and 2006.

Accounting Pronouncement

     On September 8, 2006, the Financial Accounting Standards Board issued FASB Staff Position AUG AIR-1, Accounting For Planned Major Maintenance Activities, that eliminates the acceptability of the accrue-in-advance method of accounting for planned major maintenance activities. This staff position is effective for the Company as of March 1, 2007 and requires retrospective restatement of prior period results. Early adoption of this pronouncement is precluded for the Company. The Company has been accruing for planned major maintenance activities associated with a leased airplane under the accrue-in-advance method. The Company is currently evaluating this FASB Staff Position and its effect on the Company’s financial position, results of operations and cash flows.

     On July 13, 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48, Accounting For Uncertainty In Income Taxes [FIN No. 48], that provides guidance on the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions that a company has taken or expects to take on a tax return. Under FIN No. 48, financial statements should reflect expected future tax consequences of such positions presuming the taxing authorities have full knowledge of the position and all relevant facts. The interpretation also revises the disclosure requirements and is effective for the Company as of March 1, 2007. The Company is currently evaluating FIN No. 48 and its effect on the Company’s financial position, results of operations and cash flows.

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     On December 16, 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment [“SFAS No. 123R”]. SFAS No. 123R requires companies to measure all employee stock-based compensation awards, including employee stock options, using a fair-value method and to record such expense in their consolidated financial statements. In addition, the adoption of SFAS No. 123R requires additional accounting and disclosure related to the income tax and cash flow effects resulting from share-based payment arrangements. The Company adopted Statement No. 123R on March 1, 2006. See Note 2 for further discussion.

Advertising Costs

     The Company defers the costs of major advertising campaigns for which future benefits are demonstrated. These costs are amortized over the shorter of the estimated period benefited (generally six months) or the remainder of the fiscal year. The Company had deferred $0.4 million and $0.3 million of these costs as of August 31, 2005 and 2006, respectively.

Basic and Diluted Net Income Per Common Share

     Basic net income per common share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted net income per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted. Potentially dilutive securities at August 31, 2005 and 2006 consisted of stock options and the 6.25% Series A cumulative convertible preferred stock. The 6.25% Series A cumulative convertible preferred stock was excluded from the calculation of diluted net income per common share for the three-month and six-month periods ended August 31, 2005 and August 31, 2006 as the effect of its conversion to 4.8 million shares would be antidilutive in all periods. Stock options were excluded from diluted net income per common share for the six-months ended August 31, 2006 as the effect of their conversion would be antidilutive to the net loss from continuing operations.

Reclassifications

     Certain reclassifications have been made to the prior years’ financial statements to be consistent with the August 31, 2006 presentation. The reclassifications have no impact on net income previously reported.

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Discontinued Operations

Summary of Discontinued Operations Activity:

	Three Months Ended August 31,						Six Months Ended August 31,
	2005			2006			2005			2006
Income (loss) from operations:
KKFR-FM	$	1,361		$	(384	)	$	2,300		$	537
Television		6,620			3,873			16,318			11,382
WRDA-FM		(280	)		—			(536	)		—
Phoenix		440			—			440			—
Total		8,141			3,489			18,522			11,919
Less: Provision for income taxes		3,337			1,439			7,593			5,089
Income from operations, net of tax		4,804			2,050			10,929			6,830
Gain on sale of discontinued operations:
KKFR-FM		—			19,117			—			19,117
Television		—			160,760			—			160,760
WRDA-FM		—			—			—			7,022
Total		—			179,877			—			186,899
Less: Provision for income taxes		—			73,920			—			76,799
Gain on sale of discontinued operations, net of tax		—			105,957			—			110,100
Income from discontinued operations, net of tax	$	4,804		$	108,007		$	10,929		$	116,930

A discussion of each component of discontinued operations follows.

KKFR-FM

     On July 11, 2006, Emmis completed its sale of radio station 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. The assets and liabilities of KKFR-FM have been classified as held for sale and its results of operations and cash flows for all periods presented have been reflected as discontinued operations in the accompanying condensed consolidated financial statements. KKFR-FM had historically been included in the radio segment. The following table summarizes certain operating results for KKFR-FM for all periods presented:

	Three Months Ended August 31,					Six Months Ended August 31,
	2005		2006			2005		2006
Net revenues	$	2,898	$	1,109		$	5,344	$	3,746
Station operating expenses		1,460		1,492			2,876		3,045
Depreciation and amortization		67		—			141		42
Income (loss) before taxes		1,361		(384	)		2,300		537
Provision (benefit) for income taxes		558		(157	)		943		220

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     Net assets related to KKFR-FM are classified as discontinued operations in the accompanying condensed consolidated balance sheets as follows:

	February 28, 2006
Current assets:
Accounts receivable, net	$	1,746
Prepaid expenses		269
Other		67
Total current assets		2,082
Noncurrent assets:
Property and equipment, net		1,785
Intangibles, net		55,671
Total noncurrent assets		57,456
Total assets	$	59,538
Current liabilities	$	398
Noncurrent liabilities		45
Total liabilities	$	443

Television Division

     On May 10, 2005, Emmis announced that it had engaged advisors to assist in evaluating strategic alternatives for its television assets. The decision to explore strategic alternatives for the Company’s television assets stemmed from the Company’s desire to lower its debt, coupled with the Company’s view that, in order to be successful in the long term, television stations need to be aligned with a company that is larger and more singularly focused on the challenges of American television, including digital video recorders and the industry’s relationship with cable and satellite providers. As of August 31, 2006, the Company has sold fourteen of its sixteen television stations. The Company expects to enter into agreements to sell its remaining two television stations in the next three to twelve months. The Company concluded its television assets were held for sale in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“Statement No. 144”) and the results of operations of the television division have been classified as discontinued operations in the accompanying condensed consolidated financial statements for all periods presented. The television division had historically been presented as a separate reporting segment of Emmis. The following table summarizes certain operating results for the television division for all periods presented:

	Three Months Ended August 31,				Six Months Ended August 31,
	2005		2006		2005		2006
Net revenues	$	60,253	$	15,742	$	126,825	$	31,682
Station operating expenses		40,458		11,635		82,758		21,874
Depreciation and amortization		4,852		—		12,319		—
(Gain) loss on disposal of assets		617		3		644		(2,035	)
Interest expense		7,470		—		14,255		—
Income before taxes		6,620		3,873		16,318		11,382
Provision for income taxes		2,714		1,596		6,690		4,869

     Net assets related to our television division are classified as discontinued operations in the

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accompanying condensed consolidated balance sheets as follows:

	February 28, 2006		August 31, 2006
Current assets:
Accounts receivable, net	$	10,130	$	11,302
Current portion of TV program rights		7,988		324
Prepaid expenses		275		607
Other		1,690		652
Total current assets		20,083		12,885
Noncurrent assets:
Property and equipment, net		27,477		23,944
Intangibles, net		124,369		61,035
Other noncurrent assets		8,622		2,201
Total noncurrent assets		160,468		87,180
Total assets	$	180,551	$	100,065
Current liabilities:
Accounts payable and accrued expenses	$	3,360	$	5,243
Current portion of TV program rights		12,731		3,137
Accrued salaries and commissions		1,076		1,243
Deferred revenue		7,454		111
Other		1,412		276
Total current liabilities		26,033		10,010
Noncurrent liabilities:
TV program rights payable, net of current portion		9,845		1,676
Other noncurrent liabilities		18,496		17,166
Total noncurrent liabilities		28,341		18,842
Total liabilities	$	54,374	$	28,852

     As of August 31, 2005, certain debt was required to be repaid as a result of the disposition of the Company’s television assets. The Company allocated interest expense of $7.5 million and $14.3 million associated with this portion of debt to the television operations for the three months and six months ended August 31, 2005, respectively, in accordance with Emerging Issues Task Force Issue 87-24 “Allocation of Interest to Discontinued Operations,” as modified. As no debt is required to be repaid as a result of the disposition of the remainder of the Company’s television assets as of August 31, 2006, no interest was allocated to television operations for the three-month and six-month periods ended August 31, 2006.

     Our television station in New Orleans, Louisiana, WVUE, was significantly affected by Hurricane Katrina and the subsequent flooding. The flooding of New Orleans caused extensive property damage at WVUE. Emmis spent approximately $3.7 million on capital expenditures related to flooding restoration projects during the six-months ended August 31, 2006 and expects to spend an additional $5.0 million in the next six months to complete the restoration. During the six-months ended August 31, 2006, the Company received $5.1 million of insurance proceeds, the majority of which were advanced proceeds from the Company’s private insurer. These proceeds are in addition to the $1.0 million Federal flood insurance proceeds received in the prior year. In connection with the receipt of the insurance proceeds, the Company removed the carrying value of all damaged or destroyed property and recorded a $2.0 million gain on disposal of these assets which is reflected in income from discontinued operations in the accompanying condensed consolidated statements of operations. Additionally, the Company recorded a reserve against WVUE accounts receivable due to the impact of the flooding on the local economy in the quarter-ended August 31, 2005.

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WVUE continues to monitor the financial health of its customers and adjusts its allowance for doubtful accounts on a monthly basis. As of August 31, 2006, WVUE’s reserve for doubtful accounts was approximately $0.4 million, which represents 11% of its total outstanding accounts receivable. WVUE did not broadcast its signal for an extended period of time as a result of Katrina and the general disruption of the local economy will negatively affect ongoing advertising revenue. The Company maintains business interruption insurance and expects to be reimbursed for lost net income as a result of Katrina. Emmis has not accrued for business interruption insurance proceeds. Business interruption insurance proceeds will only be recognized upon receipt.

WRDA-FM:

     On May 5, 2006, Emmis completed its sale of radio station WRDA-FM in St. Louis, MO to Radio One, Inc. and received $20.2 million of net cash proceeds. Emmis had tried various formats with the station over the past several years, but did not achieve an acceptable operating performance with any of the formats. After the most recent format change failed to meet expectations, Emmis elected to divest the station. The assets and liabilities of WRDA-FM have been classified as held for sale and its results of operations and cash flows for all periods presented have been reflected as discontinued operations in the accompanying condensed consolidated financial statements. WRDA-FM had historically been included in the radio segment. The following table summarizes certain operating results for WRDA-FM for all periods presented:

	Three Months Ended			Six Months Ended
	August 31, 2005			August 31, 2005
Net revenues	$	340		$	715
Station operating expenses		593			1,188
Depreciation and amortization		22			45
Loss before taxes		(280	)		(536	)
Benefit for income taxes		(115	)		(220	)

     The assets related to WRDA-FM are classified as discontinued operations in the accompanying condensed consolidated balance sheets as follows:

	February 28, 2006
Current assets:
Other	$	68
Total current assets		68
Noncurrent assets:
Intangibles, net		12,992
Total noncurrent assets		12,992
Total assets	$	13,060

Phoenix

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

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	Three Months Ended			Six Months Ended
	August 31, 2005			August 31, 2005
Net revenues	$	—		$	—
Station operating expenses, excluding noncash compensation		(440	)		(440	)
Noncash compensation		—			—
Depreciation and amortization		—			—
Pre-tax income		440			440
Provision for income taxes		180			180

Note 2. Share Based Payments

     The Company has granted options to purchase its common stock to employees and directors of the Company under various stock option plans at no less than the fair market value of the underlying stock on the date of grant. These options are granted for a term not exceeding ten years and are forfeited, except in certain circumstances, in the event the employee or director terminates his or her employment or relationship with the Company. All options granted since March 1, 2000 vest over three years (one-third each year for three years). The Company issues new shares upon the exercise of stock options.

     The Company adopted the fair value recognition provisions of Statement No. 123R, on March 1, 2006, using the modified-prospective-transition method. The fair value of the options is estimated using a Black-Scholes option-pricing model at the date of grant and expensed on a straight-line basis over the vesting period. Prior to adoption of Statement No. 123R, the Company accounted for share based payments under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related Interpretations, as permitted by Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“Statement No. 123”). The Company did not recognize employee compensation cost related to its stock option grants in its consolidated statements of operations for the three years ended February 28, 2006 (prior to adoption of Statement No. 123R), as all options vesting during those three years had an exercise price equal to the market value of the underlying common stock on the date of grant.

     The amounts recorded as share based payments prior to adopting Statement No. 123R primarily related to the expense associated with restricted common stock issued under employment agreements, common stock issued to employees in lieu of cash bonuses, Company matches of common stock in our 401(k) plans and common stock issued to employees in exchange for cash compensation pursuant to our stock compensation program. Under the modified-prospective-transition method, compensation cost recognized beginning in our fiscal year ending February 28, 2007 includes the above items and (a) compensation cost for all share-based payments granted on or after March 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of Statement No. 123R and (b) compensation cost associated with our employee stock purchase plan, which qualified as a noncompensatory plan under APB 25. Results for prior periods have not been restated. The Company accelerated the vesting of substantially all outstanding option awards that would have otherwise vested in fiscal 2007 and beyond. Consequently, the Company has an immaterial amount of share-based payment expense associated with stock options granted prior to March 1, 2006 that vest on or after March 1, 2006.

     As a result of adopting Statement No. 123R, the Company’s income before income taxes, minority

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interest and discontinued operations for the three-month and six-month periods ended August 31, 2006, was $0.4 million and $0.8 million lower, respectively, than if it had continued to account for share-based compensation under APB 25. The Company’s net income for the three-month and six-month periods ended August 31, 2006, was $0.2 million and $0.5 million lower, respectively, than if it had continued to account for share-based compensation under APB 25. Basic and diluted loss per share from continuing operations available to common shareholders for the three month and six-month periods ended August 31, 2006 was $0.01 lower than if the Company had continued to account for share based compensation under APB 25. The impact of adopting Statement No. 123R in the current year was minimized by the Company accelerating the vesting of substantially all unvested options in the fourth quarter of fiscal 2006. The Company accelerated the vesting of the unvested stock options to avoid recognizing the expense in future financial statements after the adoption of SFAS No. 123R.

     Prior to the adoption of Statement No. 123R, the Company presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the consolidated statements of cash flows. Statement No. 123R requires the cash flows resulting from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. The Company did not record any excess tax benefits in the three-month or six-month periods ended August 31, 2006.

     The following table illustrates the effect on net income and earnings per share as if the Company had applied the fair value recognition provisions of Statement No. 123R to options granted under the Company’s stock option plans in all periods presented.

	Three Months		Six Months
	Ended August 31,		Ended August 31,
	2005		2005
	(Unaudited)		(Unaudited)
Net Income Available to Common Shareholders:
As Reported	$	6,184	$	14,316
Plus: Reported stock-based employee compensation costs, net of tax		1,590		3,478
Less: Stock-based employee compensation costs, net of tax, if fair value method had been applied to all awards		3,399		7,096
Pro Forma	$	4,375	$	10,698
Basic EPS:
As Reported	$	0.15	$	0.29
Pro Forma	$	0.11	$	0.22
Diluted EPS:
As Reported	$	0.15	$	0.29
Pro Forma	$	0.11	$	0.22

     The fair value of each option awarded is estimated on the date of grant using a Black-Scholes option-pricing model. Expected volatilities are based on historical volatility of the Company’s stock. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. Prior to the adoption of Statement No. 123R, the Company recognized forfeitures as they occurred in its Statement No. 123 pro forma disclosures. Beginning March 1, 2006, the Company includes estimated forfeitures in its compensation cost and updates the estimated forfeiture rate through the final vesting date of awards. The

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expected term is based on the midpoint between the vesting date and the end of the contractual term. The risk free rate for periods within the life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The following assumptions were used to calculate the fair value of the Company’s options on the date of grant during the six months ended August 31, 2005 and 2006:

	Six Months Ended August 31,
	2005			2006
Risk-Free Interest Rate:		4.1	%		4.7	%
Expected Dividend Yield:		0	%		0	%
Expected Life (Years):		6.0			6.0
Expected Volatility:		60.8	%		58.3	%

The following table presents a summary of the Company’s stock options outstanding at, and stock option activity during, the six months ended August 31, 2006 (“Price” reflects the weighted average exercise price per share):

					Weighted Average		Aggregate
					Remaining		Intrinsic
	Options		Price		Contractual Term		Value
Outstanding, beginning of year		5,615,888	$	25.07
Granted		477,434		16.34
Exercised (1)		2,728		16.41
Forfeited		8,363		16.34
Expired		823,035		23.30
Outstanding, August 31		5,259,196		24.57		5.7	$	—
Exercisable, August 31		4,790,125		25.37		5.3	$	—
Weighted average fair value per option granted	$	9.64

(1) Cash received from option exercises for the six months ended August 31, 2005 and 2006 was $2.9 million and $0 million, respectively. The Company did not record an income tax benefit relating to the options exercised during the six months ended August 31, 2005 and 2006, respectively.

The weighted average grant date fair value of options granted during the six months ended August 31, 2005 and 2006 was $11.20 and $9.64, respectively. The total intrinsic value of options exercised during the six months ended August 31, 2005 and 2006 was $0.5 million and $0 million, respectively.

A summary of the Company’s nonvested options at February 28, 2006, and changes during the six months ended August 31, 2006, is presented below:

			Weighted Average
			Grant Date
	Options		Fair Value
Nonvested, beginning of year		598,274	$	16.49
Granted		477,434		9.64
Vested		598,274		16.49
Forfeited		8,363		9.64
Nonvested, August 31		469,071		9.64

There were 7.6 million shares available for future grants under the various option plans at August 31, 2006. The vesting date of outstanding options is March 1, 2009, and expiration dates range from November 2006 to March 2016 at exercise prices and average contractual lives as follows:

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	Outstanding		Weighted Average				Exercisable
	as of		Remaining		Weighted Average		as of		Weighted Average
Range of Exercise Prices	8/31/06		Contractual Life		Exercise Price		8/31/06		Exercise Price
$ .01 - $5.00		—		—	$	—		—	$	—
5.01 - 10.00		—		—		—		—		—
10.01 - 15.00		—		—		—		—		—
15.01 - 20.00		1,704,682		7.5		17.25		1,235,611		17.60
20.01 - 25.00		169,081		5.3		21.95		169,081		21.95
25.01 - 30.00		3,049,486		5.0		27.61		3,049,486		27.61
30.01 - 35.00		—		—		—		—		—
35.01 - 40.00		335,947		3.5		35.41		335,947		35.41
		5,259,196		5.7		24.57		4,790,125		25.37

Restricted Stock Awards

The Company began granting restricted stock awards to employees and directors of the Company in lieu of stock option grants in 2005. These awards generally vest at the end of the second or third year after grant and are forfeited, except in certain circumstances, in the event the employee terminates his or her employment or relationship with the Company prior to vesting. The restricted stock awards were granted out of the Company’s 2004 Equity Incentive Plan. The Company also awards, out of the Company’s 2004 Equity Incentive Plan, stock to settle certain bonuses that otherwise would be paid in cash. Any restrictions on these shares are immediately lapsed on the grant date.

The following table presents a summary of the Company’s restricted stock grants outstanding at August 31, 2006 and restricted stock activity during the six months ended August 31, 2006 (“Price” reflects the weighted average share price at the date of grant):

	Awards		Price
Grants outstanding, beginning of year		262,154	$	18.80
Granted		358,436		15.40
Vested (restriction lapsed)		213,953		14.98
Forfeited		14,857		17.67
Grants outstanding, August 31		391,780		17.79

The total fair value of shares vested during the six months ended August 31, 2005 and 2006 was $6.1 million and $3.1 million, respectively.

Recognized Non-Cash Compensation Expense

The following table summarizes stock-based compensation expense and related tax benefits recognized by the Company in the three-month and six-month periods ended August 31, 2005 and 2006:

	Three Months						Six Months
	Ended August 31,						Ended August 31,
	2005			2006			2005			2006
Station operating expenses	$	1,041		$	844		$	2,562		$	1,966
Corporate expenses		1,475			1,215			2,960			2,565
Stock-based compensation expense included in operating expenses		2,516			2,059			5,522			4,531
Tax benefit		(1,032	)		(844	)		(2,264	)		(1,858	)
Recognized stock-based compensation expense, net of tax	$	1,484		$	1,215		$	3,258		$	2,673

As of August 31, 2006, there was $6.5 million of unrecognized compensation cost related to nonvested share-based compensation arrangements. The cost is expected to be recognized over a weighted average period of approximately 2.4 years.

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Note 3. Intangible Assets and Goodwill

     Indefinite-lived Intangibles

     Under the guidance in Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“Statement No. 142”), the Company’s FCC licenses are considered indefinite-lived intangibles. These assets, which the Company determined were its only indefinite-lived intangibles, are not subject to amortization, but are tested for impairment at least annually. The carrying amounts of the Company’s FCC licenses were $819.3 million as of February 28, 2006 and August 31, 2006, respectively. This amount is entirely attributable to our radio division.

