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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2016

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 ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

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



Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	ý

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No ý

The number of shares outstanding of each of Emmis Communications Corporation's classes of common stock, as of January 2, 2017 , was:



11,253,904			Shares of Class A Common Stock, $.01 Par Value
1,142,366			Shares of Class B Common Stock, $.01 Par Value
-			Shares of Class C Common Stock, $.01 Par Value

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INDEX



	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements	3
Condensed Consolidated Statements of Operations for the three-month and nine-month periods ended November 30, 2015 and 2016	3
Condensed Consolidated Statements of Comprehensive Income for the three-month and nine-month periods ended November 30, 2015 and 2016	4
Condensed Consolidated Balance Sheets as of February 29, 2016 and November 30, 2016	5
Condensed Consolidated Statement of Changes in (Deficit) Equity for the nine-month period ended November 30, 2016	7
Condensed Consolidated Statements of Cash Flows for the nine-month periods ended November 30, 2015 and 2016	8
Notes to Condensed Consolidated Financial Statements	10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3. Quantitative and Qualitative Disclosures about Market Risk	39
Item 4. Controls and Procedures	39
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 6. Exhibits	41
Signatures	42

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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 November 30,						Nine Months Ended November 30,
	2015			2016			2015			2016
NET REVENUES	$	59,614		$	56,299		$	180,549		$	171,075
OPERATING EXPENSES:
Station operating expenses excluding depreciation and amortization expense of $1,276, $934, $3,540 and $3,129, respectively	43,654			45,426			136,931			135,406
Corporate expenses excluding depreciation and amortization expense of $256, $198, $845 and $617, respectively	2,810			3,397			10,116			8,894
Impairment loss on intangible assets	-			-			-			2,988
Depreciation and amortization	1,532			1,132			4,385			3,746
Gain on sale of publishing assets, net of disposition costs	-			(17,491		)	-			(17,491		)
Loss on disposal of property and equipment	-			-			-			125
Total operating expenses	47,996			32,464			151,432			133,668
OPERATING INCOME	11,618			23,835			29,117			37,407
OTHER EXPENSE:
Interest expense	(4,768		)	(4,481		)	(14,259		)	(13,929		)
Loss on debt extinguishment	-			(478		)	-			(478		)
Other income, net	7			10			845			142
Total other expense	(4,761		)	(4,949		)	(13,414		)	(14,265		)
INCOME BEFORE INCOME TAXES	6,857			18,886			15,703			23,142
PROVISION FOR INCOME TAXES	889			629			2,662			1,968
CONSOLIDATED NET INCOME	5,968			18,257			13,041			21,174
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	420			581			1,574			477
NET INCOME ATTRIBUTABLE TO THE COMPANY	5,548			17,676			11,467			20,697

NET INCOME PER SHARE - BASIC	$	0.50		$	1.46		$	1.05		$	1.73
NET INCOME PER SHARE - DILUTED	$	0.47		$	1.43		$	0.97		$	1.70
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic	11,100			12,114			10,961			11,989
Diluted	11,876			12,387			11,863			12,163

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 COMPREHENSIVE INCOME

(Unaudited)

(In thousands)



	Three Months Ended November 30,				Nine Months Ended November 30,
	2015		2016		2015		2016
CONSOLIDATED NET INCOME	$	5,968	$	18,257	$	13,041	$	21,174
LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	420		581		1,574		477
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	5,548	$	17,676	$	11,467	$	20,697

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 29, 2016		November 30, 2016
		(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	4,456	$	2,057
Restricted cash	1,464		2,095
Accounts receivable, net	34,906		37,477
Prepaid expenses	7,413		6,725
Other current assets	3,452		3,723
Total current assets	51,691		52,077
PROPERTY AND EQUIPMENT, NET	33,843		30,678
INTANGIBLE ASSETS (NOTE 3):
Indefinite-lived intangibles	205,129		204,443
Goodwill	14,697		4,603
Other intangibles, net	3,299		1,669
Total intangible assets	223,125		210,715
OTHER ASSETS, NET	7,947		8,597
Total assets	$	316,606	$	302,067