     Since its adoption of EITF Topic D-108 on December 1, 2004, the Company has used a direct-method valuation approach known as the greenfield income valuation method when it performs its annual impairment tests. Under this method, the Company projects the cash flows that would be generated by each of its units of accounting if the unit of accounting were commencing operations in each of its markets at the beginning of the valuation period. This cash flow stream is discounted to arrive at a value for the FCC license. The Company assumes the competitive situation that exists in each market remains unchanged, with the exception that its unit of accounting was beginning operations. In doing so, the Company extracts the value of going concern and any other assets acquired, and strictly values the FCC license. Major assumptions involved in this analysis include market revenue, market revenue growth rates, unit of accounting audience share, unit of accounting revenue share and discount rate. For its radio stations, the Company has determined the unit of accounting to be all of its stations in a local market. The required annual impairment tests may result in future periodic write-downs.

     Goodwill

     Statement No. 142 requires the Company to test goodwill for impairment at least annually using a two-step process. The first step is a screen for potential impairment, while the second step measures the amount of impairment. The Company conducts the two-step impairment test on December 1 of each fiscal year. When assessing its goodwill for impairment, the Company uses an enterprise valuation approach to determine the fair value of each of the Company’s reporting units (radio stations grouped by market and magazines on an individual basis). Management determines enterprise value for each of its reporting units by multiplying the two-year average station operating income generated by each reporting unit (current year based on actual results and the next year based on budgeted results) by an estimated market multiple. The Company uses a blended station operating income trading multiple of publicly traded radio operators as a benchmark for the multiple it applies to its radio reporting units. The multiple applied to each reporting unit is then adjusted up or down from this benchmark based upon characteristics of the reporting unit’s specific market, such as market size, market growth rate, and recently completed or announced transactions within the market. There are no publicly traded publishing companies that are focused predominantly on city and regional magazines as is our publishing segment. The market multiple used as a benchmark for our publishing reporting units is based on recently completed transactions within the city and regional magazine industry.

     This enterprise valuation is compared to the carrying value of the reporting unit for the first step of the goodwill impairment test. If the reporting unit exhibits impairment, the Company proceeds to the second step of the goodwill impairment test. For its step-two testing, the enterprise value is allocated among the tangible assets, indefinite-lived intangible assets (FCC licenses valued using a direct-method valuation approach) and unrecognized intangible assets, such as customer lists, with the residual amount representing the implied fair value of the goodwill. To the extent the carrying amount of the goodwill exceeds the implied fair value of the goodwill, the difference is recorded in the statement of operations.

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     As of February 28, 2006 and August 31, 2006, the carrying amount of the Company’s goodwill was $77.4 million. As of February 28, 2006 and August 31, 2006, approximately $25.2 million and $52.2 million of our goodwill was attributable to our radio and publishing divisions, respectively. The required annual impairment tests may result in future periodic write-downs.

     Definite-lived intangibles

     The Company’s definite-lived intangible assets consist primarily of foreign broadcasting licenses, favorable office leases, customer lists and non-compete agreements, all of which are amortized over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The following table presents the weighted-average useful life, gross carrying amount and accumulated amortization for each major class of definite-lived intangible asset at February 28, 2006 and August 31, 2006:

		February 28, 2006						August 31, 2006
	Weighted Average	Gross				Net		Gross				Net
	Useful Life	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	(in years)	Amount		Amortization		Amount		Amount		Amortization		Amount
Foreign Broadcasting Licenses	7.4	$	34,975	$	16,043	$	18,932	$	35,007	$	17,694	$	17,313
Favorable Office Leases	6.4		688		286		402		688		340		348
Customer Lists	1.0		4,765		4,549		216		4,765		4,734		31
Non-Compete Agreements	1.3		5,738		5,717		21		5,738		5,735		3
Other	24.6		1,357		754		603		1,357		820		537
TOTAL		$	47,523	$	27,349	$	20,174	$	47,555	$	29,323	$	18,232

     Total amortization expense from definite-lived intangibles for the three-month periods ended August 31, 2005 and 2006 was $1.0 million in both periods. Total amortization expense from definite-lived intangibles for the six-month periods ended August 31, 2005 and 2006 was $1.7 million and $1.9 million, respectively. The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangibles:

YEAR ENDED FEBRUARY 28 (29),
2007	$	3,765
2008		3,453
2009		3,417
2010		3,277
2011		1,960

Note 4. Significant Events

     On March 9, 2006, Emmis redeemed at par the remaining $120.0 million outstanding of its senior floating rate notes. In connection with this debt extinguishment, Emmis recorded a loss of approximately $2.6 million in its quarter ended May 31, 2006 related to the write-off of unamortized deferred debt costs.

     On March 15, 2006, Emmis redeemed at 106.25% of par the remaining $1.4 million outstanding of its 12.5% senior discount notes. In connection with this debt extinguishment, Emmis recorded a loss of approximately $0.1 million in its quarter ended May 31, 2006 related to the premium paid and the write-off of unamortized deferred debt costs.

     On May 5, 2006, Emmis closed on its sale of WRDA-FM in St. Louis 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 $4.1 million, net of tax, in its quarter ended May 31, 2006, which is included in discontinued operations in the accompanying condensed consolidated statement of operations.

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     On May 8, 2006, Emmis announced that ECC Acquisition, Inc., an Indiana corporation wholly owned by Jeffrey H. Smulyan, the Chairman, Chief Executive Officer and controlling shareholder of the Company, had made a non-binding proposal to acquire the outstanding publicly held shares of Emmis for $15.25 per share in cash. The proposal stated that the purchaser intended to invite certain other members of the Company’s management to join the purchaser to participate in the transaction. In the proposal, Mr. Smulyan also made clear that, in his capacity as a shareholder of the Company, his interest in the proposed transaction was to purchase shares of the Company not owned by him and that he would not agree to any other transaction involving the Company or his shares of the Company. In response to the proposal, the Board of Directors of Emmis formed a special committee of three independent directors, namely, Peter A. Lund, Frank V. Sica and Lawrence B. Sorrel, to consider the proposal. The special committee selected its own independent financial and legal advisors and appointed Mr. Sica to serve as its chairman. Mr. Smulyan and other directors of Emmis that are members of management did not participate in the evaluation of the proposal. On August 4, 2006, the Company received a letter from ECC Acquisition, Inc. withdrawing the proposal. Subsequently, Mr. Smulyan and his advisors at various times discussed with directors who served on the special committee and/or their advisors the withdrawn proposal and whether Mr. Smulyan or ECC Acquisition, Inc. would make a similar going private proposal. Those discussions included exploration by Mr. Smulyan of the directors’ views of a potential reinstitution of the proposal at a price of $16.80 per share in cash. Those discussions were discontinued on or around August 31, 2006 without a new offer being made. The special committee is no longer active, but a consolidated lawsuit filed in Marion County (Indiana) Superior Court on behalf of Emmis shareholders seeking injunctive relief and damages in connection with the offer, as well as class action status, remains on file with the Court. The Company believes the withdrawal of the proposal makes the lawsuit moot.

     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, in its quarter ended August 31, 2006, which is included in discontinued operations in the accompanying condensed consolidated statement of operations.

     On July 11, 2006, Emmis closed on its sale of KKFR-FM in Phoenix 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 $11.5 million, net of tax, in its quarter ended August 31, 2006, which is included in discontinued operations in the accompanying condensed consolidated statement of operations.

     On August 31, 2006, Emmis closed on its sale of WKCF-TV in Orlando 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 $93.3 million, net of tax, in its quarter ended August 31, 2006, which is included in discontinued operations in the accompanying condensed consolidated statement of operations.

Note 5. Pro Forma Financial Information

     Unaudited pro forma summary information is presented below for the three-month and six-month periods ended August 31, 2005 assuming the acquisition of (i) D.EXPRES in Slovakia in March 2005 and (ii) Radio FM Plus in Bulgaria in November 2005 had occurred on the first day of the pro forma period presented below. Unaudited historical information is presented below for the three-month and six-month periods ended August 31, 2006.

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

	Three Months Ended August 31,				Six Months Ended August 31,
	2005		2006		2005		2006
	(Pro Forma)		(Historical)		(Pro Forma)		(Historical)
Net revenues	$	105,134	$	99,909	$	198,787	$	189,696
Net income from continuing operations	$	3,560	$	4,275	$	7,155	$	4,006
Net income (loss) available to common shareholders from continuing operations	$	1,314	$	2,029	$	2,663	$	(486	)
Net income (loss) per share available to common shareholders from continuing operations:
Basic	$	0.03	$	0.05	$	0.05	$	(0.01	)
Diluted	$	0.03	$	0.05	$	0.05	$	(0.01	)
Weighted average shares outstanding:
Basic		40,893		37,242		48,769		37,184
Diluted		41,434		37,346		49,266		37,184

Note 6. Comprehensive Income

     Comprehensive income (loss) was comprised of the following for the three-month and six-month periods ended August 31, 2005 and 2006:

	Three Months						Six Months
	Ended August 31,						Ended August 31,
	2005			2006			2005			2006
Net income	$	8,430		$	112,282		$	18,808		$	120,936
Translation adjustment		(1,154	)		(265	)		(2,446	)		207
Total comprehensive income	$	7,276		$	112,017		$	16,362		$	121,143

Note 7. Segment Information

     The Company’s operations are aligned into two business segments: (i) Radio and (ii) Publishing and Other. These business segments are consistent with the Company’s management of these businesses and its financial reporting structure. Corporate represents expense not allocated to reportable segments.

     The Company’s segments operate primarily in the United States with one radio station located in Hungary, a network of radio stations located in Belgium and national radio networks in Slovakia and Bulgaria.

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     The following table summarizes the net revenues and long-lived assets of our international properties included in our condensed consolidated financial statements.

	Net Revenues				Net Revenues				Long-lived Assets
	Three Months Ended August 31,				Six Months Ended August 31,				As of August 31,
	2005		2006		2005		2006		2005		2006
Hungary	$	5,554	$	5,488	$	9,502	$	9,321	$	6,350	$	5,229
Belgium		263		392		421		567		3,550		3,143
Slovakia		2,494		2,934		2,933		4,979		11,984		11,505
Bulgaria		N/A		477		N/A		844		N/A		4,383

     In the quarter ended August 31, 2005, Emmis concluded its television assets were held for sale in accordance with Statement No. 144. Emmis sold KKFR-FM in Phoenix, AZ in July 2006 and WRDA-FM in St. Louis, MO in May 2006. Accordingly, the results of operations of the television division, KKFR-FM and WRDA-FM have been classified as discontinued operations in the accompanying condensed consolidated financial statements (see Note 1) and excluded from the segment disclosures below.

     The accounting policies as described in the summary of significant accounting policies included in the Company’s Annual Report filed on Form 10-K for the year ended February 28, 2006 and in Note 1 to these condensed consolidated financial statements, are applied consistently across segments.

Three Months Ended			Publishing
August 31, 2006	Radio		and Other		Corporate			Consolidated
	(Unaudited)
Net revenues	$	79,132	$	20,777	$	—		$	99,909
Station operating expenses		47,830		18,553		—			66,383
Corporate expenses		—		—		8,292			8,292
Depreciation and amortization		2,393		168		662			3,223
Loss on disposal of assets		3		—		—			3
Operating income (loss)	$	28,906	$	2,056	$	(8,954	)	$	22,008
Assets — continuing operations	$	997,689	$	78,053	$	232,828		$	1,308,570
Assets — discontinued operations		979		—		100,064			101,043
Total assets	$	998,668	$	78,053	$	332,892		$	1,409,613

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Three Months Ended				Publishing
August 31, 2005	Radio			and Other		Corporate			Consolidated
	(Unaudited)
Net revenues	$	83,860		$	20,794	$	—		$	104,654
Station operating expenses		45,472			19,405		—			64,877
Corporate expenses		—			—		7,958			7,958
Depreciation and amortization		2,464			175		1,618			4,257
(Gain) loss on disposal of assets		(8	)		—		—			(8	)
Operating income (loss)	$	35,932		$	1,214	$	(9,576	)	$	27,570
Assets — continuing operations	$	1,028,919		$	85,883	$	128,995		$	1,243,797
Assets — discontinued operations		74,950			—		518,339			593,289
Total assets	$	1,103,869		$	85,883	$	647,334		$	1,837,086

Six Months Ended			Publishing
August 31, 2006	Radio		and Other		Corporate			Consolidated
	(Unaudited)
Net revenues	$	147,926	$	41,770	$	—		$	189,696
Station operating expenses		91,581		38,438		—			130,019
Corporate expenses		—		—		15,179			15,179
Depreciation and amortization		4,827		330		1,341			6,498
(Gain) loss on disposal of assets		3		—		—			3
Operating income (loss)	$	51,515	$	3,002	$	(16,520	)	$	37,997
Assets — continuing operations	$	997,689	$	78,053	$	232,828		$	1,308,570
Assets — discontinued operations		979		—		100,064			101,043
Total assets	$	998,668	$	78,053	$	332,892		$	1,409,613

Six Months Ended				Publishing
August 31, 2005	Radio			and Other		Corporate			Consolidated
	(Unaudited)
Net revenues	$	156,139		$	40,896	$	—		$	197,035
Station operating expenses		87,357			38,251		—			125,608
Corporate expenses		—			—		16,561			16,561
Depreciation and amortization		4,454			355		3,244			8,053
(Gain) loss on disposal of assets		(6	)		1		50			45
Operating income (loss)	$	64,334		$	2,289	$	(19,855	)	$	46,768
Assets — continuing operations	$	1,028,919		$	85,883	$	128,995		$	1,243,797
Assets — discontinued operations		74,950			—		518,339			593,289
Total assets	$	1,103,869		$	85,883	$	647,334		$	1,837,086

Note 8. Financial Information for Subsidiary Guarantors
and Subsidiary Non-Guarantors of Emmis

     Included in current maturities of long-term debt is $375 million of senior subordinated notes. The notes are fully and unconditionally guaranteed, jointly and severally, by certain direct and indirect subsidiaries of Emmis (the “Subsidiary Guarantors”). As of February 28, 2006, subsidiaries holding Emmis’ interest in its radio stations in Austin, Texas, Hungary, Slovakia, Bulgaria and Belgium, as well as certain other subsidiaries (such as those conducting joint ventures with third parties), did not guarantee the senior subordinated notes (the “Subsidiary Non-Guarantors”). The claims of creditors of the Subsidiary Non-Guarantors have priority

-24-

over the rights of Emmis to receive dividends or distributions from such subsidiaries.

     Presented below is condensed consolidating financial information for the Emmis Communications Corporation (ECC) Parent Company Only, Emmis Operating Company (EOC) Parent Company Only (issuer of the senior subordinated notes), the Subsidiary Guarantors and the Subsidiary Non-Guarantors as of February 28, 2006 and August 31, 2006 and for the three-month and six-month periods ended August 31, 2005 and 2006. Emmis uses the equity method in both of its Parent Company Only information with respect to investments in subsidiaries.

-25-

Emmis Communications Corporation

As of August 31, 2006
Condensed Consolidating Balance Sheet
(Unaudited)

													Eliminations
	ECC Parent			EOC Parent						Subsidiary			and
	Company			Company			Subsidiary			Non-			Consolidating
	Only			Only			Guarantors			Guarantors			Entries			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	—		$	182,776		$	2,219		$	9,695		$	—		$	194,690
Accounts receivable, net		—			—			61,021			14,174			—			75,195
Prepaid expenses		—			2,283			13,077			1,194			—			16,554
Other		—			836			1,070			306			—			2,212
Deferred tax assets — current		—			1,653			—			—			—			1,653
Current assets — discontinued operations		—			—			13,863			—			—			13,863
Total current assets		—			187,548			91,250			25,369			—			304,167
Property and equipment, net		—			23,252			27,566			10,510			—			61,328
Intangible assets, net		—			—			781,804			133,179			—			914,983
Investment in affiliates		498,224			1,025,212			—			—			(1,523,436	)		—
Other assets, net		—			54,050			4,848			1,535			(18,477	)		41,956
Noncurrent assets — discontinued operations		—			—			87,179			—			—			87,179
Total assets	$	498,224		$	1,290,062		$	992,647		$	170,593		$	(1,541,913	)	$	1,409,613
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	—		$	5,609		$	7,746		$	19,426		$	(14,789	)	$	17,992
Current maturities of long-term debt		—			381,750			—			1,370			(372	)		382,748
Accrued salaries and commissions		—			871			6,640			884			—			8,395
Accrued interest		—			8,145			—			—			—			8,145
Deferred revenue		—			—			13,104			—			—			13,104
Other		1,123			7,684			801			457			—			10,065
Current liabilities — discontinued operations		—			—			10,056			—			—			10,056
Total current liabilities		1,123			404,059			38,347			22,137			(15,161	)		450,505
Long-term debt, net of current maturities		—			143,250			—			—			—			143,250
Other long-term debt, net of current maturities		—			—			4			6,646			(3,316	)		3,334
Other noncurrent liabilities		—			26,072			1,798			74			—			27,944
Minority interest		—			—			—			50,180			—			50,180
Deferred income taxes		—			177,241			—			—			—			177,241
Noncurrent liabilities — discontinued operations		—			—			18,842			—			—			18,842
Total liabilities		1,123			750,622			58,991			79,037			(18,477	)		871,296
PREFERRED STOCK		143,750			—			—			—			—			143,750
SHAREHOLDERS’ EQUITY:
Common stock		372			498,224			—			—			(498,224	)		372
Additional paid-in capital		520,065			—			—			—			—			520,065
Subsidiary investment		—			—			(29,801	)		128,637			(98,836	)		—
Retained earnings/(accumulated deficit)		(167,086	)		42,963			963,457			(33,008	)		(930,449	)		(124,123	)
Accumulated other comprehensive income (loss)		—			(1,747	)		—			(4,073	)		4,073			(1,747	)
Total shareholders’ equity		353,351			539,440			933,656			91,556			(1,523,436	)		394,567
Total liabilities and shareholders’ equity	$	498,224		$	1,290,062		$	992,647		$	170,593		$	(1,541,913	)	$	1,409,613

-26-

Emmis Communications Corporation

Condensed Consolidating Balance Sheet
As of February 28, 2006
(Unaudited)

												Eliminations
	ECC Parent			EOC Parent					Subsidiary			and
	Company			Company			Subsidiary		Non-			Consolidating
	Only			Only			Guarantors		Guarantors			Entries			Consolidated
CURRENT ASSETS:
Cash and cash equivalents	$	—		$	129,701		$	3,714	$	7,407		$	—		$	140,822
Accounts receivable, net		—			—			54,618		10,756			—			65,374
Prepaid expenses		—			1,197			14,491		917			—			16,605
Program rights		—			—			—		—			—			—
Other		—			931			2,335		823			—			4,089
Deferred tax assets — current		—			6,083			—		—			—			6,083
Current assets — discontinued operations		—			—			22,233		—			—			22,233
Total current assets		—			137,912			97,391		19,903			—			255,206
Property and equipment, net		—			24,469			29,327		10,765			—			64,561
Intangible assets, net		—			—			782,057		135,094			—			917,151
Investment in affiliates		618,267			1,146,540			—		—			(1,764,807	)		—
Other assets, net		2,672			54,762			3,617		1,565			(17,749	)		44,867
Noncurrent assets — discontinued operations		—			—			230,916		—			—			230,916
Total assets	$	620,939		$	1,363,683		$	1,143,308	$	167,327		$	(1,782,556	)	$	1,512,701
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	—		$	10,520		$	8,349	$	18,401		$	(12,012	)	$	25,258
Current maturities of long-term debt		121,406			6,750			—		1,385			(366	)		129,175
Current portion of TV program rights payable		—			—			—		—			—			—
Accrued salaries and commissions		—			4,092			6,922		843			—			11,857
Accrued interest		1,279			8,282			—		—			—			9,561
Deferred revenue		—			—			13,581		—			—			13,581
Other		1,123			3,263			1,330		324			—			6,040
Current liabilities — discontinued operations		—			—			26,431		—			—			26,431
Total current liabilities		123,808			32,907			56,613		20,953			(12,378	)		221,903
Long-term debt, net of current maturities		—			664,424			—		—			—			664,424
Other long-term debt, net of current maturities		—			—			20		8,871			(5,371	)		3,520
TV program rights payable, net of current portion		—			—			—		—			—			—
Other noncurrent liabilities		—			2,509			747		40			—			3,296
Minority interest		—			—			—		48,465			—			48,465
Deferred income taxes		—			127,228			—		—			—			127,228
Noncurrent liabilities — discontinued operations		—			—			28,386		—			—			28,386
Total liabilities		123,808			827,068			85,766		78,329			(17,749	)		1,097,222
PREFERRED STOCK		143,750			—			—		—			—			143,750
SHAREHOLDERS’ EQUITY:
Common stock		371			618,267			—		—			(618,267	)		371
Additional paid-in capital		513,879			—			—		—			—			513,879
Subsidiary investment		—			—			275,907		128,089			(403,996	)		—
Retained earnings/(accumulated deficit)		(160,869	)		(79,698	)		781,635		(35,469	)		(746,166	)		(240,567	)
Accumulated other comprehensive loss		—			(1,954	)		—		(3,622	)		3,622			(1,954	)
Total shareholders’ equity		353,381			536,615			1,057,542		88,998			(1,764,807	)		271,729
Total liabilities and shareholders’ equity	$	620,939		$	1,363,683		$	1,143,308	$	167,327		$	(1,782,556	)	$	1,512,701

-27-

Emmis Communications Corporation

Condensed Consolidating Statement of Operations
For the Three–month Period Ended August 31, 2006
(Unaudited)

												Eliminations
	ECC Parent			EOC Parent					Subsidiary			and
	Company			Company			Subsidiary		Non-			Consolidating
	Only			Only			Guarantors		Guarantors			Entries			Consolidated
Net revenues	$	—		$	207		$	82,488	$	17,214		$	—		$	99,909
Operating expenses:
Station operating expenses		—			173			55,256		10,954			—			66,383
Corporate expenses		—			8,292			—		—			—			8,292
Depreciation and amortization		—			662			1,233		1,328			—			3,223
Loss on disposal of assets		—			—			3		—			—			3
Total operating expenses		—			9,127			56,492		12,282			—			77,901
Operating income (loss)		—			(8,920	)		25,996		4,932			—			22,008
Other income (expense)
Interest expense		—			(11,476	)		—		(213	)		135			(11,554	)
Loss on debt extinguishment		—			(537	)		—		—			—			(537	)
Other income (expense), net		—			204			237		(210	)		211			442
Total other income (expense)		—			(11,809	)		237		(423	)		346			(11,649	)
Income (loss) before income taxes, minority interest and discontinued operations		—			(20,729	)		26,233		4,509			346			10,359
Provision (benefit) for income taxes		—			2,758			—		1,775			—			4,533
Minority interest expense, net of tax		—			—			—		1,551			—			1,551
Income (loss) from continuing operations		—			(23,487	)		26,233		1,183			346			4,275
Income (loss) from discontinued operations, net of tax		—			—			108,007		—			—			108,007
Equity in earnings (loss) of subsidiaries		—			135,769			—		—			(135,769	)		—
Net income (loss)		—			112,282			134,240		1,183			(135,423	)		112,282
Preferred stock dividends		2,246			—			—		—			—			2,246
Net income (loss) available to common shareholders	$	(2,246	)	$	112,282		$	134,240	$	1,183		$	(135,423	)	$	110,036

-28-

Emmis Communications Corporation

Condensed Consolidating Statement of Operations
For the Six–month Period Ended August 31, 2006
(Unaudited)

													Eliminations
	ECC Parent			EOC Parent						Subsidiary			and
	Company			Company			Subsidiary			Non-			Consolidating
	Only			Only			Guarantors			Guarantors			Entries			Consolidated
Net revenues	$	—		$	461		$	157,132		$	32,103		$	—		$	189,696
Operating expenses:
Station operating expenses		—			351			108,266			21,402			—			130,019
Corporate expenses		—			15,179			—			—			—			15,179
Depreciation and amortization		—			1,341			2,475			2,682			—			6,498
Loss on disposal of assets		—			—			3			—			—			3
Total operating expenses		—			16,871			110,744			24,084			—			151,699
Operating income (loss)		—			(16,410	)		46,388			8,019			—			37,997
Other income (expense)
Interest expense		(295	)		(23,663	)		(2	)		(566	)		410			(24,116	)
Loss on debt extinguishment		(2,753	)		(627	)		—			—			—			(3,380	)
Other income (expense), net		125			327			466			(357	)		224			785
Total other income (expense)		(2,923	)		(23,963	)		464			(923	)		634			(26,711	)
Income (loss) before income taxes, minority interest and discontinued operations		(2,923	)		(40,373	)		46,852			7,096			634			11,286
Provision (benefit) for income taxes		(1,198	)		3,843			—			1,913			—			4,558
Minority interest expense, net of tax		—			—			—			2,722			—			2,722
Income (loss) from continuing operations		(1,725	)		(44,216	)		46,852			2,461			634			4,006
Income (loss) from discontinued operations, net of tax		—			—			116,930			—			—			116,930
Equity in earnings (loss) of subsidiaries		—			166,877			—			—			(166,877	)		—
Net income (loss)		(1,725	)		122,661			163,782			2,461			(166,243	)		120,936
Preferred stock dividends		4,492			—			—			—			—			4,492
Net income (loss) available to common shareholders	$	(6,217	)	$	122,661		$	163,782		$	2,461		$	(166,243	)	$	116,444

-29-

Emmis Communications Corporation

Condensed Consolidating Statement of Operations
For the Three–month Period Ended August 31, 2005
(Unaudited)

													Eliminations
	ECC Parent			EOC Parent						Subsidiary			and
	Company			Company			Subsidiary			Non-			Consolidating
	Only			Only			Guarantors			Guarantors			Entries			Consolidated
Net revenues	$	—		$	270		$	88,596		$	15,788		$	—		$	104,654
Operating expenses:
Station operating expenses		—			280			54,145			10,452			—			64,877
Corporate expenses		—			7,958			—			—			—			7,958
Depreciation and amortization		—			1,618			1,454			1,185			—			4,257
(Gain) loss on disposal of assets		—			—			(8	)		—			—			(8	)
Total operating expenses		—			9,856			55,591			11,637			—			77,084
Operating income (loss)		—			(9,586	)		33,005			4,151			—			27,570
Other income (expense)
Interest expense		(7,440	)		(10,765	)		1			(444	)		307			(18,341	)
Other income (expense), net		—			(92	)		237			(707	)		752			190
Total other income (expense)		(7,440	)		(10,857	)		238			(1,151	)		1,059			(18,151	)
Income (loss) before income taxes, minority interest and discontinued operations		(7,440	)		(20,443	)		33,243			3,000			1,059			9,419
Provision (benefit) for income taxes		(3,049	)		7,326			—			(118	)		—			4,159
Minority interest expense, net of tax		—			—			—			1,634			—			1,634
Income (loss) from continuing operations		(4,391	)		(27,769	)		33,243			1,484			1,059			3,626
Income from discontinued operations, net of tax		—			—			4,804			—			—			4,804
Equity in earnings (loss) of subsidiaries		—			40,590			—			—			(40,590	)		—
Net income (loss)		(4,391	)		12,821			38,047			1,484			(39,531	)		8,430
Preferred dividends		2,246			—			—			—			—			2,246
Net income (loss) available to common shareholders	$	(6,637	)	$	12,821		$	38,047		$	1,484		$	(39,531	)	$	6,184

-30-

Emmis Communications Corporation
Condensed Consolidating Statement of Operations
For the Six–month Period Ended August 31, 2005
(Unaudited)

													Eliminations
	ECC Parent			EOC Parent						Subsidiary			and
	Company			Company			Subsidiary			Non-			Consolidating
	Only			Only			Guarantors			Guarantors			Entries			Consolidated
Net revenues	$	—		$	557		$	168,893		$	27,585		$	—		$	197,035
Operating expenses:
Station operating expenses		—			440			105,479			19,689			—			125,608
Corporate expenses		—			16,561			—			—			—			16,561
Depreciation and amortization		—			3,244			2,884			1,925			—			8,053
(Gain) loss on disposal of assets		—			—			45			—			—			45
Total operating expenses		—			20,245			108,408			21,614			—			150,267
Operating income (loss)		—			(19,688	)		60,485			5,971			—			46,768
Other income (expense)
Interest expense		(7,481	)		(20,859	)		(3	)		(829	)		586			(28,586	)
Other income (expense), net		—			(507	)		586			(1,404	)		1,488			163
Total other income (expense)		(7,481	)		(21,366	)		583			(2,233	)		2,074			(28,423	)
Income (loss) before income taxes, minority interest and discontinued operations		(7,481	)		(41,054	)		61,068			3,738			2,074			18,345
Provision (benefit) for income taxes		(3,066	)		10,392			—			721			—			8,047
Minority interest expense, net of tax		—			—			—			2,419			—			2,419
Income (loss) from continuing operations		(4,415	)		(51,446	)		61,068			598			2,074			7,879
Income (loss) from discontinued operations, net of tax		—			—			10,929			—			—			10,929
Equity in earnings (loss) of subsidiaries		—			74,669			—			—			(74,669	)		—
Net income (loss)		(4,415	)		23,223			71,997			598			(72,595	)		18,808
Preferred dividends		4,492			—			—			—			—			4,492
Net income (loss) available to common shareholders	$	(8,907	)	$	23,223		$	71,997		$	598		$	(72,595	)	$	14,316

-31-

Emmis Communications Corporation
Condensed Consolidating Statement of Cash Flows
For the Six-month Period Ended August 31, 2006
(Unaudited)

													Eliminations
	ECC Parent			EOC Parent						Subsidiary			and
	Company			Company			Subsidiary			Non-			Consolidating
	Only			Only			Guarantors			Guarantors			Entries			Consolidated
OPERATING ACTIVITIES:
Net income (loss)	$	(1,725	)	$	122,661		$	163,782		$	2,461		$	(166,243	)	$	120,936
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities —
Discontinued operations		—			—			(116,930	)		—			—			(116,930	)
Depreciation and amortization		11			2,097			2,475			2,682			—			7,265
Accretion of interest on senior discount notes and amortization of related debt costs		8			—			—			—			—			8
Minority interest expense		—			—			—			2,722			—			2,722
Provision for bad debts		—			—			1,447			—			—			1,447
Provision for deferred income taxes		(1,198	)		(26,728	)		—			1,913			—			(26,013	)
Noncash compensation		—			2,565			1,966			—			—			4,531
Loss on debt extinguishment		2,753			627			—			—			—			3,380
Equity in earnings of subsidiaries		—			(166,877	)		—			—			166,877			—
Other		—			—			3			634			(634	)		3
Changes in assets and liabilities —
Accounts receivable		—			—			(7,850	)		(3,506	)		—			(11,356	)
Prepaid expenses and other current assets		—			3,439			(1,766	)		121			—			1,794
Other assets		(92	)		(655	)		(1,290	)		33			728			(1,276	)
Accounts payable and accrued liabilities		(1,279	)		(6,449	)		(987	)		1,054			(2,783	)		(10,444	)
Deferred revenue		—			—			(477	)		—			—			(477	)
Income taxes		—			29,997			—			—			—			29,997
Other liabilities		—			(2,013	)		(947	)		(2,702	)		2,055			(3,607	)
Net cash provided by operating activities — discontinued operations		—			—			11,467			—			—			11,467
Net cash provided by (used in) operating activities		(1,522	)		(41,336	)		50,893			5,412			—			13,447
INVESTING ACTIVITIES:
Purchases of property and equipment		—			(124	)		(690	)		(343	)		—			(1,157	)
Cash paid for acquisitions		—			—			—			—			—			—
Deposits and other		—			302			—			—			—			302
Net cash provided by investing activities — discontinued operations		—			—			314,050			—			—			314,050
Net cash provided by (used in) investing activities		—			178			313,360			(343	)		—			313,195
FINANCING ACTIVITIES:
Payments on long-term debt		(121,406	)		(160,682	)		—			—			—			(282,088	)
Proceeds from long-term debt		—			14,500			—			—			—			14,500
Premiums paid to redeem outstanding debt obligations		(88	)		—			—			—			—			(88	)
Proceeds from exercise of stock options and employee stock purchases		150			—			—			—			—			150
Preferred stock dividends paid		(4,492	)		—			—			—			—			(4,492	)
Settlement of tax withholding obligations on stock issued to employees		(716	)		—			—			—			—			(716	)
Intercompany, net		128,051			240,415			(365,748	)		(2,718	)		—			—
Other		23			—			—			—			—			23
Net cash provided by (used in) financing activities		1,522			94,233			(365,748	)		(2,718	)		—			(272,711	)
Effect of exchange rate on cash and cash equivalents		—			—			—			(63	)		—			(63	)
DECREASE IN CASH AND CASH EQUIVALENTS		—			53,075			(1,495	)		2,288			—			53,868
CASH AND CASH EQUIVALENTS:
Beginning of period		—			129,701			3,714			7,407			—			140,822
End of period	$	—		$	182,776		$	2,219		$	9,695		$	—		$	194,690

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Emmis Communications Corporation
Condensed Consolidating Statement of Cash Flows
For the Six-month Period Ended August 31, 2005
(Unaudited)

													Eliminations
	ECC Parent			EOC Parent						Subsidiary			and
	Company			Company			Subsidiary			Non-			Consolidating
	Only			Only			Guarantors			Guarantors			Entries			Consolidated
OPERATING ACTIVITIES:
Net income (loss)	$	(4,415	)	$	23,223		$	71,997		$	598		$	(72,595	)	$	18,808
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities —
Discontinued operations		—			—			(10,929	)		—			—			(10,929	)
Depreciation and amortization		254			4,090			2,885			1,925			—			9,154
Accretion of interest on senior discount notes and amortization of related debt costs		81			—			—			—			—			81
Minority interest expense		—			—			1,615			804			—			2,419
Provision for bad debts		—			—			1,435			—			—			1,435
Provision (benefit) for deferred income taxes		(3,066	)		10,980			(621	)		721			—			8,014
Noncash compensation		—			3,690			1,719			113			—			5,522
Equity in earnings of subsidiaries		—			(74,669	)		—			—			74,669			—
Other		—			—			45			2,074			(2,074	)		45
Changes in assets and liabilities —																	—
Accounts receivable		—			—			(14,942	)		(3,398	)		—			(18,340	)
Prepaid expenses and other current assets		—			1,653			79			250			—			1,982
Other assets		(8,522	)		9,816			933			(1,225	)		—			1,002
Accounts payable and accrued liabilities		—			6,888			(2,537	)		2,026			—			6,377
Deferred revenue		—			—			307			—			—			307
Other liabilities		—			523			(3,468	)		37			—			(2,908	)
Net cash provided from operating activities — discontinued operations		—			—			25,566			—			—			25,566
Net cash provided by (used in) operating activities		(15,668	)		(13,806	)		74,084			3,925			—			48,535
INVESTING ACTIVITIES:
Purchases of property and equipment		—			(214	)		(4,228	)		(747	)		—			(5,189	)
Cash paid for acquisitions		—			—			—			(12,563	)		—			(12,563	)
Deposits and other		—			(60	)		—			—			—			(60	)
Net cash used in investing activities — discontinued operations		—			—			(6,453	)		—			—			(6,453	)
Net cash used in investing activities		—			(274	)		(10,681	)		(13,310	)		—			(24,265	)
FINANCING ACTIVITIES:
Payments on long-term debt		—			(87,875	)		—			—			—			(87,875	)
Proceeds from long-term debt		350,000			135,000			—			—			—			485,000
Purchases of the Company’s Class A Common Stock		(396,737	)		—			—			—			—			(396,737	)
Proceeds from exercise of stock options		2,925			—			—			—			—			2,925
Preferred stock dividends paid		(4,492	)		—			—			—			—			(4,492	)
Settlement of tax withholding obligations on stock issued to employees		(1,105	)		—			—			—			—			(1,105	)
Intercompany, net		65,077			(10,631	)		(66,263	)		11,817			—			—
Debt related costs		—			(10,531	)		—			—			—			(10,531	)
Net cash provided by (used in) financing activities		15,668			25,963			(66,263	)		11,817			—			(12,815	)
Effect of exchange rate on cash and cash equivalents		—			—			—			(732	)		—			(732	)
DECREASE IN CASH AND CASH EQUIVALENTS		—			11,883			(2,860	)		1,700			—			10,723
CASH AND CASH EQUIVALENTS:
Beginning of period		—			3,688			6,173			6,193			—			16,054
End of period	$	—		$	15,571		$	3,313		$	7,893		$	—		$	26,777

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Note 9. Regulatory, Legal and Other Matters

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

     During the Company’s fiscal quarter ended August 31, 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 have requested that the FCC reconsider the 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. These challenges are currently pending before the Commission, but Emmis does not expect the challenges to result in any changes to the consent decree or in the denial of any license renewals.

     In January 2005, we received the first of several subpoenas from the Office of Attorney General of the State of New York, as have some of the other radio broadcasting companies operating in the State of New York. The subpoenas were issued in connection with the New York Attorney General’s investigation of record company promotional practices. We are cooperating with this investigation. We do not expect that the outcome of this matter would have a material impact on our 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.

     In connection with Emmis Chairman and CEO Jeffrey H. Smulyan’s non-binding proposal to purchase the outstanding common equity of the Company, a consolidated lawsuit was filed in Marion County (Indiana) Superior Court on behalf of Emmis shareholders seeking injunctive relief and damages in connection with the offer, as well as class action status. The Company believes the withdrawal of the proposal makes the lawsuit moot.

Note 10. Subsequent Events

     On September 18, 2006, the Company announced that its Board of Directors had authorized Emmis management to take the necessary steps to enable the Board to declare a special cash dividend of $4 per share payable pro rata to all holders of the Company’s common stock. On September 21, 2006, Emmis announced that Emmis Operating Company had commenced an offer to purchase, at par, $339.6 million of the outstanding 6 7/8% Senior Subordinated Notes (the “Notes”) due 2012 pursuant to an asset sale offer required under the indenture for a portion of the Notes and a separate tender offer for the balance of the Notes. The Notes have been classified as current as of August 31, 2006 in the accompanying condensed consolidated balance sheet as a result of the purchase offers. The Company expects to complete these transactions by the end of its quarter ending November 30, 2006.

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

Note: Certain statements included in this report or in the financial statements contained herein which are not statements of historical fact, including but not limited to those identified with the words “expect,” “should,” “will” or “look” are intended to be, and are, by this Note, identified as “forward-looking statements,” as defined in the Securities and Exchange Act of 1934, as amended. Such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future result, performance or achievement expressed or implied by such forward-looking statement. Such factors include, among others:

• general economic and business conditions;

• fluctuations in the demand for advertising and demand for different types of advertising media;

• our ability to service our outstanding debt;

• loss of key personnel;

• increased competition in our markets and the broadcasting industry;

• our ability to attract and secure programming, on-air talent, writers and photographers;

• inability to obtain (or to obtain timely) necessary approvals for purchase or sale transactions or to complete the transactions for other reasons generally beyond our control;

• increases in the costs of programming, including on-air talent;

• inability to grow through suitable acquisitions;

• new or changing regulations of the Federal Communications Commission or other governmental agencies;

• competition from new or different technologies;

• war, terrorist acts or political instability; and

• other factors mentioned in other documents filed by the Company with the Securities and Exchange Commission.

Emmis does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.

GENERAL

     We own and operate radio, television and publishing properties located primarily in the United States. In the quarter ended August 31, 2005, we classified our television assets as held for sale (see Note 1 to the accompanying condensed consolidated financial statements for more discussion). 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. Broadcast entities’ ratings are measured principally four times a year by Arbitron Radio Market Reports for radio stations and by A.C. Nielsen Company for television stations. Because audience ratings in a station’s local market are critical to the station’s financial success, our strategy is to use market research and 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. Our television division’s revenues (classified as discontinued operations) typically fluctuate from year to year due to political spending, which is the highest in our odd-numbered fiscal years.

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     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 the three-month and six-month periods ended August 31, 2005 and 2006. 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.

	Three Months Ended August 31,										Six Months Ended August 31,
	2005		% of Total			2006		% of Total			2005		% of Total			2006		% of Total
			(Dollars in thousands)										(Dollars in thousands)
Net revenues:
Local	$	67,544		64.5	%	$	62,876		62.9	%	$	130,391		66.2	%	$	124,061		65.4	%
National		17,025		16.3	%		18,516		18.5	%		32,324		16.4	%		33,548		17.7	%
Political		5		0.0	%		19		0.0	%		15		0.0	%		39		0.0	%
Publication Sales		4,393		4.2	%		2,973		3.0	%		9,175		4.7	%		7,313		3.9	%
Non Traditional		11,137		10.6	%		9,663		9.7	%		16,158		8.2	%		13,221		7.0	%
Other		4,550		4.4	%		5,862		5.9	%		8,972		4.5	%		11,514		6.0	%
Total net revenues	$	104,654				$	99,909				$	197,035				$	189,696

     As previously mentioned, we derive more than 80% of our net revenues from advertising sales. Our radio stations derive a higher percentage of their advertising revenues from local and regional sales than our publishing entities. In the six-month period ended August 31, 2006, local and regional sales, excluding political revenues, represented approximately 83% and 61% of our advertising revenues for our radio and publishing divisions, respectively. In the six-month period ended August 31, 2005, local and regional sales, excluding political revenues, represented approximately 84% and 61% of our advertising revenues for our radio and publishing divisions, respectively.