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 29, 2016			November 30, 2016
		(Unaudited)
LIABILITIES AND (DEFICIT) EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	8,127		$	7,952
Current maturities of long-term debt (Note 4)	17,573			10,583
Accrued salaries and commissions	8,375			5,822
Deferred revenue	11,435			7,841
Other current liabilities	5,775			5,321
Total current liabilities	51,285			37,519
LONG-TERM DEBT, NET OF CURRENT MATURITIES (NOTE 4)	228,027			207,428
OTHER NONCURRENT LIABILITIES	7,728			6,847
DEFERRED INCOME TAXES	43,715			45,615
Total liabilities	330,755			297,409
COMMITMENTS AND CONTINGENCIES
(DEFICIT) EQUITY:
Class A common stock, $.01 par value; authorized 42,500,000 shares; issued and outstanding 10,402,400 shares at February 29, 2016 and 11,253,904 shares at November 30, 2016	104			113
Class B common stock, $.01 par value; authorized 7,500,000 shares; issued and outstanding 1,142,366 shares at February 29, 2016 and November 30, 2016	11			11
Series A non-cumulative convertible preferred stock, $.01 par value; $50.00 liquidation preference per share, aggregate liquidation preference and redemption amount of $43,316 and $0 at February 29, 2016 and November 30, 2016, respectively; authorized 2,875,000 shares; issued and outstanding 866,319 shares at February 29, 2016; no shares issued and outstanding at November 30, 2016	9			-
Additional paid-in capital	589,830			591,726
Accumulated deficit	(642,500		)	(621,803		)
Total shareholders' deficit	(52,546		)	(29,953		)
NONCONTROLLING INTERESTS	38,397			34,611
Total (deficit) equity	(14,149		)	4,658
Total liabilities and (deficit) equity	$	316,606		$	302,067

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

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EMMIS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN (DEFICIT) EQUITY

(Unaudited)

(In thousands, except share data)



	Class A Common Stock				Class B Common Stock			Series A Preferred Stock					Additional Paid-in Capital			Accumulated Deficit			Noncontrolling Interests			Total (Deficit) Equity
	Shares		Amount		Shares	Amount		Shares		Amount
Balance, February 29, 2016	10,402,400		$	104	1,142,366	$	11	866,319		$	9		$	589,830		$	(642,500	)	$	38,397		$	(14,149	)
Net income																20,697			477			21,174
Issuance of common stock to employees and officers	189,036		2										1,778									1,780
Exercise of stock options	57,738		1										114									115
Distributions to noncontrolling interests																			(4,263		)	(4,263		)
Conversion of Series A Preferred Stock to Class A Common Stock	606,423		6					(866,319	)	(9		)	9									6
Purchase of Class A common stock	(1,693	)	-										(5		)							(5		)
Balance, November 30, 2016	11,253,904		$	113	1,142,366	$	11	-		$	-		$	591,726		$	(621,803	)	$	34,611		$	4,658

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)

	Nine Months Ended November 30,
	2015			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Consolidated net income	$	13,041		$	21,174
Adjustments to reconcile consolidated net income to net cash provided by operating activities -
Impairment loss on intangible assets	-			2,988
Gain on sale of publishing assets, net of disposition costs	-			(17,491		)
Depreciation and amortization	4,385			3,746
Amortization of debt discount	1,245			1,270
Noncash accretion of debt	557			557
Loss on debt extinguishment	-			478
Provision for bad debts	292			161
Provision for deferred income taxes	2,523			1,900
Noncash compensation	4,669			2,217
Loss on disposal of property and equipment	-			125
Changes in assets and liabilities -
Restricted cash	693			(631		)
Accounts receivable	(3,376		)	(2,732		)
Prepaid expenses and other current assets	445			532
Other assets	(1,216		)	(715		)
Accounts payable and accrued liabilities	(4,294		)	(2,728		)
Deferred revenue	(622		)	(146		)
Income taxes	(12		)	(87		)
Other liabilities	(1,630		)	(916		)
Net cash provided by operating activities	16,700			9,702
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(1,943		)	(1,403		)
Net proceeds from the sale of publishing assets	-			23,466
Distributions from investments, net	123			66
Proceeds from the sale of property and equipment	-			283
Other	-			(35		)
Net cash (used in) provided by investing activities	$	(1,820	)	$	22,377