     No customer represents more than 10% of our consolidated net revenues. Our top ten categories for radio represent approximately 63% of the total advertising net revenues. The automotive industry is the largest category for radio, representing approximately 13% of the radio segment’s advertising net revenues in the six-month period ended August 31, 2006.

     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.

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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 advertisers that satellite radio and MP3 players diminish the effectiveness of radio advertising.

     The radio industry has begun several initiatives to address these issues. The radio industry has begun the rollout of HD Radio digital broadcasting. Music transmitted in HD sounds noticeably better than the current analogue broadcasts. Further, compression technology enables radio operators to offer second and possibly third or fourth digital program streams within each operator’s existing allotted bandwidth. This will essentially increase the number of radio programming alternatives available to listeners in each radio market and enable radio operators to offer a broader selection of free music and other format choices. 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 digital program streams in each radio market to ensure a more diverse consumer offering and to accelerate the rollout of HD receivers, particularly in automobiles. In recent months, broadcasters have begun to aggressively promote HD radio on their analogue signals to increase consumer awareness of the technology. These industry efforts are in addition to the independent decisions of many radio operators to dramatically reduce the number of commercials aired per hour, which serves the dual purpose of creating a more enjoyable experience for listeners plus creating a more favorable pricing environment due to a reduction in the supply of commercial inventory.

     Our two radio stations in Los Angeles have suffered significant ratings declines, which has led to a decline in revenues of the stations. KPWR-FM has been negatively affected by direct format competition. The Company’s second Los Angeles station, KMVN-FM (formerly KZLA-FM) recently switched its format from Country to Rhythmic/Pop Contemporary. The targeted demographic of the Rhythmic/Pop Contemporary format is much larger in Los Angeles than the Country format, and should give the station a much broader audience base. However, the format change has led to substantial revenue and operating income declines which will continue throughout the remainder of the fiscal year. Also, our three radio stations in New York have been adversely affected by the decline in radio advertising revenue in the entire New York market and by a decline in station ratings. Our New York ratings have declined primarily due to increased competition in the formats of our stations. We have invested resources in promoting our Los Angeles and New York stations to recapture lost ratings and revenues. Recent ratings information indicates that our stations’ ratings are improving.

     Emmis is in the process of divesting all of its television stations. The decision to explore strategic alternatives for the Company’s television assets stemmed from the Company’s desire to lower its debt, coupled with the Company’s view that, in order to be successful in the long term, television stations need to be aligned with a company that is larger and more singularly focused on the challenges of American television, including digital video recorders and the industry’s relationship with cable and satellite providers. As of August 31, 2006, Emmis has closed on sales of fourteen of its sixteen television stations, receiving gross proceeds of approximately $1.14 billion. Emmis expects to sell KGMB-TV in Honolulu, Hawaii and WVUE-TV in New Orleans, Louisiana in the next three to twelve months.

     On September 18, 2006, the Company announced that its Board of Directors had authorized Emmis management to take the necessary steps to enable the Board to declare a special cash dividend of $4 per share payable pro rata to all holders of the Company’s common stock. On September 21, 2006, Emmis announced that Emmis Operating Company had commenced an offer to purchase, at par, $339.6 million of the outstanding 6 7/8%

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Senior Subordinated Notes (the “Notes”) due 2012 pursuant to an asset sale offer required under the indenture for a portion of the Notes and a separate tender offer for the balance of the Notes. The Notes have been classified as current as of August 31, 2006 in the accompanying condensed consolidated balance sheet as a result of the purchase offer. The Company expects to complete these transactions by the end of its quarter ending November 30, 2006. If consummated, the repurchase of the Notes will be funded by using available cash on hand coupled with additional borrowings under the Company’s credit facility and the proposed special dividend will be funded under an amended and restated credit facility.

     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.

ACCOUNTING PRONOUNCEMENTS

     On September 8, 2006, the Financial Accounting Standards Board issued FASB Staff Position AUG AIR-1, Accounting For Planned Major Maintenance Activities, that eliminates the acceptability of the accrue-in-advance method of accounting for planned major maintenance activities. This staff position is effective for the Company as of March 1, 2007 and requires retrospective restatement of prior period results. Early adoption of this pronouncement is precluded for the Company. The Company has been accruing for planned major maintenance activities associated with a leased airplane under the accrue-in-advance method. The Company is currently evaluating this FASB Staff Position and its effect on the Company’s financial position, results of operations and cash flows.

FIN No. 48

     On July 13, 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48, Accounting For Uncertainty In Income Taxes [FIN No. 48], that provides guidance on the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions that a company has taken or expects to take on a tax return. Under FIN No. 48, financial statements should reflect expected future tax consequences of such positions presuming the taxing authorities have full knowledge of the position and all relevant facts. The interpretation also revises the disclosure requirements and is effective for the Company as of March 1, 2007. The Company is currently evaluating FIN No. 48 and its effect on the Company’s financial position, results of operations and cash flows.

SFAS 123R

     The Company adopted the fair value recognition provisions of Statement No. 123R, on March 1, 2006, using the modified-prospective-transition method. The fair value of the options is estimated using a Black-Scholes option-pricing model at the date of grant and expensed on a straight-line basis over the vesting period. Prior to adoption of Statement No. 123R, the Company accounted for share based payments under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related Interpretations, as permitted by Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“Statement No. 123”). The Company did not recognize employee compensation cost related to its stock option grants in its consolidated statements of operations for the three years ended February 28, 2006 (prior to adoption of Statement No. 123R), as all options vesting during those three years had an exercise price equal to the market value of the underlying common stock on the date of grant.

     The amounts recorded as share based payments prior to adopting Statement No. 123R primarily related to

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the expense associated with restricted common stock issued under employment agreements, common stock issued to employees in lieu of cash bonuses, Company matches of common stock in our 401(k) plans and common stock issued to employees in exchange for cash compensation pursuant to our stock compensation program. Under the modified-prospective-transition method, compensation cost recognized beginning in our fiscal year ending February 28, 2007 includes the above items and (a) compensation cost for all share-based payments granted on or after March 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of Statement No. 123R and (b) compensation cost associated with our employee stock purchase plan, which qualified as a noncompensatory plan under APB 25. Results for prior periods have not been restated. The Company accelerated the vesting of substantially all outstanding option awards that would have otherwise vested in fiscal 2007 and beyond. Consequently, the Company has an immaterial amount of share-based payment expense associated with stock options granted prior to March 1, 2006 that vests on or after March 1, 2006.

     As a result of adopting Statement No. 123R, the Company’s income before income taxes, minority interest and discontinued operations for the three-month and six-month periods ended August 31, 2006, was $0.4 million and $0.8 million lower, respectively, than if it had continued to account for share-based compensation under APB 25. The Company’s net income for the three-month and six-month periods ended August 31, 2006, was $0.2 million and $0.5 million lower, respectively, than if it had continued to account for share-based compensation under APB 25. Basic and diluted loss per share from continuing operations available to common shareholders for the three month and six-month periods ended August 31, 2006 was $0.01 lower, respectively, than if the Company had continued to account for share based compensation under APB 25. The impact of adopting Statement No. 123R in the current year was minimized by the Company accelerating the vesting of substantially all unvested options in the fourth quarter of fiscal 2006. The Company accelerated the vesting of the unvested stock options to avoid recognizing the expense in future financial statements after the adoption of SFAS No. 123R.

     The Company began granting restricted stock awards to employees and directors of the Company in lieu of stock option grants in 2005. These awards hold a legend which restricts their transferability for a term of from two to three years and are forfeited, except in certain circumstances, in the event the employee terminates his or her employment or relationship with the Company prior to the lapse of the restriction. The restricted stock awards were granted out of the Company’s 2004 Equity Incentive Plan. The Company also issues stock to settle certain bonuses that otherwise would be paid in cash. Any restrictions on these shares are immediately lapsed on the grant date.

     As of August 31, 2006, there was $6.5 million of unrecognized compensation cost related to nonvested share-based compensation arrangements. The cost is expected to be recognized over a weighted average period of approximately 2.4 years.

CRITICAL ACCOUNTING POLICIES

     Critical accounting policies are defined as those that encompass significant judgments and uncertainties, and potentially lead to 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 Statement 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 Statement No. 142 to the extent we do not achieve our expected cash flow growth

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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 within Emmis 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 $1.6 million accrued for employee healthcare claims as of February 28, 2006 and August 31, 2006, respectively. 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 claims.

 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 of its stock price when determining expected volatility, but each year the Company reassesses whether or not historical data is representative of expected results.

Results of Operations for the Three-month and Six-month Periods Ended August 31, 2006 Compared to August 31, 2005

Net revenue pro forma reconciliation:

     Since March 1, 2005, we have acquired radio networks in Slovakia and Bulgaria. The results of our television division, our radio station sold in Phoenix and our 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.

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	Three Months Ended August 31,										Six Months Ended August 31,
	2005		2006		$ Change			% Change			2005		2006		$ Change			% Change
	(Dollars in thousands)										(Dollars in thousands)
Reported net revenues
Radio	$	83,860	$	79,132	$	(4,728	)		-5.6	%	$	156,139	$	147,926	$	(8,213	)		-5.3	%
Publishing		20,794		20,777		(17	)		-0.1	%		40,896		41,770		874			2.1	%
Total		104,654		99,909		(4,745	)		-4.5	%		197,035		189,696		(7,339	)		-3.7	%
Plus: Net revenues from stations acquired
Radio		480		—								1,752		—
Publishing		—		—								—		—
Total		480		—								1,752		—
Pro forma net revenues
Radio		84,340		79,132		(5,208	)		-6.2	%		157,891		147,926		(9,965	)		-6.3	%
Publishing		20,794		20,777		(17	)		-0.1	%		40,896		41,770		874			2.1	%
Total	$	105,134	$	99,909	$	(5,225	)		-5.0	%	$	198,787	$	189,696	$	(9,091	)		-4.6	%

     For further disclosure of segment results, see Note 7 to the accompanying condensed consolidated financial statements. For additional pro forma results, see Note 5 to the accompanying condensed consolidated financial statements.

Net revenues:

     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 radio networks in Slovakia and Bulgaria had been purchased on March 1, 2005), radio net revenues for the three-month and six-month periods ended August 31, 2006 would have decreased $5.2 million, or 6.2%, and $10.0 million, or 6.3%, respectively. 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, Arase & Co., LLP (“Miller, Kaplan”). For the three-month period ended August 31, 2006, on a pro forma basis, net revenues of our domestic radio stations were down 7.6%, whereas Miller, Kaplan reported that net revenues of our domestic radio markets were down 2.9%. For the six-month period ended August 31, 2006, on a pro forma basis, net revenues of our domestic radio stations were down 7.7%, whereas Miller, Kaplan reported that net revenues of our domestic radio markets were down 3.0%. 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, during the three-months ended August 31, 2006, we changed the format of KMVN-FM (formerly KZLA-FM) from Country to Rhythmic/Pop Contemporary. This format change negatively impacted net revenues. Our New York and Los Angeles stations account for approximately 50% of our domestic radio revenues. We are continuing to reinvest in our properties, particularly in New York and Los Angeles, through additional promotional spending, recruiting and retaining compelling on-air talent and by doing extensive research.

     Publishing net revenues for the six-month period increased principally due to the introduction of new city guides in Atlanta and Cincinnati. Also, Tu Ciudad produced one additional issue during the six-months ended August 31, 2006 versus the same period of the prior year.

     On a consolidated basis, pro forma net revenues for the three-month and six-month periods ended August 31, 2006 decreased $5.2 million, or 5.0%, and $9.1 million, or 4.6%, respectively, 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

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television division, our radio station sold in Phoenix and our 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.

	Three Months Ended August 31,										Six Months Ended August 31,
	2005		2006		$ Change			% Change			2005		2006		$ Change		% Change
	(Dollars in thousands)										(Dollars in thousands)
Reported station operating expenses
Radio	$	45,472	$	47,830	$	2,358			5.2	%	$	87,357	$	91,581	$	4,224		4.8	%
Publishing		19,405		18,553		(852	)		-4.4	%		38,251		38,438		187		0.5	%
Total		64,877		66,383		1,506			2.3	%		125,608		130,019		4,411		3.5	%
Plus: Station operating expenses from stations acquired:
Radio		363		—								1,675		—
Publishing		—		—								—		—
Total		363		—								1,675		—
Pro forma station operating expenses
Radio		45,835		47,830		1,995			4.4	%		89,032		91,581		2,549		2.9	%
Publishing		19,405		18,553		(852	)		-4.4	%		38,251		38,438		187		0.5	%
Total	$	65,240	$	66,383	$	1,143			1.8	%	$	127,283	$	130,019	$	2,736		2.1	%

     For further disclosure of segment results, see Note 7 to the accompanying condensed consolidated financial statements. For additional pro forma results, see Note 5 to the accompanying condensed consolidated financial statements.

Station operating expenses:

     Radio station operating expenses increased in the three-month and six-month periods ended August 31, 2006 as a result of increased promotional spending, particularly in New York and Los Angeles as discussed above. Additionally, a portion of the increase relates to higher programming costs associated with certain on-air talent contracts and severances booked in association with the format change at KMVN-FM as previously discussed.

     Publishing operating expenses decreased in the three-month period ended August 31, 2006 principally due to the elimination of certain specialty magazines of Country Sampler. For the six-month period, these operating expense savings are more than offset by severance expenses associated with the elimination of the specialty magazines and by a $0.2 million inventory charge related to our Emmis Books operation, both of which were incurred in our first fiscal quarter.

     On a consolidated basis, pro forma station operating expenses, for the three-month and six-month periods ended August 31, 2006 increased $1.1 million, or 1.8%, and $2.7 million, or 2.1%, respectively, due to the effect of the items described above.

Corporate expenses:

	Three Months Ended August 31,									Six Months Ended August 31,
	2005		2006		$ Change		% Change			2005		2006		$ Change			% Change
	(As reported, amounts in thousands)									(As reported, amounts in thousands)
Corporate expenses	$	7,958	$	8,292	$	334		4.2	%	$	16,561	$	15,179	$	(1,382	)		(8.3	)%

     Corporate expenses decreased during the six-months ended August 31, 2006 primarily as a result of the divestiture of the Company’s television stations. Due to the divesture of the stations, the Company made numerous staffing reductions and has delayed filling certain open positions. In the three-months ended August 31, 2006, these savings were more than offset by $2.4 million of consulting fees incurred related to the going private

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transaction as discussed in Note 4 in the accompanying condensed consolidated financial statements. In the quarter ended November 30, 2006, the Company expects to incur approximately $2 million of professional fees in connection with a special dividend payment (see Note 10 to the accompanying condensed consolidated financial statements). These costs will be expensed as incurred as a component of corporate expenses.

Depreciation and amortization:

	Three Months Ended August 31,										Six Months Ended August 31,
	2005		2006		$ Change			% Change			2005		2006		$ Change			% Change
	(As reported, amounts in thousands)										(As reported, amounts in thousands)
Depreciation and amortization:
Radio	$	2,464	$	2,393	$	(71	)		(2.9	)%	$	4,454	$	4,827	$	373			8.4	%
Publishing		175		168		(7	)		(4.0	)%		355		330		(25	)		(7.0	)%
Corporate		1,618		662		(956	)		(59.1	)%		3,244		1,341		(1,903	)		(58.7	)%
Total depreciation and amortization	$	4,257	$	3,223	$	(1,034	)		(24.3	)%	$	8,053	$	6,498	$	(1,555	)		(19.3	)%

     Substantially all of the increase in radio depreciation and amortization expense for the six-month period ended August 31, 2006 relates to the acquisition of radio networks in Slovakia and Bulgaria in March 2005 and November 2005, respectively. The decrease in corporate depreciation and amortization relates to equipment and furniture and fixtures becoming fully depreciated in the fourth quarter of fiscal 2006.

Operating income:

	Three Months Ended August 31,												Six Months Ended August 31,
	2005			2006			$ Change			% Change			2005			2006			$ Change			% Change
	(As reported, amounts in thousands)												(As reported, amounts in thousands)
Operating income:
Radio	$	35,932		$	28,906		$	(7,026	)		(19.6	)%	$	64,334		$	51,515		$	(12,819	)		(19.9	)%
Publishing		1,214			2,056			842			69.4	%		2,289			3,002			713			31.1	%
Corporate		(9,576	)		(8,954	)		622			(6.5	)%		(19,855	)		(16,520	)		3,335			(16.8	)%
Total operating income	$	27,570		$	22,008		$	(5,562	)		(20.2	)%	$	46,768		$	37,997		$	(8,771	)		(18.8	)%

     In both the three-month and six-month periods ended August 31, 2006, radio operating income decreased due to declining revenues in our New York and Los Angeles markets, coupled with higher expenses at our existing stations, as discussed above. Although we are investing heavily in our Los Angeles and New York markets, continued ratings pressure on our stations in New York and Los Angeles will be a challenge for the Company.

     In the three-month period ended August 31, 2006, publishing operating income increased principally due to operational costs savings associated with the elimination of certain specialty magazines of Country Sampler. In the six-month period August 31, 2006, publishing operating income increased due to higher revenues as a result of successful city guides in Atlanta and Cincinnati and additional revenue generated by the publishing of an additional issue of Tu Ciudad in the current year as compared to the same period of the prior year. Operating expenses in the six-month period ended August 31, 2006 were relatively flat Operational cost savings related to the elimination of specialty magazines discussed above that were mostly offset by severance expenses associated with the elimination of the specialty magazines and by a $0.2 million inventory charge related to our Emmis Books operation in our first fiscal quarter.

     On a consolidated basis in both the three-month and six-month periods ended August 31, 2006, operating income decreased due to decline in radio operating income partially offset by increases in publishing and corporate operating income, as discussed above.

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Interest expense:

	Three Months Ended August 31,										Six Months Ended August 31,
	2005		2006		$ Change			% Change			2005		2006		$ Change			% Change
	(As reported, amounts in thousands)										(As reported, amounts in thousands)
Interest expense	$	18,341	$	11,554	$	(6,787	)		(37.0	)%	$	28,586	$	24,116	$	(4,470	)		(15.6	)%

     Certain debt would have been required            to be repaid as of August 31, 2005 as a result of the disposition of the Company’s television assets. The Company allocated interest expense associated with this portion of debt to the television operations in accordance with Emerging Issues Task Force Issue 87-24 “Allocation of Interest to Discontinued Operations,” as modified. No debt would be required to be repaid as a result of the disposition of the Company’s remaining television assets as of August 31, 2006, thus no interest was allocated to television operations for the three-month or six-month periods ended August 31, 2006. The Company allocated $7.5 million and $14.3 million of interest expense to discontinued operations for the three-month and six-month periods ended August 31, 2005. Excluding the reclassification of interest expense to discontinued operations, interest expense for the three-month and six-month periods ended August 31, 2006 would have decreased $14.3 million, or 55.2%, and $18.7 million, or 43.7%, respectively. The decrease in interest expense is due to reduced levels of borrowings under the Company’s senior credit facility as a result of the application of television sale proceeds partially offset by higher interest rates on the senior credit facility.

Loss on debt extinguishment:

	Three Months Ended August 31,								Six Months Ended August 31,
	2005		2006		$ Change		% Change		2005		2006		$ Change		% Change
	(As reported, amounts in thousands)								(As reported, amounts in thousands)
Loss on debt extinguishment	$	—	$	537	$	537		N/A	$	—	$	3,380	$	3,380		N/A

     During the three-months ended May 31, 2006, the Company redeemed at 106.25% of par the remaining $1.4 million outstanding of its 12.5% senior discount notes and the remaining $120.0 million outstanding of its senior floating rate notes. In connection with these debt redemptions, the Company recorded a loss on debt extinguishment of $2.8 million. During the three-months ended August 31, 2006, the Company made repayments on its credit facility that permanently reduced availability under the facility. The Company recorded a loss on debt extinguishment of $0.5 million in connection with the permanent reduction of the credit facility.

Income before income taxes, minority interest and discontinued operations:

	Three Months Ended August 31,									Six Months Ended August 31,
	2005		2006		$ Change		% Change			2005		2006		$ Change			% Change
	(As reported, amounts in thousands)									(As reported, amounts in thousands)
Income (loss) before income taxes, minority interest and discontinued operations	$	9,419	$	10,359	$	940		10.0	%	$	18,345	$	11,286	$	(7,059	)		(38.5	)%

     The increase in the three-months ended August 31, 2006 is attributable to lower reported interest expense partially offset by lower operating income in our radio division. The decrease in the six-months ended August 31, 2006 is principally related to lower operating income in our radio division partially offset by lower reported interest expense as discussed above. In addition to these items, in the six-months ended August 31, 2006, we recorded a $3.4 million loss on debt extinguishment related to the write-off of deferred debt costs for debt issuances redeemed.

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Minority interest expense, net of tax:

	Three Months Ended August 31,										Six Months Ended August 31,
	2005		2006		$ Change			% Change			2005		2006		$ Change		% Change
	(As reported, amounts in thousands)										(As reported, amounts in thousands)
Minority interest expense, net of tax	$	1,634	$	1,551	$	(83	)		(5.1	)%	$	2,419	$	2,722	$	303		12.5	%

     Our minority interest expense principally relates to our partnership in Austin, Texas (we own 50.1%) and our radio station in Hungary (we own 59.5%).

Income from discontinued operations, net of tax:

	Three Months Ended August 31,									Six Months Ended August 31,
	2005		2006		$ Change		% Change			2005		2006		$ Change		% Change
	(As reported, amounts in thousands)									(As reported, amounts in thousands)
Income from discontinued operations, net of tax	$	4,804	$	108,007	$	103,203		2148.3	%	$	10,929	$	116,930	$	106,001		969.9	%

     Our television division, radio stations in Phoenix (including KKFR-FM), and one radio station in St. Louis have been classified as discontinued operations in the accompanying condensed consolidated statements. The financial results of these stations and related discussions are fully described in Note 1 to the accompanying condensed consolidated financial statements. Below is a summary of the components of discontinued operations:

	Three Months Ended August 31,						Six Months Ended August 31,
	2005			2006			2005			2006
Income (loss) from operations:
KKFR-FM	$	1,361		$	(384	)	$	2,300		$	537
Television		6,620			3,873			16,318			11,382
WRDA-FM		(280	)		—			(536	)		—
Phoenix		440			—			440			—
Total		8,141			3,489			18,522			11,919
Less: Provision for income taxes		3,337			1,439			7,593			5,089
Income from operations, net of tax		4,804			2,050			10,929			6,830
Gain on sale of discontinued operations:
KKFR-FM		—			19,117			—			19,117
Television		—			160,760			—			160,760
WRDA-FM		—			—			—			7,022
Total		—			179,877			—			186,899
Less: Provision for income taxes		—			73,920			—			76,799
Gain on sale of discontinued operations, net of tax		—			105,957			—			110,100
Income from discontinued operations, net of tax	$	4,804		$	108,007		$	10,929		$	116,930

     Our television station in New Orleans, Louisiana, WVUE, was significantly affected by Hurricane Katrina and the subsequent flooding. The flooding of New Orleans caused extensive property damage at WVUE. Emmis spent approximately $3.7 million on capital expenditures related to flooding restoration projects during the six-months ended August 31, 2006 and expects to spend an additional $5.0 million in the next six months to complete the restoration. During the six-months ended August 31, 2006, the Company received $5.1 million of insurance proceeds, the majority of which were advanced proceeds from the Company’s private insurer. These proceeds are in addition to the $1.0 million Federal flood insurance proceeds received in the prior year. In connection with the

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receipt of the insurance proceeds, the Company removed the carrying value of all damaged or destroyed property and recorded a $2.0 million gain on disposal of these assets which is reflected in income from discontinued operations in the accompanying condensed consolidated statements of operations. Additionally, the Company recorded a reserve against WVUE accounts receivable due to the impact of the flooding on the local economy in the quarter-ended August 31, 2005. WVUE continues to monitor the financial health of its customers and adjusts its allowance for doubtful accounts on a monthly basis. As of August 31, 2006, WVUE’s reserve for doubtful accounts was approximately $0.4 million, which represents 11% of its total outstanding accounts receivable. WVUE did not broadcast its signal for an extended period of time as a result of Katrina and the general disruption of the local economy will negatively affect ongoing advertising revenue. The Company maintains business interruption insurance and expects to be reimbursed for lost net income as a result of Katrina. Emmis has not accrued for business interruption insurance proceeds. Business interruption insurance proceeds will only be recognized upon receipt.

     On May 5, 2006, Emmis closed on its sale of WRDA-FM in St. Louis to Radio One, Inc. Emmis recorded a $4.1 million gain on the sale, net of tax, which is reflected in discontinued operations in the accompanying condensed 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, in its quarter ended August 31, 2006, which is included in discontinued operations in the accompanying condensed consolidated statement of operations.

     On July 11, 2006, Emmis closed on its sale of KKFR-FM in Phoenix 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 $11.5 million, net of tax, in its quarter ended August 31, 2006, which is included in discontinued operations in the accompanying condensed consolidated statement of operations.

     On August 31, 2006, Emmis closed on its sale of WKCF-TV in Orlando 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 $93.3 million, net of tax, in its quarter ended August 31, 2006, which is included in discontinued operations in the accompanying condensed consolidated statement of operations.

Net income:

	Three Months Ended August 31,									Six Months Ended August 31,
	2005		2006		$ Change		% Change			2005		2006		$ Change		% Change
	(As reported, amounts in thousands)									(As reported, amounts in thousands)
Net income (loss):	$	8,430	$	112,282	$	103,852		1231.9	%	$	18,808	$	120,936	$	102,128		543.0	%

     The increase in net income in the three-month and six-month periods ended August 31, 2006 is primarily attributable to the gain on sale of discontinued operations and lower interest expense partially offset by lower operating income in our radio division.

Liquidity and Capital Resources

     Our primary sources of liquidity are cash provided by operations and cash available through revolver

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borrowings under our credit facility. Our primary uses of capital have been historically, and are expected to continue to be, funding acquisitions, capital expenditures, working capital, debt service and preferred stock dividend requirements. We also have used capital to repurchase our common stock. We expect to pay a special $4 per share dividend by November 30, 2006. We may continue to return capital to shareholders via dividends or stock repurchases. Since we manage cash on a consolidated basis, any cash needs of a particular segment or operating entity are met by intercompany transactions. See Investing Activities below for a discussion of specific segment needs.

     At August 31, 2006, we had cash and cash equivalents of $194.7 million and net working capital, excluding the $375 million of senior subordinated notes classified as current maturities of long-term debt, of $228.7 million. At February 28, 2006, we had cash and cash equivalents of $140.8 million and net working capital of $33.3 million. The increase in working capital primarily relates to additional cash on hand at August 31, 2006 as a result of the closing of the sale of WKCF-TV to Hearst-Argyle Television Inc. On July 11, 2006, Emmis completed its sale of radio station 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. 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. The proceeds of the KKFR-FM and WBPG-TV transactions were used to pay outstanding indebtedness. On March 15, 2006, the Company redeemed at 106.25% of par the remaining $1.4 million outstanding of its 12.5% senior discount notes. On March 9, 2006, the Company redeemed at par the remaining $120.0 million outstanding of its senior floating rate notes. In connection with these debt redemptions, the Company recorded a loss on debt extinguishment of $2.8 million in the three-months ended May 31, 2006.

   Operating Activities

     Cash flows provided by operating activities were $13.4 million for the six-month period ended August 31, 2006 versus $48.5 million in the same period of the prior year. Cash flows provided by operating activities decreased due to lower net revenues less station operating expenses and corporate expenses, coupled with lower accounts payable and accrued liabilities due to the settlement of year-end bonus and severance obligations. Additionally, since August 31, 2005, we have sold fourteen television stations and two radio stations, which has reduced operating cash flows. Cash flows provided by operating activities are historically the highest in our third and fourth fiscal quarters as a significant portion of our accounts receivable collections is derived from revenues recognized in our second and third fiscal quarters, which are our highest revenue quarters.

   Investing Activities

     Cash flows provided by investing activities were $313.2 million for the six-month period ended August 31, 2006. Cash flows used in investing activities were $24.3 million in the same period of the prior year. In the six-month period ended August 31, 2006, we sold: (i) WRDA-FM in St. Louis, Missouri for $20.0 million in cash, (ii) WBPG-TV in Mobile, AL – Pensacola, FL for $3.0 million in cash, (iii) KKFR-FM in Phoenix, AZ for $77.6 million in cash and (iv) WKCF-TV in Orlando, FL for $217.5 million in cash. In the six-month period ended August 31, 2005, we purchased a national radio network in Slovakia for $12.6 million. Investment activities include capital expenditures and business acquisitions and dispositions.

     Capital expenditures primarily relate to leasehold improvements to various office and studio facilities, broadcast equipment purchases, tower upgrades and computer equipment replacements. In the six-month periods ended August 31, 2005 and 2006, we had capital expenditures of $5.2 million and $1.2 million, respectively. We expect capital expenditures related to continuing operations to be approximately $8.0 million in the current fiscal year, compared to $11.7 million in fiscal 2006. The decrease principally relates to an expansion of our offices in Chicago to accommodate WLUP-FM, which was completed in fiscal 2006. We expect that future requirements for

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capital expenditures will include capital expenditures incurred during the ordinary course of business and HD Radio upgrade costs. We expect to fund such capital expenditures with cash generated from operating activities and borrowings under our credit facility.

   Financing Activities

     Cash flows used in financing activities were $272.7 million for the six-month period ended August 31, 2006. Cash flows provided by investing activities were $12.8 million in the same period of the prior year. Cash flows used in financing activities in the six-months ended August 31, 2006 relate to the redemption of $120.0 million of senior floating rate notes and $1.4 million of senior discount notes. The Company also repaid $160.7 million under its senior credit facility during the six-months ended August 31, 2006.

     On September 18, 2006, the Company announced that its Board of Directors had authorized Emmis management to take the necessary steps to enable the Board to declare a special cash dividend of $4 per share payable pro rata to all holders of the Company’s common stock. Emmis then announced, on September 21, 2006, that it had commenced an offer to purchase, at par, all of the outstanding 6 7/8% Senior Subordinated Notes (the “Notes”) due 2012 pursuant to an asset sale offer required under the indenture for a portion of the Notes and a tender offer for the balance of the Notes. The Notes have been classified as current as of August 31, 2006 in the accompanying condensed consolidated balance sheet as a result of the purchase offer. In connection with the special dividend and the offer to purchase the Notes at par, the Company plans to amend and restate its senior credit facility. The Company expects to complete these transactions by the end of its quarter ending November 30, 2006. If consummated, the repurchase of the Notes will be funded by using available cash on hand coupled with additional borrowings under the Company’s credit facility and the proposed special dividend will be funded under an amended and restated credit facility.

     As of August 31, 2006, Emmis had $150 million of borrowings under its senior credit facility ($6.7 million current and $143.3 million long-term), $375 million of senior subordinated notes classified as current, $4.3 million of other indebtedness ($1.0 million current and $3.3 million long-term) and $143.8 million of convertible preferred stock outstanding. All outstanding amounts under our credit facility bear interest, at our option, at a rate equal to the Eurodollar rate or an alternative Base Rate plus a margin. As of August 31, 2006, our weighted average borrowing rate under our credit facility was approximately 7.1% and our overall weighted average borrowing rate, after taking into account amounts outstanding under our senior subordinated notes, was approximately 6.9%.

     The debt service requirements of Emmis over the next twelve-month period (excluding interest under our credit facility and principal amounts of our senior subordinated notes) are expected to be $41.6 million. This amount is comprised of $25.8 million for interest under our senior subordinated notes, $6.8 million for repayment of term notes under our credit facility and $9.0 million in preferred stock dividend requirements. Interest paid under our senior subordinated notes in the next twelve-month period is subject to the outcome of the offers to purchase the Notes at par as discussed above. Although interest will be paid under the credit facility at least every three months, the amount of interest is not presently determinable given that the credit facility bears interest at variable rates. The terms of Emmis’ preferred stock provide for a quarterly dividend payment of $.78125 per share on each January 15, April 15, July 15 and October 15.

     At October 2, 2006, we had $141.5 million available under our credit facility, which is net of $2.6 million in outstanding letters of credit, with an additional $205.9 million available for permitted acquisitions and investments that are identified by December 2006 and closed by June 2007. As part of our business strategy, we continually evaluate potential acquisitions of radio stations, publishing properties and other businesses we believe hold promise for long-term appreciation in value. If we elect to take advantage of future acquisition opportunities, we may incur additional debt or issue additional equity or debt securities, depending on market conditions and other factors. In addition, Emmis has the option, but not the obligation, to purchase our 49.9% partner’s entire

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interest in the Austin partnership in December 2007 based on an 18-multiple of trailing 12-month cash flow. If the option is exercised by Emmis, the minority partner has the right to defer this option for one year, to December 2008.

Intangibles

     Including intangible assets classified as noncurrent assets – discontinued operations in the accompanying condensed consolidated balance sheet, at August 31, 2006, approximately 70% of our total assets consisted of intangible assets, such as FCC broadcast licenses, goodwill, subscription lists and similar assets, the value of which depends significantly upon the operational results of our businesses. In the case of our U.S. radio stations, we would not be able to operate the properties without the related FCC license for each property. FCC licenses are renewed every eight years; consequently, we continually monitor our stations’ compliance with the various regulatory requirements. Historically, all of our FCC licenses have been renewed at the end of their respective periods, and we expect that all FCC licenses will continue to be renewed in the future. Our foreign broadcasting licenses expire during periods ranging from November 2009 to May 2013. We will need to submit applications to extend our foreign licenses upon their expiration to continue our broadcast operations in these countries.

Regulatory, Legal and Other Matters

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

     During the Company’s fiscal quarter ended August 31, 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 have requested that the FCC reconsider the 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. These challenges are currently pending before the Commission, but Emmis does not expect the challenges to result in any changes to the consent decree or in the denial of any license renewals.

     In January 2005, we received a subpoena from the Office of Attorney General of the State of New York, as have some of the other radio broadcasting companies operating in the State of New York. The subpoenas were issued in connection with the New York Attorney General’s investigation of record company promotional practices. We are cooperating with this investigation. We do not expect that the outcome of this matter would have a material impact on our 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 this matter, and based on information gathered, Emmis believes the claims are without merit. Litigation has not been initiated and Emmis intends to defend itself vigorously in the matter.

     In connection with Emmis Chairman and CEO Jeffrey H. Smulyan’s non-binding proposal to purchase the outstanding common equity of the Company, a consolidated lawsuit was filed in Marion County (Indiana) Superior Court on behalf of Emmis shareholders seeking injunctive relief and damages in connection with the offer, as well as class action status. The Company believes the withdrawal of the proposal makes the lawsuit moot.

     On June 13, 2006, Emmis filed a lawsuit in federal court in Indianapolis seeking damages for CBS Radio’s actions in connection with its hiring of former Emmis CFO Walter Berger. The complaint alleges that: (i) CBS

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Radio knew Berger had a valid and enforceable employment agreement with Emmis when it recruited and ultimately hired him and (ii) despite objections from Emmis, CBS Radio encouraged Berger to breach his contract by leaving Emmis in January 2006, more than three years before the contract was set to expire. Emmis also filed an arbitration action against Berger seeking damages for breach of contract, which include repayment of certain amounts paid to him under his Emmis employment agreement.

     The Company is a party to various other legal proceedings arising in the ordinary course of business. In the opinion of management of the Company, however, none of these pending legal proceedings is likely to have a material adverse effect on the Company.

Quantitative and Qualitative Disclosures About Market Risk

     As of February 28, 2006, approximately 53% of Emmis’ total outstanding debt bore interest at variable rates. As a result of the redemption of senior floating rate notes and senior discount notes in March 2006, and repayments of debt outstanding under our senior credit facility with proceeds from our various station sales during the six months ended August 31, 2006, approximately 29% of the Company’s debt as of October 2, 2006 bears interest at variable rates. Based on amounts outstanding at October 2, 2006, if the interest rate on our variable debt were to increase by 1.0%, our annual interest expense would be higher by approximately $1.5 million.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Discussion regarding these items is included in management’s discussion and analysis of financial condition and results of operations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     As of the end of the period covered by this quarterly report, the Company evaluated the effectiveness of the design and operation of its “disclosure controls and procedures” (“Disclosure Controls”). This evaluation (the “Controls Evaluation”) was performed under the supervision and with the participation of management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”).

     Based upon the Controls Evaluation, our CEO and CFO concluded that as of August 31, 2006, our Disclosure Controls are effective to provide reasonable assurance that information relating to Emmis Communications Corporation and Subsidiaries that is required to be disclosed by us in the reports that we file or submit, is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

     During the period covered by this quarterly report, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

     It should be noted that any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

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PART II — OTHER INFORMATION

Item 6. Exhibits

     (a) Exhibits.

       The following exhibits are filed or incorporated by reference as a part of this report:

10.1	Change in Control Severance Agreement, dated as of August 24, 2006, by and between Emmis Communications Corporation and Patrick Walsh.
10.2	Employment Agreement, dated as of September 4, 2006, by and between Emmis Operating Company and Patrick Walsh.
12	Statement re: Computation of Ratio of Earnings to Fixed Charges and Preferred Stock Dividends.
31.1	Certification of Principal Executive Officer of Emmis Communications Corporation pursuant to Rule 13a-14(a) under the Exchange Act.
31.2	Certification of Principal Financial Officer of Emmis Communications Corporation pursuant to Rule 13a-14(a) under the Exchange Act.
32.1	Section 1350 Certification of Principal Executive Officer of Emmis Communications Corporation.
32.2	Section 1350 Certification of Principal Financial Officer of Emmis Communications Corporation.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	EMMIS COMMUNICATIONS CORPORATION
Date: October 10, 2006	By:	/s/ PATRICK WALSH
	Patrick Walsh
	Executive Vice President, Chief Financial
	Officer and Treasurer

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EX-10.1

Exhibit 10.1

EMMIS COMMUNICATIONS CORPORATION
CHANGE IN CONTROL SEVERANCE AGREEMENT

          THIS AGREEMENT is entered into as of August 24, 2006 (the “Effective Date”) by and between EMMIS COMMUNICATIONS CORPORATION, an Indiana corporation (the “Company”), and PATRICK WALSH (“Executive”).

W I T N E S S E T H

          WHEREAS, the Company considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company and its stockholders; and

          WHEREAS, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may arise and that such possibility may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders; and

          WHEREAS, it is in the best interests of the Company and its stockholders to secure Executive’s continued services and to ensure Executive’s continued and undivided dedication to his duties in the event of any threat or occurrence of a “Change in Control” (as defined in Section 1) of the Company.

          NOW, THEREFORE, for and in consideration of the mutual covenants and agreements herein contained, the Company and Executive hereby agree as follows:

          1. Definitions. As used in this Agreement, the following terms shall have the respective meanings set forth below:

               (a) “Affiliate” means, with respect to a specified person, a person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the person specified.

               (b) “Board” means the Board of Directors of the Company.

               (c) “Bonus Amount” means the greater of (i) the highest annual incentive bonus earned by Executive from the Company (or its Affiliates) during the last three (3) completed fiscal years of the Company immediately preceding Executive’s Date of Termination (annualized in the event Executive was not employed by the Company (or its Affiliates) for the whole of any such fiscal year), or (ii) if the Date of Termination occurs before Executive has been employed for a full fiscal year, and before the date Company generally pays bonuses to its Executives for the fiscal year in which Executive’s employment commenced, the Executive’s target bonus for the fiscal year of the Company which includes the Executive’s Date of Termination.

               (d) “Cause” means (i) the willful and continued failure of Executive to perform substantially his duties with the Company (other than any such failure resulting from Executive’s incapacity due to physical or mental illness or any such

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failure subsequent to Executive being delivered a Notice of Termination without Cause by the Company or delivering a Notice of Termination for Good Reason to the Company) after a written demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed Executive’s duties; provided that Executive has not cured such failure or commenced such performance within 30 days after such demand is given to Executive, or (ii) the willful engaging by Executive in illegal conduct or gross misconduct which is demonstrably and materially injurious to the Company or its Affiliates. For purpose of the preceding sentence, no act or failure to act by Executive shall be considered “willful” unless done or omitted to be done by Executive in bad faith and without reasonable belief that Executive’s action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, based upon the advice of counsel for the Company (or upon the instructions of the Company’s chief executive officer or another senior officer of the Company) shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. Cause shall not exist unless and until the Company has delivered to Executive a copy of a resolution duly adopted by three-quarters (3/4) of the entire Board (excluding Executive if Executive is a Board member) at a meeting of the Board called and held for such purpose (after reasonable notice to Executive and an opportunity for Executive, together with counsel, to be heard before the Board), finding that in the good faith opinion of the Board an event set forth in clauses (i) or (ii) has occurred and specifying the particulars thereof in detail. The Company must notify Executive of any event constituting Cause within ninety (90) days following the Company’s knowledge of its existence or such event shall not constitute Cause under this Agreement.

               (e) “Change in Control” means any of the following: (i) any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (other than an Affiliate or any employee benefit plan (or any related trust) of the Company or an Affiliate, and other than Jeffrey H. Smulyan or an Affiliate of Mr. Smulyan) (a “Person”) becomes after the date hereof the beneficial owner of 25% or more of either the then outstanding Stock or the combined voting power of the then outstanding voting securities of the Company entitled to vote in the election of directors, except that no Change in Control shall be deemed to have occurred solely by reason of any such acquisition by a corporation with respect to which, after such acquisition, more than 60% of both the then outstanding common shares of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote in the election of directors are then beneficially owned, directly or indirectly, by the persons who were the beneficial owners of the Stock and voting securities of the Company immediately before such acquisition in substantially the same proportion as their ownership, immediately before such acquisition, of the outstanding Stock and the combined voting power of the then outstanding voting securities of the Company entitled to vote in the election of directors; (ii) individuals who, as of the Effective Date, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board; provided that any individual who becomes a director after the Effective Date whose election, or nomination for election by the Company’s shareholders, was approved by a

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vote or written consent of at least two-thirds of the directors then comprising the Incumbent Directors shall be considered as though such individual were an Incumbent Director, but excluding, for this purpose, any such individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company (as such terms are used in Rule 14a-11 under the Exchange Act); (iii) the consummation of (A) a merger, reorganization or consolidation with respect to which the individuals and entities who were the respective beneficial owners of the Stock and voting securities of the Company immediately before such merger, reorganization or consolidation do not, after such merger, reorganization or consolidation, beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding common shares and the combined voting power of the then outstanding voting securities entitled to vote in the election of directors of the corporation resulting from such merger, reorganization or consolidation, or (B) the sale or other disposition of all or substantially all of the assets of the Company to any Person; (iv) the approval by the shareholders of the Company of a liquidation or dissolution of the Company; or (v) such other event(s) or circumstance(s) as are determined by the Board to constitute a Change in Control. Notwithstanding the foregoing provisions of this definition, a Change in Control of the Company shall be deemed not to have occurred (a) with respect to any Executive, if such Executive is, by written agreement executed prior to such Change in Control, a participant on such Executive’s own behalf in a transaction in which the persons (or their Affiliates) with whom such Executive has the written agreement Acquire the Company (as defined below) and, pursuant to the written agreement, the Executive has an equity interest in the resulting entity or a right to acquire such an equity interest, or (b) in the event the Company separates or bifurcates its radio and television divisions by means of merger, corporate reorganization, sale or disposition of assets, spin-off, tax-free reorganization, or otherwise (any such separation or bifurcation, a “Separation Event”), and, immediately thereafter, Mr. Smulyan is Chairman or Chief Executive Officer of the Company or any successor thereto, including without limitation, either division or any entity established as a result of a Separation Event ( a “Successor”), Mr. Smulyan retains the ability to vote at least fifty percent (50%) of all classes of stock of the Company or any Successor, or Mr. Smulyan retains the ability to elect a majority of the Board of Directors of the Company or any Successor.

          Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur solely because any Person acquires beneficial ownership of more than 25% of the then outstanding Stock as a result of the acquisition of the Stock by the Company which reduces the number of shares of Stock outstanding; provided, that if after such acquisition by the Company such person becomes the beneficial owner of additional Stock that increases the percentage of outstanding Stock beneficially owned by such person, a Change in Control of the Company shall then occur.

          For the purposes of this definition, “Acquire the Company” means the acquisition of beneficial ownership by purchase, merger, or otherwise, of either more than 50% of the Stock (such percentage to be computed in accordance with Rule 13d-3(d)(1)(i) of the SEC under the Exchange Act) or substantially all of the assets of the Company or its successors; “person” means such term as used in Rule 13d-5 of the SEC under the Exchange Act; “beneficial owner” means such term as defined in Rule 13d-3 of

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the SEC under the Exchange Act; and “group” means such term as defined in Section 13(d) of the Exchange Act.

               (f) “Code” means the Internal Revenue Code of 1986, as amended, and regulations and rulings thereunder. References to a particular section of the Code shall include references to successor provisions.

               (g) “Date of Termination” means (1) the effective date on which Executive’s employment by the Company terminates as specified in a prior written notice by the Company or Executive, as the case may be, to the other, delivered pursuant to Section 10 or (2) if Executive’s employment by the Company terminates by reason of death, the date of death of Executive.

               (h) “Disability” means termination of Executive’s employment by the Company due to Executive’s absence from Executive’s duties with the Company on a full-time basis for at least one hundred eighty (180) consecutive days as a result of Executive’s incapacity due to physical or mental illness.

               (i) “Exchange Act” means the Securities Exchange Act of 1934, as amended. References to a particular section of, or rule under, the Exchange Act shall include references to successor provisions.

               (j) “Good Reason” means, without Executive’s express written consent, the occurrence of any of the following events after a Change in Control:

               (i) any (A) change in the duties or responsibilities (including reporting responsibilities) of Executive that is inconsistent in any material and adverse respect with Executive’s position(s), duties, responsibilities or status with the Company immediately prior to such Change in Control (including any material and adverse diminution of such duties or responsibilities); provided, however, that Good Reason shall not be deemed to occur upon a change in duties or responsibilities (other than reporting responsibilities) that is solely and directly a result of the Company no longer being a publicly traded entity and does not involve any other event set forth in this paragraph (j) or (B) material and adverse change in Executive’s titles or offices (including, if applicable, membership on the Board) with the Company as in effect immediately prior to such Change in Control;

               (ii) a material breach by the Company or an Affiliate of the Company of an employment agreement to which the Executive and the Company or an Affiliate of the Company are parties;

               (iii) a reduction by the Company in Executive’s rate of annual base salary or annual target bonus opportunity as in effect immediately prior to such Change in Control or as the same may be increased from time to time thereafter;

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               (iv) any requirement of the Company that Executive (A) be based anywhere more than thirty-five (35) miles from the office where Executive is located at the time of the Change in Control, if such relocation increases Executive’s commute by more than twenty (20) miles, or (B) travel on Company business to an extent substantially greater than the travel obligations of Executive immediately prior to such Change in Control;

               (v) the failure of the Company to (A) continue in effect any material employee benefit plan, compensation plan, welfare benefit plan or fringe benefit plan in which Executive is participating immediately prior to such Change in Control or the taking of any action by the Company which would adversely affect Executive’s participation in or reduce Executive’s benefits under any such plan, unless Executive is permitted to participate in other plans providing Executive with substantially equivalent benefits in the aggregate (at substantially equivalent cost with respect to welfare benefit plans), or (B) provide Executive with paid vacation in accordance with the most favorable vacation policies of the Company and its Affiliates as in effect for Executive immediately prior to such Change in Control, including the crediting of all service for which Executive had been credited under such vacation policies prior to the Change in Control;

               (vi) any refusal by the Company to continue to permit Executive to engage in activities not directly related to the business of the Company in which Executive was permitted to engage prior to the Change in Control;

               (vii) any purported termination of Executive’s employment which is not effectuated pursuant to Section 10(b) (and which will not constitute a termination hereunder); or

               (viii) the failure of the Company to obtain the assumption and, if applicable, guarantee, agreement from any successor (and parent corporation) as contemplated in Section 9(b).

Notwithstanding anything herein to the contrary, termination of employment by Executive for any reason during the 30-day period commencing one (1) year after the date of a Change in Control shall constitute a termination for Good Reason. An isolated, insubstantial and inadvertent action taken in good faith and which is remedied by the Company within ten (10) days after receipt of notice thereof given by Executive shall not constitute Good Reason. Executive’s right to terminate employment for Good Reason shall not be affected by Executive’s incapacity due to mental or physical illness and Executive’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any event or condition constituting Good Reason; provided, however, that Executive must provide notice of termination of employment within ninety (90) days following Executive’s knowledge of an event constituting Good Reason or such event shall not constitute a termination for Good Reason under this Agreement.

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               (k) “Qualifying Termination” means a termination of Executive’s employment (i) by the Company other than for Cause or (ii) by Executive for Good Reason. Termination of Executive’s employment on account of death, Disability or Retirement shall not be treated as a Qualifying Termination.

               (l) “Retirement” means Executive’s retirement (not including any mandatory early retirement) in accordance with the Company’s retirement policy generally applicable to its salaried employees, as in effect immediately prior to the Change in Control, or in accordance with any retirement arrangement established with respect to Executive with Executive’s written consent; provided, however, that under no circumstances shall a resignation with Good Reason be deemed a Retirement.

               (m) “SEC” means the Securities and Exchange Commission.

               (n) “Stock” means the Class A Common Stock and the Class B Common Stock of the Company, par value $.01 per share.

               (o) “Termination Period” means the period of time beginning with a Change in Control and ending two (2) years following such Change in Control. Notwithstanding anything in this Agreement to the contrary, if (i) Executive’s employment is terminated prior to a Change in Control for reasons that would have constituted a Qualifying Termination if they had occurred following a Change in Control; (ii) Executive reasonably demonstrates that such termination (or Good Reason event) was at the request of a Person who had indicated an intention or taken steps reasonably calculated to effect a Change in Control, or was otherwise made in connection with a Change in Control; and (iii) a Change in Control involving such third party or an Affiliate of such third party (or a party competing with such third party to effectuate a Change in Control) does occur, then for purposes of this Agreement, the date immediately prior to the date of such termination of employment or event constituting Good Reason shall be treated as a Change in Control. For purposes of determining the timing of payments and benefits to Executive under Section 4, the date of the actual Change in Control shall be treated as Executive’s Date of Termination under Section l(g).

     2. Obligation of Executive. In the event of a tender or exchange offer, proxy contest, or the execution of any agreement which, if consummated, would constitute a Change in Control, Executive agrees not to voluntarily leave the employ of the Company, other than as a result of Disability, Retirement or an event which would constitute Good Reason if a Change in Control had occurred, until the Change in Control occurs or, if earlier, such tender or exchange offer, proxy contest, or agreement is terminated or abandoned.

     3. Term of Agreement. This Agreement shall be effective on the date hereof and shall continue in effect until the Company shall have given three (3) years’ written notice of cancellation; provided, that, notwithstanding the delivery of any such notice, this Agreement shall continue in effect for a period of two (2) years after a Change in Control, if such Change in Control shall have occurred during the term of this Agreement. Notwithstanding anything in this Section to the contrary, this Agreement

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shall terminate if Executive or the Company terminates Executive’s employment prior to a Change in Control except as provided in the second sentence of Section 1(o).

          4. Payments Upon Termination of Employment.

               (a) Qualifying Termination — Severance. If during the Termination Period the employment of Executive shall terminate pursuant to a Qualifying Termination, then the Company shall provide to Executive:

               (i) within ten (10) days following the Date of Termination a lump-sum cash amount equal to the sum of (A) Executive’s base salary through the Date of Termination and any bonus amounts which have become payable, to the extent not theretofore paid or deferred, (B) a pro rata portion of Executive’s annual bonus for the fiscal year in which Executive’s Date of Termination occurs in an amount at least equal to (1) Executive’s target bonus for such fiscal year, multiplied by (2) a fraction, the numerator of which is the number of days in the fiscal year in which the Date of Termination occurs through the Date of Termination and the denominator of which is three hundred sixty-five (365), and (C) any accrued vacation pay, in each case to the extent not theretofore paid; plus

               (ii) within ten (10) days following the Date of Termination, a lump-sum cash amount equal to (i) three (3) times Executive’s highest annual rate of base salary during the 36-month period immediately prior to Executive’s Date of Termination plus (ii) three (3) times Executive’s Bonus Amount.

               (b) Qualifying Termination — Benefits. If during the Termination Period the employment of Executive shall terminate pursuant to a Qualifying Termination, the Company shall continue to provide, for a period of three (3) years following Executive’s Date of Termination, Executive (and Executive’s dependents, if applicable) with the same level of medical, dental, accident, disability and life insurance benefits upon substantially the same terms and conditions (including contributions required by Executive for such benefits) as existed immediately prior to Executive’s Date of Termination (or, if more favorable to Executive, as such benefits and terms and conditions existed immediately prior to the Change in Control); provided, that, if Executive cannot continue to participate in the Company plans providing such benefits, the Company shall otherwise provide such benefits on the same after-tax basis as if continued participation had been permitted. Notwithstanding the foregoing, in the event Executive becomes reemployed with another employer and becomes eligible to receive welfare benefits from such employer, the welfare benefits described herein shall be secondary to such benefits during the period of Executive’s eligibility, but only to the extent that the Company reimburses Executive for any increased cost and provides any additional benefits necessary to give Executive the benefits provided hereunder. For two years following the Executive’s Date of Termination (or such shorter period ending upon the subsequent employment of Executive at a level of service commensurate with Executive’s positions with the Company on the Date of Termination), Executive shall be

8

provided with outplacement services from a provider selected by the Company and at the Company’s expense. In addition, the Company may make such additional payments, and provide such additional benefits, to Executive as the Company and Executive may agree in writing, or to which the Executive may be entitled under the compensation and benefit plans, policies, and arrangements of the Company.

               (c) Nonqualifying Termination. If during the Termination Period the employment of Executive shall terminate other than by reason of a Qualifying Termination, then the Company shall pay to Executive within thirty (30) days following the Date of Termination, a lump-sum cash amount equal to the sum of Executive’s base salary through the Date of Termination and any bonus amounts which have become payable, to the extent not theretofore paid or deferred, and any accrued vacation pay, to the extent not theretofore paid. The Company may make such additional payments, and provide such additional benefits, to Executive as the Company and Executive may agree in writing, and the Company shall provide the Executive with those payments and benefits to which Executive may be entitled under the compensation and benefit plans, policies, and arrangements of the Company, or any employment agreement with the Company or an Affiliate of the Company.

               (d) Stock Options. In the event of a Change in Control, all options to purchase Company stock held by Executive (“Options”) which are not fully vested and exercisable shall become fully vested and exercisable as of a time established by the Board, which shall be no later than a time preceding the Change in Control which allows Executive to exercise the Options and cause the stock acquired thereby to participate in the Change in Control transaction. If the Change in Control transaction is structured such that stock participating therein at one time is or may be treated differently than stock participating therein at a different time (e.g., a tender offer followed by a squeeze-out merger), the Board shall interpret this paragraph (d) to provide for the required vesting acceleration in a manner designed to allow Executive to exercise the Options and cause the stock acquired thereby to participate in the earliest portion of the Change in Control transaction. If the consummation of a Change in Control transaction is uncertain (e.g., a tender offer in which the tender of a minimum number of shares is a condition to closing, or a voted merger or proxy contest in which a minimum number of votes is a condition to closing), the Board shall apply this paragraph (d) by using its best efforts to determine if and when the Change in Control transaction is likely to close, and proceeding accordingly. To the extent necessary to implement this Section 4(d), each stock option agreement reflecting the Options, and each stock option plan relating to each such stock option agreement, if any, shall be deemed amended.

          5. Certain Additional Payments by the Company.

               (a) If it is determined (as hereafter provided) that any payment or distribution by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or

9

exercisability of any of the foregoing (a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such excise tax (such tax or taxes, together with any such interest and penalties, are hereafter collectively referred to as the “Excise Tax”), then Executive will be entitled to receive an additional payment or payments (a “Gross-Up Payment”) in an amount such that, after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

               (b) Subject to the provisions of Section 5(f) hereof, all determinations required to be made under this Section 5, including whether an Excise Tax is payable by Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required and the amount of such Gross-Up Payment, will be made by a nationally recognized firm of certified public accountants (the “Accounting Firm”) selected by Executive in his sole discretion. Executive will direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and Executive within 15 calendar days after the date of Executive’s termination of employment, if applicable, and any other such time or times as may be requested by the Company or Executive. If the Accounting Firm determines that any Excise Tax is payable by Executive, the Company will pay the required Gross-Up Payment to Executive within five business days after receipt of such determination and calculations. If the Accounting Firm determines that no Excise Tax is payable by Executive, it will, at the same time as it makes such determination, furnish Executive with an opinion that he has substantial authority not to report any Excise Tax on his federal, state, local income or other tax return. Subject to the provisions of this Section 5, any determination by the Accounting Firm as to the amount of the Gross-Up Payment will be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (an “Underpayment”), consistent with the calculations required to be made hereunder. In the event that an Underpayment is made and the Company exhausts or fails to pursue its remedies pursuant to Section 5(f) hereof and Executive thereafter is required to make a payment of any Excise Tax, Executive will direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and Executive as promptly as possible. Any such Underpayment will be promptly paid by the Company to, or for the benefit of, Executive within five business days after receipt of such determination and calculations.

               (c) The Company and Executive will each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determination contemplated by Section 5(b) hereof.

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               (d) The federal, state and local income or other tax returns filed by Executive will be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by Executive. Executive will make proper payment of the amount of any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of his federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment. If prior to the filing of Executive’s federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, Executive will within five business days pay to the Company the amount of such reduction.

               (e) The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Sections 5(b) and (d) hereof will be borne by the Company. If such fees and expenses are initially advanced by Executive, the Company will reimburse Executive the full amount of such fees and expenses within five business days after receipt from Executive of a statement therefor and reasonable evidence of his payment thereof.

               (f) Executive will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of a Gross-Up Payment. Such notification will be given as promptly as practicable but no later than 10 business days after Executive actually receives notice of such claim and Executive will further apprise the Company of the nature of such claim and the date on which such claim is requested to be paid (in each case, to the extent known by Executive). Executive will not pay such claim prior to the earlier of (i) the expiration of the 30-calendar-day period following the date on which he gives such notice to the Company and (ii) the date that any payment of amount with respect to such claim is due. If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive will:

               (i) provide the Company with any written records or documents in his possession relating to such claim reasonably requested by the Company;

               (ii) take such action in connection with contesting such claim as the Company will reasonably request in writing from time to time, including without limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by the Company;

               (iii) cooperate with the Company in good faith in order effectively to contest such claim; and

               (iv) permit the Company to participate in any proceedings relating to such claim;

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provided, however, that the Company will bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and will indemnify and hold harmless Executive, on an after-tax basis, for and against any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses. Without limiting the foregoing provisions of this Section 5(f), the Company will control all proceedings taken in connection with the contest of any claim contemplated by this Section 5(f) and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided that Executive may participate therein at his own cost and expense) and may, at its option, either direct Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company will determine; provided, however, that if the Company directs Executive to pay the tax claimed and sue for a refund, the Company will advance the amount of such payment to Executive on an interest-free basis and will indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax, including interest or penalties with respect thereto, imposed with respect to such advance; and provided further, however, that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which the contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of any such contested claim will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

               (g) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 5(f) hereof, Executive receives any refund with respect to such claim, Executive will (subject to the Company’s complying with the requirements of Section 5(f) hereof) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 5(f) hereof, a determination is made that Executive will not be entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial or refund prior to the expiration of 30 calendar days after such determination, then such advance will be forgiven and will not be required to be repaid and the amount of such advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid pursuant to this Section 5.

          6. Withholding Taxes. The Company may withhold from all payments due to Executive (or his beneficiary or estate) hereunder all taxes which, by applicable federal, state, local or other law, the Company is required to withhold therefrom. In the case of the withholding of an Excise Tax, such withholding shall be consistent with any determination made under Section 5.

          7. Reimbursement of Expenses. If any contest or dispute shall arise under this Agreement involving termination of Executive’s employment with the

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Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company shall reimburse Executive, on a current basis, for all reasonable legal fees and expenses, if any, incurred by Executive in connection with such contest or dispute (regardless of the result thereof); provided, however, Executive shall be required to repay any such amounts to the Company to the extent that a court or an arbitration panel issues a final order from which no appeal can be taken, or with respect to which the time period to appeal has expired, setting forth that Executive has not wholly or partially prevailed on at least one material issue in dispute.

          8. Scope of Agreement. Nothing in this Agreement shall be deemed to entitle Executive to continued employment with the Company or its Subsidiaries, and if Executive’s employment with the Company shall terminate prior to a Change in Control, Executive shall have no further rights under this Agreement (except as otherwise provided hereunder); provided, however, that any termination of Executive’s employment during the Termination Period shall be subject to all of the provisions of this Agreement.

          9. Successors; Binding Agreement.

     (a) This Agreement shall not be terminated by any Change in Control or other merger, consolidation, statutory share exchange, sale of substantially all the assets or similar form of corporate transaction involving the Company (a “Business Combination”). In the event of any Business Combination, the provisions of this Agreement shall be binding upon the surviving corporation, and such surviving corporation shall be treated as the Company hereunder.

               (b) The Company agrees that in connection with any Business Combination, it will cause any successor entity to the Company unconditionally to assume (and for any parent corporation in such Business Combination to guarantee), by written instrument delivered to Executive (or his beneficiary or estate), all of the obligations of the Company hereunder. Failure of the Company to obtain such assumption and guarantee prior to the effectiveness of any such Business Combination that constitutes a Change in Control, shall be a breach of this Agreement and shall constitute Good Reason hereunder and shall entitle Executive to compensation and other benefits from the Company in the same amount and on the same terms as Executive would be entitled hereunder if Executive’s employment were terminated following a Change in Control by reason of a Qualifying Termination. For purposes of implementing the foregoing, the date on which any such Business Combination becomes effective shall be deemed the date Good Reason occurs, and shall be the Date of Termination if requested by Executive.

               (c) This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive shall die while any amounts would be payable to Executive hereunder had Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the

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terms of this Agreement to such person or persons appointed in writing by Executive to receive such amounts or, if no person is so appointed, to Executive’s estate.

          10. Notice. (a) For purposes of this Agreement, all notices and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given when actually received or, if mailed, three days after mailing by registered or certified mail, return receipt requested, or one business day after mailing by a nationally recognized express mail delivery service with instructions for next-day delivery, addressed as follows:

          If to the Executive, to the Executive’s principal residence as reflected in the records of the Company.

If to the Company:

Emmis Communications Corporation

40 Monument Circle

Suite 700

Indianapolis, Indiana 46204

Attn.: General Counsel

or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

               (b) A written notice of Executive’s Date of Termination by the Company or Executive, as the case may be, to the other, shall (i) indicate the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated and (iii) specify the termination date (which date shall be not less than fifteen (15) (thirty (30), if termination is by the Company for Disability) nor more than sixty (60) days after the giving of such notice). The failure by Executive or the Company to set forth in such notice any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of Executive or the Company hereunder or preclude Executive or the Company from asserting such fact or circumstance in enforcing Executive’s or the Company’s rights hereunder.

          11. Full Settlement; Resolution of Disputes. The Company’s obligation to make any payments and provide any benefits pursuant to this Agreement and otherwise to perform its obligations hereunder shall be in lieu and in full settlement of all other severance payments to Executive under any other severance or employment agreement between Executive and the Company, and any severance plan of the Company; provided, however, that if any such other agreement or plan would provide Executive with a greater payment or more or longer benefits in respect of any particular item described hereunder (e.g., severance, welfare benefits), then Executive shall receive such particular item of payment and/or benefit pursuant to such other agreement or plan,

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in lieu of receiving that particular item pursuant to this Agreement. The Company’s obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or others. In no event shall Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable and benefits provided to Executive under any of the provisions of this Agreement and, except as provided in Section 4(b), such amounts shall not be reduced whether or not Executive obtains other employment. The parties agree that any controversy or claim of either party hereto arising out of or in any way relating to this Agreement, or breach thereof, shall be settled by final and binding arbitration in Indianapolis, Indiana by three arbitrators in accordance with the applicable rules of the American Arbitration Association, and that judgment upon any award rendered may be entered by the prevailing party in any court having jurisdiction thereof. The Company shall bear all costs and expenses arising in connection with any arbitration proceeding pursuant to this Section.

     12. Employment by Subsidiaries. Employment by the Company for purposes of this Agreement shall include employment by any Affiliate.

     13. Survival. The respective obligations and benefits afforded to the Company and Executive as provided in Sections 4 (to the extent that payments or benefits are owed as a result of a termination of employment that occurs during the term of this Agreement), 5 (to the extent that Payments are made to Executive as a result of a Change in Control that occurs during the term of this Agreement), 6, 7, 9(c) and 11 shall survive the termination of this Agreement.

     14. GOVERNING LAW; VALIDITY. THE INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF INDIANA WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF, OF SUCH PRINCIPLES OF ANY OTHER JURISDICTION WHICH COULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF INDIANA. THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN FULL FORCE AND EFFECT.

     15. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

     16. Miscellaneous. No provision of this Agreement may be modified or waived unless such modification or waiver is agreed to in writing and signed by Executive and by a duly authorized officer of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any

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prior or subsequent time. Failure by Executive or the Company to insist upon strict compliance with any provision of this Agreement or to assert any right Executive or the Company may have hereunder, including, without limitation, the right of Executive to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. Except as otherwise specifically provided herein, the rights of, and benefits payable to, Executive, his estate or his beneficiaries pursuant to this Agreement are in addition to any rights of, or benefits payable to, Executive, his estate or his beneficiaries under any other employee benefit plan or compensation program of the Company.

          IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly authorized officer of the Company and Executive has executed this Agreement as of the day and year first above written.

EMMIS COMMUNICATIONS CORPORATION
By:	/s/ Jeffrey H. Smulyan
	Jeffrey H. Smulyan
	Chairman & Chief Executive Officer
EXECUTIVE
/s/ Patrick Walsh
Patrick Walsh

EX-10.2

Exhibit 10.2

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (“Agreement”) is effective as of September 4, 2006, by and between EMMIS OPERATING COMPANY, an Indiana corporation (“Employer” or “Emmis”), and PATRICK WALSH, a Maryland resident (“Executive”).

RECITALS

     WHEREAS, Employer and its subsidiaries are engaged in the ownership and operation of certain radio and television stations, magazines, and related operations (together, the “Emmis Group”); and

     WHEREAS, Employer desires to employ Executive as an executive, and Executive desires to be so employed.

     NOW, THEREFORE, in consideration of the foregoing, the mutual promises and covenants set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:

AGREEMENT

     1. Employment Status. Upon the terms and subject to the conditions set forth in this Agreement, Employer hereby employs Executive, and Executive hereby accepts exclusive employment with Employer.

     2. Term. The term of Executive’s employment shall be for a period of three (3) years commencing on September 4, 2006, and ending on September 3, 2009 (the “Term”). This Agreement shall expire at the end of the Term unless earlier terminated in accordance with the terms of this Agreement. For purposes of this Agreement, the term “First Contract Year” shall be defined to mean the twelve (12) month period commencing on September 4, 2006 and ending on September 3, 2007; the term “Second Contract Year” shall be defined to mean the twelve (12) month period commencing on September 4, 2007 and ending on September 3, 2008; the term “Third Contract Year” shall be defined to mean the twelve (12) month period commencing on September 4, 2008 and ending on September 3, 2009 (each, a “Contract Year”).

     3. Executive’s Position, Duties and Authority.

     3.1 Position. Employer shall employ Executive, and Executive shall serve as an executive of Employer, and of any successor of Employer by merger, acquisition of substantially all of the assets or stock of Employer, or otherwise. During the Term, Executive shall serve as Executive Vice President, Chief Financial Officer and Treasurer of Employer.

     3.2 Duties and Authority. Executive shall have such duties, functions, authority and responsibilities as are commensurate with the offices Executive holds with the Employer during the Term. Executive shall report directly to the Chief Executive Officer of the Employer. Executive’s services hereunder shall be performed in a professional, diligent and competent manner to the best of Executive’s abilities.

     3.3 Directorships and Other Offices. If Executive is elected as a Director of Emmis Communications Corporation, Executive shall serve in such position without additional remuneration (unless Employer elects to remunerate “inside directors”) but shall be entitled to the benefit of indemnification pursuant to the terms of Section 15.10. Executive shall also serve without additional remuneration as a director and/or officer of one or more of Employer’s subsidiaries or affiliates if appointed to such position(s) by Employer during the Term.

     4. Full-Time and Exclusive Services. Executive’s services pursuant to this Agreement shall be performed on a full-time and exclusive basis, except for vacation periods and periods of illness as permitted by the Company’s employment policies. Accordingly, Executive shall not undertake any outside business activity during the Term without the prior written consent of Employer. Executive shall be permitted to serve on the board of charitable or civic organizations so long as such services: (i) are approved in writing in advance by Employer; and (ii) do not interfere with Executive’s duties and obligations under this Agreement.

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     5. Location of Employment; Travel. The location for performance of Executive’s services hereunder shall be the offices designated by Employer in Indianapolis, Indiana. Executive shall undertake such travel as the performance of Executive’s duties pursuant to this Agreement may require.

     6. Compensation.

     6.1 Base Salary. Upon the terms and subject to the conditions set forth in this Agreement, each Contract Year, Employer shall pay or cause to be paid to Executive an annualized base salary (“Base Salary”) in the amount of Four Hundred Thousand Dollars ($400,000), to be paid according to Employer’s customary payroll practices. Employer shall have no obligation to pay Executive the Base Salary for any period during which Executive fails or refuses to render services pursuant to this Agreement, or for any period following the expiration or termination of this Agreement. All Base Salary earned by Executive and paid pursuant to this Agreement shall be subject to withholding for applicable taxes and as otherwise required by law.

     6.2 Annual Incentive Compensation. Upon the terms and subject to the conditions set forth in this Section 6.2, following the conclusion of each Emmis fiscal year during the Term, Executive shall be eligible to receive one (1) performance bonus in a target amount of Two Hundred Thousand Dollars ($200,000) (each, a “Fiscal Year Bonus”), the exact amount of which shall be determined by means of Executive’s attainment of certain performance goals as determined each fiscal year by the Compensation Committee of the Employer’s Board of Directors (the “Compensation Committee”) and communicated to Executive within ten (10) days after a final determination by the Compensation Committee. The Fiscal Year Bonus earned by Executive for the fiscal year ending on February 28, 2007, if any, shall be pro-rated according to the following formula: the amount of the Fiscal Year Bonus that Executive would have earned had Executive worked the entire fiscal year multiplied by a fraction the numerator of which shall be the number of full months during the fiscal year during which

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Executive was employed by Employer plus three (3) months; the denominator of which shall be twelve (12). If this Agreement is not renewed and expires on September 3, 2009, Executive shall be eligible to receive a pro-rata Fiscal Year Bonus, if earned, for the fiscal year during which the Agreement expires based on the number of completed months as set forth in the formula above (except that the additional three (3) months shall not be credited for purposes of the calculation). Executive acknowledges and agrees that, as a material condition to receiving a Fiscal Year Bonus, as of the end of each respective fiscal year during the Term: (i) this Agreement must be in full force and effect; and (ii) Executive must be fully performing all of Executive’s duties and obligations as required hereunder and not be in breach of any of the terms and conditions of this Agreement; provided, however, that notwithstanding the foregoing, in the event Executive voluntarily resigns for Good Reason (as defined in Section 11.5 below), Executive shall remain eligible for a Fiscal Year Bonus in accordance with the terms of Section 11.5. Employer may pay all or any portion of a Fiscal Year Bonus in Shares of Class A Common Stock of Emmis Communications Corporation (“Shares”) in the same manner utilized for other senior management level employees. Any Fiscal Year Bonus amounts earned by Executive pursuant to the terms and conditions of this Section 6.2 (including upon non-renewal and expiration of the Term or upon a termination for Good Reason) shall be awarded following Employer’s fiscal year-end earnings release or at such other time as annual incentive compensation awards are made to other members of Employer’s senior management team (but in no event later than ninety (90) days after the expiration of the applicable fiscal year). All Fiscal Year Bonus amounts earned by Executive pursuant to this Agreement shall be subject to withholding for applicable taxes and as otherwise required by law.

     6.3 Equity Incentive Compensation. Upon the terms and subject to the conditions set forth in this Section 6.3, at or promptly following the commencement of the Term, Executive shall receive (i) an option (“Option”) to

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acquire Ten Thousand (10,000) Shares, and (ii) Three Thousand (3,000) restricted Shares. Additionally, upon the terms and subject to the conditions set forth in this Section 6.3, on or about the commencement of each Emmis fiscal year during the Term, or at such time(s) during the Term as Employer grants equity incentive compensation to members of its senior management team, Executive shall receive (i) an Option to acquire Twenty Thousand (20,000) Shares, and (ii) Six Thousand (6,000) restricted Shares. The grants of Options and restricted Shares described in this Section 6.3 shall be subject to the terms and conditions of the applicable equity compensation plan of Employer, the Option agreements evidencing the Option grants and the restricted stock agreements evidencing the grants of restricted Shares. In the event of any change in the outstanding Shares by reason of any reorganization, recapitalization, reclassification, merger, stock split, reverse stock split, stock dividend, asset spinoff, share combination, consolidation or similar event, the number and class of all Shares awarded pursuant to this Agreement or covered by an Option granted pursuant to this Agreement (and any applicable Option exercise price) shall be adjusted by the Compensation Committee in its sole discretion and in accordance with the terms of the applicable equity compensation or similar plan of Employer, the Option agreement evidencing the grant of the Option, and the restricted Stock agreement evidencing the grant of Shares. The determination of the Compensation Committee shall be conclusive and binding.

     6.4 Completion Bonus. On or about September 3, 2009, Executive shall receive Twenty Thousand (20,000) Shares (the “Completion Shares”); provided, that (i) this Agreement is in effect on September 3, 2009 and has not been terminated for any reason (other than a material breach of this Agreement by Employer); and (ii) Executive has fully performed all of Executive’s duties and obligations under this Agreement throughout the Term and is not in breach of any of the material terms and conditions of this Agreement. The Completion Shares

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shall be freely transferable when delivered to Executive subject to Employer’s securities trading policy and applicable federal and state law. Employer shall have the right, in its sole and absolute discretion, to pay Executive the value of the Completion Shares (in the same manner applied to other senior management level employees) in cash in lieu of granting Executive the Completion Shares. The Completion Shares shall be subject to withholding for applicable taxes and as otherwise required by law.

     6.5 Fractional Shares. In the event that the calculation of a certain number of Shares awarded to Executive pursuant to any of the provisions of this Section 6 results in a fractional Share, such fractional Share shall be rounded up to the nearest whole Share.

     6.6. Auto Allowance. During the Term, Executive shall receive a monthly auto allowance in the amount of One Thousand Dollars ($1,000) (subject to withholding for applicable taxes and as otherwise required by law) consistent with Employer’s policy or practice regarding such allowances, as such policy or practice may be changed from time to time, or eliminated, during the Term in Employer’s sole discretion; provided, however, that in no event shall the amount paid to Executive under this Section 6.6 be reduced.

     6.7 Moving Allowance. Employer agrees to reimburse Executive for reasonable moving and relocation expenses actually incurred in connection with Executive’s relocation to Indianapolis, Indiana in an amount up to a maximum of One Hundred Thousand Dollars ($100,000) upon submission of receipts evidencing such expenses satisfactory to Employer (“Moving Allowance”). The Moving Allowance is intended to cover the following expenses, each to be secured at a reasonable rate: (1) moving expenses relating to the transfer of Executive’s and Executive’s family’s belongings to Indianapolis, Indiana; (2) airfare to and from Indianapolis, Indiana for Executive and members of Executive’s immediate family for the purpose of locating and securing a residence; (3) a maximum of twelve (12) months of either temporary housing in

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Indianapolis or payment of the interest portion of Executive’s monthly mortgage payment at his Maryland residence after purchasing a home in the Indianapolis area, but before his previous residence has been sold; and (4) broker’s fees on the sale of Executive’s Maryland home. Employer agrees to pay to Executive a “gross up” amount on any payments made to Executive pursuant to this provision that are taxable to Executive as ordinary income under the applicable provisions of the Internal Revenue Code. Notwithstanding the foregoing, it is understood and agreed that, in no event, shall the amount paid to Executive pursuant to this Section 6.7 exceed One Hundred Thousand Dollars ($100,000).

     6.8 Life and Disability Insurance. Each Contract Year, Employer agrees to reimburse Executive in an amount not to exceed Five Thousand Dollars ($5,000) for the annual premium associated with Executive’s purchase of a term life and disability insurance policy or policies on the life of Executive. Executive shall be entitled to freely select and change the beneficiary or beneficiaries under such policy or policies. Notwithstanding anything to the contrary contained in this Agreement, Employer’s obligations under this Section 6.8 are expressly contingent upon Executive providing required information and taking all necessary actions required of Executive in order to obtain and maintain the subject policy or policies, including without limitation, passing any required physical examinations.

     7. Business Expenses. Employer shall pay or reimburse Executive for all reasonable expenses actually incurred by Executive during the Term directly related to the performance of Executive’s services hereunder upon presentation of expense statements, vouchers or similar documentation, or such other supporting information as Employer may require of Executive.

     8. Fringe Benefits and Vacation. Each Contract Year during the Term, Executive shall be entitled to four (4) weeks of paid vacation in accordance with Employer’s applicable policies and procedures for executive-level employees. Executive shall also be eligible to participate in and receive the fringe benefits generally

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made available to other executive-level employees of Employer in accordance with, and to the extent that Executive is eligible under, the general provisions of Employer’s fringe benefit plans or programs; provided, however, that Executive understands that these benefits may be increased, changed, eliminated or added from time to time during the Term as determined in Employer’s sole and absolute discretion.

     9. Confidential Information.

     9.1 Non-Disclosure. Executive acknowledges that certain information concerning the business of the Emmis Group and its members is of a proprietary and highly confidential nature, and that as a result of Executive’s employment with Employer during the Term, Executive will receive and develop such proprietary and confidential information concerning the business of Employer and other members of the Emmis Group which, if known to competitors of Employer, would damage Employer, the other members of the Emmis Group, and their respective businesses. Accordingly, Executive agrees that, during the Term and thereafter, Executive shall not divulge or appropriate for Executive’s own use, or for the use or benefit of any third party (other than Employer or its representatives or as specifically directed in writing by Employer) any information or knowledge concerning the business of Employer or any other member of the Emmis Group which is not generally available to the public other than through the activities of Executive. Executive further agrees that upon termination of Executive’s employment for any reason, Executive shall promptly surrender to Employer all documents, brochures, writings, illustrations, client, financial and sales lists, marketing and strategic plans, programs, presentations, budgets, financial statements, marketing materials and any other such documents or materials (regardless of form or character) that Executive received from or developed on behalf of Employer in connection with Executive’s employment. Executive acknowledges that all such materials shall remain at all times during and after the expiration or early termination of the Term for any reason the sole and exclusive property of Employer, and that nothing in this Agreement shall be

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deemed to grant Executive any right, title or interest in such material, all of which shall be deemed a “work made for hire” for the sole and exclusive benefit of Employer.

     9.2 Injunctive Relief. Executive acknowledges that: Executive’s breach of Section 9.1 will cause irreparable harm and damage to Employer, the exact amount of which will be difficult to ascertain; that the remedies at law for any such breach would be inadequate; and that the provisions of this Section 9 have been specifically negotiated and carefully written to prevent such irreparable harm and damage. Accordingly, if Executive breaches Section 9.1, notwithstanding the arbitration and dispute resolution provisions contained in this Agreement, Employer shall be entitled to injunctive relief (including attorneys’ fees and costs) enforcing Section 9.1 to the extent reasonably necessary to protect Employer’s legitimate interests, without posting bond or other security.

     10. Non-Interference; Exclusive Employment and Non-Competition.

     10.1 Non-Interference. During the Term and for a period of two (2) years immediately following the expiration or early termination of the Term for any reason, Executive shall not, directly or indirectly, take any action (or permit any action to be taken by an entity or person with which Executive is associated) which has the effect of interfering with Employer’s relationship (contractual or otherwise) with any employee of Employer or any member of the Emmis Group. Without limiting the generality of the foregoing, Executive specifically agrees that during such time period, Executive shall not solicit or encourage, directly or indirectly, any employee of any member of the Emmis Group to cease his or her employment for any reason.

     10.2 Exclusive Employment and Non-Competition. Executive acknowledges the special and unique nature of Executive’s employment with Employer as a member of Employer’s senior management team, and understands that, as a result of Executive’s employment with Employer during the Term, Executive will gain knowledge of and have access to highly sensitive

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and valuable information regarding the operations of Employer and other members of the Emmis Group, including but not limited to the proprietary and other confidential information described more fully in Section 9.1. Accordingly, Executive acknowledges Employer’s special interest in preventing the disclosure of such information through the engagement of Executive’s services by any of Employer’s competitors following the expiration or early termination of the Term. Therefore, Executive agrees that, during the Term and for a period of twelve (12) months immediately following the expiration or early termination of the Term for any reason, Executive shall not, without the prior written approval of Employer, engage directly or indirectly in services for, or become employed by, serve as an agent or consultant to, or become an officer, director, partner, principal or shareholder of, any corporation, partnership or other entity which is engaged in the local terrestrial radio or local terrestrial television broadcasting business, or the city and regional magazine publishing business, in any city in which Employer operates or has an interest in any radio or television station, or magazine. So long as Executive does not engage in any other activity prohibited by the immediately preceding sentence, Executive’s ownership of less than five percent (5%) of the issued and outstanding stock of any corporation whose stock is traded on an established securities market shall not constitute competition with Employer for purposes of this Section 10.2.

     10.3 Injunctive Relief. Executive acknowledges and agrees that the provisions of this Section 10 have been specifically negotiated and carefully worded in recognition of the opportunities which shall be afforded to Executive by Employer by virtue of Executive’s association with Employer and the influence that Executive will have over Employer’s employees, customers and vendors. Executive further acknowledges that: Executive’s breach of Section 10.1 or 10.2 will cause irreparable harm and damage to Employer, the exact amount of which will be difficult to ascertain; that the remedies at law for any such breach would be inadequate; and that the provisions of this Section 10 have been specifically

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negotiated and carefully written to prevent such irreparable injury and damage. Accordingly, if Executive breaches Section 10.1 or 10.2, notwithstanding the arbitration and dispute resolution provisions contained in this Agreement, Employer shall be entitled to injunctive relief enforcing Section 10.1 or 10.2, as the case may be, to the extent reasonably necessary to protect Employer’s legitimate interests, without posting bond or other security. If Executive violates Section 10.1 or 10.2 and Employer brings legal action for injunctive or other relief, Employer shall not, as a result of the time involved in obtaining such relief, be deprived of the benefit of the full period of non-interference or non-competition set forth herein. Accordingly, the obligations set forth in Sections 10.1 and 10.2 shall be deemed to have the duration set forth therein, computed from the date such relief is granted but reduced by the time expired between the date the restrictive period began to run and the date of the first violation of the obligation(s) by Executive.

     10.4 Construction. Despite the express agreement herein between Employer and Executive, in the event that any of the provisions set forth in this Section 10 shall be determined by any court or other tribunal of competent jurisdiction to be unenforceable for any reason whatsoever, the parties agree that this Section 10 shall be interpreted to extend only to the maximum extent as to which it may be enforceable, and that this Section 10 shall be severable into its component parts, all as determined by such court or tribunal.

     11. Termination of Agreement.

     11.1 Termination of Agreement by Employer for Cause. Employer may terminate this Agreement and Executive’s employment hereunder for Cause (as defined in Section 11.3 below) in accordance with the terms and conditions of this Section 11. Following a determination by Employer that Executive should be terminated for Cause, Employer shall give written notice to Executive specifying the grounds for such termination (the “Preliminary Notice”), and Executive shall have ten (10) days after receipt of the Preliminary Notice to respond to Employer

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in writing. If following the expiration of such ten (10) day period Employer reaffirms its determination that Executive should be terminated for Cause, such termination shall be effective upon delivery by Employer to Executive of a final notice of termination.

     11.2 Effect of Termination by Employer for Cause. In the event of termination for Cause as provided in Section 11.1 above:

          (i) Executive shall have no further obligations or liabilities hereunder, except Executive’s obligations under Section 9 and 10, which shall survive the termination of this Agreement.

          (ii) Employer shall have no further obligations or liabilities hereunder, except that Employer shall, not later than two (2) weeks after the termination date:

               (a) Pay to Executive all earned but unpaid Base Salary with respect to any applicable pay period ending on or before the termination date; and

               (b) Pay to Executive any Fiscal Year Bonus, if any, which Executive earned for a fiscal year ending on or prior to the termination date pursuant to Section 6.2 but which is unpaid as of the termination date.

          Additionally, Employer shall comply with the applicable provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and the provisions of any Employer benefit plans in which Executive or Executive’s eligible dependents or beneficiaries are participating at the time of termination.

     11.3 Definition of Cause. For purposes of this Agreement, ”Cause” shall be defined to mean any of the following: (i) any action or omission by Executive involving willful or repeated failure or refusal to perform any of Executive’s material obligations under this Agreement (or any material duties assigned to Executive consistent with the terms of this Agreement) and continuation of such breach after written notice and the expiration of a ten (10) day cure period; provided, however, that it is not the parties’ intention that

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Employer shall be required to provide successive such notices, and in the event Employer has provided Executive with a notice and opportunity to cure pursuant to this Section 11.3, Employer may terminate this Agreement for a subsequent breach similar or related to the breach for which notice was previously given or for a continuing series or pattern of breaches (whether or not similar or related) without providing notice and an opportunity to cure; (ii) commission of any felony or any other crime involving an act of moral turpitude which is harmful to Employer’s business or reputation; (iii) Executive’s action or omission, or knowing allowance of actions or omissions, which are in violation of any law or any of the rules or regulations of the Federal Communications Commission (the “FCC”), or which otherwise jeopardizes any license granted to Employer or any member of the Emmis Group in connection with the ownership or operation of any radio or television station; (iv) theft in any amount; (v) actual or threatened violence against another employee or individual; (vi) sexual or other prohibited harassment of another employee or individual; (vii) unauthorized disclosure or use of proprietary or confidential information, including without limitation the information described more fully in Section 9.1; (viii) any action which brings Employer or any member of the Emmis Group into public disrepute, contempt, scandal or ridicule and which is harmful to Employer’s business or reputation; and (ix) violation of any policy of Employer that has been communicated to Executive in advance of such violation.

     11.4 Change in Control. In the event of a “Change in Control,” the rights and obligations of Executive and Employer shall be set forth in the separate Change in Control Agreement executed by the parties and attached to this Agreement as Exhibit A. “Change in Control” shall have the meaning ascribed to it in Exhibit A.

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     11.5 Voluntary Resignation by Executive for Good Reason. If Executive terminates this Agreement for Good Reason, then:

     (i) Executive shall have no further obligations or liabilities hereunder, except Executive’s obligations under Section 9 and 10, which shall survive the termination of this Agreement.

     (ii) Employer shall have no further obligations or liabilities hereunder, except that Employer shall, not later than two (2) weeks after the termination date:

          (a) Pay to Executive all earned but unpaid Base Salary with respect to any applicable pay period ending on or before the termination date;

          (b) Pay to Executive any Fiscal Year Bonus, if any, which Executive earned for a fiscal year ending on or prior to the termination date pursuant to Section 6.2 but which is unpaid as of the termination date;

          (c) Continue to pay Executive’s then-current Base Salary, on each regularly scheduled payroll date of Employer after the date of termination, for a period of one (1) year, subject to any applicable tax withholding and deductions as required by law;

          (d) Pay or reimburse, for a period up to one (1) year, any medical, dental or vision insurance premiums (up to the amount that Employer is paying on behalf of Executive and his eligible dependents immediately prior to the date of termination, e.g., the employer-paid premium) for the continuation of such health coverage for Executive and Executive’s dependents pursuant to the provisions of COBRA or applicable state law. If Employer becomes eligible to participate in any other group insurance program of another employer and elects coverage thereunder, these payments shall cease at that time.

          (e) Pay Executive’s full Fiscal Year Bonus opportunity, in a lump-sum cash payment within two (2) weeks after the termination date, for the fiscal year in which the termination occurs, subject to applicable tax withholding

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          (f) Accelerate the vesting of any equity compensation described in Section 6.3 and granted to Executive prior to the termination date within two (2) weeks after the termination date (subject to applicable tax withholding and deductions as required by law).

          (g) Grant to Executive the Completion Shares (or cash equivalent) described in Section 6.4 within two (2) weeks after the termination date (subject to applicable tax withholding and deductions as required by law).

     For purposes of this Section 11.5, the term “Good Reason” shall be defined to mean, without Executive’s written consent: (1) a material adverse change made by Employer to Executive’s functions, duties or responsibilities; (2) a reduction by Employer in Executive’s Base Salary or target Fiscal Year Bonus opportunity from the amounts set forth in this Agreement; (3) failure to provide an office or administrative support or requiring Executive to work in an office that is more than thirty-five (35) miles from the location of the Company’s principal executive offices at the time of this Agreement, except for required travel on business of the Company to the extent substantially consistent with Executive’s business travel obligations, and (4) a material breach of the terms of this Agreement by Employer; provided, that Executive has given Employer notice of such breach and such breach remains uncured after thirty (30) days.

     12. Incapacity.

     12.1 Termination of Employment. If Executive shall become Incapacitated (as defined in Section 12.2), Employer shall continue to compensate Executive under the terms of this Agreement without diminution and otherwise without regard to such incapacity or nonperformance of duties until Executive has been incapacitated for a cumulative period of six (6) months, at which time Employer may, in its sole discretion, elect to terminate Executive’s employment. If Employer elects to terminate Executive’s employment pursuant

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to this Section 12.1, the date on which Executive’s employment terminates shall be referred to herein as the “Incapacity Termination Date.”

     12.2 Definition of Incapacity. Executive shall be deemed to have become “Incapacitated” for purposes of this Agreement if, during the Term, Executive shall have been unable to perform Executive’s duties hereunder for reasons beyond Executive’s control, with or without reasonable accommodation, on account of physical or mental impairment or sickness as reasonably determined by a physician selected by mutual agreement of the parties, or if applicable, their representative.

     12.3 Obligations after Termination. Executive shall have no further obligations or liabilities hereunder after a Incapacity Termination Date except Executive’s obligations under Sections 9 and 10 which shall survive the expiration or termination of the Term. After a Incapacity Termination Date, Employer shall have no further obligations or liabilities hereunder except its obligations under Section 12.4 which shall also survive the termination of the Term.

     12.4 Payment of Unpaid Amounts after Termination. Employer shall, not later than two (2) weeks after a Incapacity Termination Date, pay to Executive: (i) all earned but unpaid Base Salary with respect to any pay period ending on or before the Incapacity Termination Date; plus (ii) any Fiscal Year Bonus, if any, earned by Executive for a fiscal year ending on or prior to the Incapacity Termination Date pursuant to Section 6.2 but which is unpaid as of the Incapacity Termination Date; provided, however, that in the event a Incapacity Termination Date occurs at least six (6) months after the commencement of a fiscal year during the Term, Employer shall pay to Executive a pro-rated portion of the Fiscal Year Bonus for the fiscal year during which the Incapacity Termination Date occurs, such amount to be determined in the sole discretion of Employer. Additionally, Employer shall comply with the provisions of COBRA and the provisions of any Employer benefit plans in which Executive or

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Executive’s eligible dependents or beneficiaries are participating at the time of termination.

     12.5 No Reduction. Amounts payable pursuant to this Section 12 shall not be reduced by the value of any benefits payable to Executive under any disability insurance plan or policy.

     13. Death of Executive.

     13.1 Termination of Agreement. This Agreement shall terminate immediately upon Executive’s death. In the event of such termination, Employer shall have no further obligations or liabilities hereunder except its obligations under Section 13.2 below which shall survive such termination.

     13.2 Compensation. Employer shall, not later than two (2) weeks after Executive’s date of death, pay to Executive’s estate or designated beneficiary all unpaid Base Salary and Fiscal Year Bonus amounts earned by Executive, if any, with respect to any pay period or fiscal year, as the case may be, ending on or before Executive’s date of death. Additionally, Employer shall comply with the provisions of COBRA and the provisions of any Employer benefit plans in which Executive or Executive’s eligible dependents or beneficiaries are participating at the time of termination.

     13.3 No Reduction. Amounts payable pursuant to this Section 13 shall not be reduced by the value of any benefits payable to Executive’s estate or designated beneficiaries under any applicable life insurance plan or policy.

     13.4 Death after Termination. In the event that Executive dies after termination of this Agreement pursuant to Sections 11 or 12, all amounts required to be paid by Employer prior to Executive’s death in connection with such termination that remain unpaid as of Executive’s date of death shall be paid to Executive’s estate or designated beneficiary.

     14. Notices. All notices, requests, consents and other communications, required or permitted to be given hereunder, shall be made in writing and shall be deemed to have been duly given if delivered personally or mailed via first-class,

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overnight or certified mail, as follows (or to such other or additional address as either party shall designate by notice in writing to the other in accordance herewith):

          (i) If to Employer:

David O. Barrett, Esq.
Emmis Communications Corporation
40 Monument Circle
Suite 700
Indianapolis, Indiana 46204

          With a copy to:

Gary L. Kaseff, Esq.
3500 W. Olive Avenue
Suite 1450
Burbank, California 91505

          (ii) If to Executive, to Executive’s address on the personnel records of Employer.

     15. Miscellaneous.

     15.1 Governing Law. This Agreement shall be deemed to have been entered into in the State of Indiana and shall be governed by, and construed and enforced in accordance with, the laws of the State of Indiana without regard to its choice of law provisions.

     15.2 Arbitration. The parties agree that any controversy or claim of either party hereto arising out of or in any way relating to this Agreement, or breach thereof, shall be settled by final and binding arbitration in Indianapolis, Indiana in accordance with the applicable rules of the American Arbitration Association (using a single arbitrator), and that judgment upon any award rendered may be entered by the prevailing party in any court having jurisdiction thereof. The parties agree to share equally all costs associated with any arbitration; provided, however, that each party shall be responsible for its own attorneys’ fees and expenses.

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     15.3 Captions. The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of any of the terms or conditions of this Agreement.

     15.4 Entire Agreement; Merger. This Agreement (including Exhibit A) sets forth the entire agreement and understanding of the parties relating to the subject matter herein, and supersedes all prior agreements, arrangements and understandings, written or oral, between the parties, which are merged herein.

     15.5 Successors and Assigns. This Agreement, and Executive’s rights and obligations hereunder, may not be assigned by Executive without the prior written consent of Employer, which consent may be granted or withheld in Employer’s sole and absolute discretion; provided, however, that Executive may designate pursuant to Section 15.7 one or more beneficiaries to receive any amounts that would otherwise be payable hereunder to Executive’s estate. Employer may assign all or any portion of its rights and obligations hereunder to any subsidiary, affiliate or related entity, or any third party by way of merger, corporate reorganization, acquisition of substantially all of the assets or stock of Employer, or otherwise.

     15.6 Amendments; Waivers. This Agreement cannot be changed, modified or amended, and no provision or requirement hereof may be waived, without the written consent of Executive and Employer. The failure of either party at any time or times to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce such provision. No waiver by a party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach or a waiver of the breach of any other term or covenant contained in this Agreement.

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     15.7 Beneficiaries. Whenever this Agreement provides for any payment to Executive’s estate, such payment may be made instead to such beneficiary or beneficiaries as Executive may have designated in a writing filed with Employer. Executive shall have the right to revoke any such designation and to re-designate a beneficiary or beneficiaries by written notice to Employer (and to any applicable insurance company).

     15.8 Warranty and Indemnity. Executive and Employer hereby mutually represent and warrant that each of them: (i) has the full and unqualified right to enter into and fully perform this Agreement according to each and every term and condition contained herein; and (ii) in Executive’s case, has not made any agreement, contractual obligation, or commitment in contravention of any of the terms and conditions of this Agreement or which would prevent Executive from performing according to any of the terms and conditions contained herein. Furthermore, Executive hereby agrees to fully indemnify and hold harmless Employer and each of its subsidiaries, affiliates and related entities, and each of their respective officers, directors, employees, shareholders, agents, attorneys, insurers and representatives from and against any losses, costs, damages, expenses (including attorneys’ fees and expenses), liabilities and claims, arising out of, in connection with, or in any way related to Executive’s breach of any of the representations or warranties contained in this Section 15.8.

     15.9 Change in Fiscal Year and Capitalization. If Employer changes its fiscal year (currently March 1^st through February 28^th), Employer shall in good faith make such adjustments to the various dates and amounts included herein or in any plan or program referenced herein as are necessary or appropriate with the intent to place Executive in a same or substantially similar financial position; provided, however, that the end of the Term shall in no event be extended beyond the expiration of the Term without the written consent of the parties.

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     15.10 Indemnification. Executive shall be entitled to the benefit of the indemnification provisions set forth in Employer’s Amended and Restated Articles of Incorporation and/or By-Laws, or any applicable corporate resolution, as the same may be amended from time to time during the Term (not including any limiting amendments or additions, but including any amendments or additions that add to or broaden the protection afforded to Executive at the time of execution of this Agreement) to the fullest extent permitted by applicable law. Additionally, Employer shall cause Executive to be indemnified in accordance with Chapter 37 of the Indiana Business Corporation Law (the “IBCL”), as the same may be amended from time to time during the Term, to the fullest extent permitted by the IBCL as required to make Executive whole in connection with any indemnifiable loss, cost or expense incurred in Executive’s performance of Executive’s duties and obligations pursuant to this Agreement. Employer shall also maintain during the Term an insurance policy providing directors’ and officers’ liability coverage in a commercially reasonable amount providing coverage on a “claims made” basis relating to Executive’s duties and obligations during Executive’s term of employment with Employer. It is understood that the foregoing indemnification obligations shall survive the expiration or termination of the Term.

     15.11 Subsequent Employment by Employer. Subject to the conditions set forth in the last sentence of this Section 15.11, in the event Employer does not offer Executive reasonably acceptable employment with Employer upon the expiration of the Term, Employer shall continue to make regular payments of Executive’s then-current Base Salary for either: (a) twelve (12) months; or (b) until such time as Executive commences subsequent employment with a new employer, whichever first occurs (the “Severance Payment”). It is understood and agreed that, as a material condition upon which Executive shall be entitled to receive the Severance Payment, Executive agrees to promptly notify Employer of the commencement date upon which Executive begins subsequent employment

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with a new employer. It is further understood and agreed that Executive shall not be entitled to any additional severance compensation upon the expiration of this Agreement other than the Severance Payment. Executive shall not be entitled to the Severance Payment as otherwise specified in this provision if Executive’s employment is terminated either (i) by Employer under Section 11, (ii) by reason of Executive’s incapacity or death under Section 12 or 13, or (iii) by Executive for any reason other than Good Reason. Notwithstanding the foregoing, the Severance Payment and any other severance payments contemplated by this Agreement shall be delayed for a period of six (6) months (with a catch-up payment equal to the sum of all installments that have been delayed to be made as of the date of the initial payment) after the date of such termination if Executive is determined to be a “specified employee” within the meaning of Section 409A(a)(2)(B) of the Code and such delay is required to avoid the imposition of the tax set forth in Section 409A(a)(1) of the Code. In any circumstance involving the payment of the Severance Payment, it shall not be possible for the parties to accelerate or further defer the dates of any such payments other than as specified under the payment schedule above to the extent Section 409A is applicable.

     15.12 Taxes. The parties recognize the uncertainty regarding the application of Section 409A to payments under this Agreement and to the extent that any payment or benefit provided hereunder is determined to be subject to Section 409A (and otherwise does not comply with the provisions of Section 409A such that Executive will be subject to the taxes imposed under Section 409A(a)(1)), then the parties agree to work together in good faith to modify the payments or benefits to avoid the application of Section 409A while undertaking to place Executive and Employer in a same or substantially similar financial position.

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     IN WITNESS WHEREOF, the parties, intending to be legally bound, have duly executed this Agreement as of the date first written above.

EMMIS OPERATING COMPANY (“Employer”)
By:	/s/ Jeffrey H. Smulyan
	Jeffrey H. Smulyan
	Chairman of the Board and Chief Executive Officer
PATRICK WALSH (“Executive”)
By:	/s/ Patrick Walsh
	Patrick Walsh

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EX-12

Exhibit 12

EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited, dollars in thousands)

	Three Months Ended August 31,				Six Months Ended August 31,
	2005		2006		2005		2006
EARNINGS:
Pre-tax income (loss) from continuing operations before adjustment for minority interests in consolidated subsidiaries or income or loss from equity investees	$	9,417	$	10,310	$	18,396	$	11,201
Add:
Fixed charges		21,159		14,455		34,279		29,892
Amortization of capitalized interest		18		18		37		37
Less:
Capitalized interest		—		—		—		—
Preferred stock dividends		2,246		2,246		4,492		4,492
Earnings	$	28,348	$	22,537	$	48,220	$	36,638
FIXED CHARGES:
Interest expense (including amortization of debt expenses)	$	18,341	$	11,554	$	28,586	$	24,116
Capitalized interest		—		—		—		—
Portion of rents representative of the interest factor		572		655		1,201		1,284
Preferred stock dividends		2,246		2,246		4,492		4,492
Fixed Charges	$	21,159	$	14,455	$	34,279	$	29,892
Ratio of Earnings to Fixed Charges		1.3		1.6		1.4		1.2
Deficiency	$	—	$	—	$	—	$	—

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Jeffrey H. Smulyan, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Emmis Communications Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 10, 2006

/s/ JEFFREY H. SMULYAN
Jeffrey H. Smulyan
Chairman of the Board, President and
Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Patrick Walsh, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Emmis Communications Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 10, 2006

/s/ PATRICK WALSH  

Patrick Walsh 

Executive Vice President, Chief Financial Officer and Treasurer 

EX-32.1

Exhibit 32.1

SECTION 1350 CERTIFICATION

The undersigned hereby certifies, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Emmis Communications Corporation (the “Company”), that, to his knowledge:

(1)	the Quarterly Report of the Company on Form 10-Q for the period ended August 31, 2006, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 10, 2006

/s/ JEFFREY H. SMULYAN  

Jeffrey H. Smulyan 

Chairman of the Board, President and
Chief Executive Officer 

EX-32.2

Exhibit 32.2

SECTION 1350 CERTIFICATION

The undersigned hereby certifies, in accordance with 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of Emmis Communications Corporation (the “Company”), that, to his knowledge:

(1) the Quarterly Report of the Company on Form 10-Q for the period ended August 31, 2006, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: October 10, 2006

/s/ PATRICK WALSH  

Patrick Walsh 

Executive Vice President, Chief Financial Officer and Treasurer