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

	Nine Months Ended November 30,
	2015			2016
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt	$	(17,022	)	$	(45,862	)
Proceeds from long-term debt	9,000			16,000
Debt-related costs	(1,134		)	(32		)
Distributions to noncontrolling interests	(4,391		)	(4,263		)
Proceeds from the exercise of stock options	133			115
Purchase of Class A common stock	-			(5		)
Settlement of tax withholding obligations on stock issued to employees	(819		)	(431		)
Net cash used in financing activities	(14,233		)	(34,478		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	647			(2,399		)
CASH AND CASH EQUIVALENTS:
Beginning of period	3,669			4,456
End of period	$	4,316		$	2,057
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	12,567		$	12,082
Cash paid for income taxes, net	216			112
Noncash financing transactions-
Stock issued to employees and directors	4,042			2,217

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)

November 30, 2016

(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 ("SEC"), the condensed consolidated interim financial statements included herein have been prepared, without audit, by Emmis Communications Corporation ("ECC") and its subsidiaries (collectively, "our," "us," "we," "Emmis" or the "Company"). As permitted under the applicable rules and regulations of the SEC, certain information and footnote disclosures normally included in financial statements prepared in conformity with accounting principles generally accepted in the United States of America 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 29, 2016 . 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, except as otherwise noted) necessary to present fairly the consolidated financial position of Emmis at November 30, 2016 , the results of its operations for the three-month and nine-month periods ended November 30, 2015 and 2016 , and cash flows for the nine -month periods ended November 30, 2015 and 2016 .

There have been no changes to our significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended February 29, 2016 that have had a material impact on our condensed consolidated financial statements and related notes.

Common Stock Reverse Split

On July 8, 2016, the Company effected a one-for-four reverse stock split for its Class A, Class B and Class C common stock. All share and per share information has been retroactively adjusted to reflect the reverse stock split.

Basic and Diluted Net Income Per Common Share

Basic net income per common share is computed by dividing net income attributable 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 November 30, 2015 and 2016 consisted of stock options and restricted stock awards. Potentially dilutive securities at November 30, 2015 also included Series A non-cumulative convertible preferred stock (the "Preferred Stock"). All shares of Preferred Stock were converted into Class A common stock during the three months ended May 31, 2016. The following table sets forth the calculation of basic and diluted net income per share:




	For the three months ended
	November 30, 2015					November 30, 2016
	Net Income		Shares	Net Income Per Share		Net Income		Shares	Net Income Per Share
	(amounts in 000's, except per share data)
Basic net income per common share:
Net income available to common shareholders	$	5,548	11,100	$	0.50	$	17,676	12,114	$	1.46
Impact of equity awards	-		247			-		273
Impact of conversion of preferred stock into common stock	-		529			-		-
Diluted net income per common share:
Net income available to common shareholders	$	5,548	11,876	$	0.47	$	17,676	12,387	$	1.43

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	For the nine months ended
	November 30, 2015					November 30, 2016
	Net Income		Shares	Net Income Per Share		Net Income		Shares	Net Income Per Share
	(amounts in 000's, except per share data)
Basic net income per common share:
Net income available to common shareholders	$	11,467	10,961	$	1.05	$	20,697	11,989	$	1.73
Impact of equity awards	-		352	-		-		174	-
Impact of conversion of preferred stock into common stock	-		550	-		-		-	-
Diluted net income per common share:
Net income available to common shareholders	$	11,467	11,863	$	0.97	$	20,697	12,163	$	1.70

Shares excluded from the calculation as the effect of their conversion into shares of our common stock would be antidilutive were as follows:



	For the three month ended November 30,		For the nine months ended November 30,
	2015	2016	2015	2016
	(shares in 000's )
Equity awards	1,346	1,237	987	1,362
Antidilutive common share equivalents	1,346	1,237	987	1,362

Local Programming and Marketing Agreement Fees

The Company from time to time enters into local programming and marketing agreements ("LMAs"), often pending regulatory approval of transfer of the Federal Communications Commission ("FCC") licenses in connection with acquisitions or dispositions of radio stations. Under the terms of these agreements, the acquiring company makes specified periodic payments to the holder of the FCC license in exchange for the right to program and sell advertising for a specified portion of the station's inventory of broadcast time. The acquiring company records revenues and expenses associated with the portion of the station's inventory of broadcast time it manages. Nevertheless, as the holder of the FCC license, the owner-operator retains control and responsibility for the operation of the station, including responsibility over all programming broadcast on the station.

On April 26, 2012, Emmis entered into an LMA with a subsidiary of Disney Enterprises, Inc. for 98.7FM in New York (formerly WRKS-FM and now WEPN-FM, hereinafter referred to as "98.7FM"). The LMA for this station started on April 30, 2012 and will continue until August 31, 2024. Emmis retains ownership and control of the station, including the related FCC license during the term of the LMA and is scheduled to receive an annual fee until the LMA's termination. LMA fee revenue is recorded on a straight-line basis over the term of the LMA as a component of net revenues in our accompanying condensed consolidated statements of operations.

The following table summarizes certain operating results of 98.7FM for all periods presented. Net revenues for 98.7FM are solely related to LMA fees. 98.7FM is a part of our radio segment.



	For the three months ended November 30,				For the nine months ended November 30,
	2015		2016		2015		2016
	(amounts in 000's)
Net revenues	$	2,582	$	2,582	$	7,748	$	7,748
Station operating expenses, excluding depreciation and amortization expense	232		346		748		960
Interest expense	754		699		2,302		2,142

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Assets and liabilities of 98.7FM as of February 29, 2016 and November 30, 2016 were as follows:



	As of February 29,		As of November 30,
	2016		2016
	(amounts in 000's)
Current assets:
Restricted cash	$	1,464	$	1,430
Prepaid expenses	545		459
Total current assets	2,009		1,889
Noncurrent assets:
Property and equipment, net	253		234
Indefinite lived intangibles	49,297		49,297
Deposits and other	5,460		6,042
Total noncurrent assets	55,010		55,573
Total assets	$	57,019	$	57,462
Current liabilities:
Accounts payable and accrued expenses	$	14	$	28
Current maturities of long-term debt	5,453		5,885
Deferred revenue	779		807
Other current liabilities	223		210
Total current liabilities	6,469		6,930
Noncurrent liabilities:
Long-term debt, net of current portion and unamortized debt discount	57,728		53,441
Total noncurrent liabilities	57,728		53,441
Total liabilities	$	64,197	$	60,371

Restricted Cash

The Company's restricted cash, included in current assets in the accompanying condensed consolidated balance sheets, totaled $1.5 million and $2.1 million as of February 29, 2016 and November 30, 2016 , respectively.

The terms of our 98.7FM non-recourse notes and related agreements discussed in Note 4 restrict a portion of our cash on deposit for specific operating and financing purposes. Restricted cash related to the 98.7FM non-recourse notes and related agreements totaled $1.5 million and $1.4 million as of February 29, 2016 and November 30, 2016 , respectively.

In connection with the Company's agreement with Sprint/United Management Company ("Sprint"), the Company collects cash from other participating companies in the radio industry and remits cash collected to Sprint. The entirety of cash collected but not yet remitted to Sprint classified as restricted cash as of November 30, 2016 was $0.6 million . The Company had remitted to Sprint all collected cash related to its agreement as of February 29, 2016.

Noncontrolling Interests

The Company follows Accounting Standards Codification paragraph 810-10-65-1 to report the noncontrolling interests related to our Austin radio partnership and Digonex Technologies Inc., a dynamic pricing business (hereinafter "Digonex"). We have a 50.1% controlling interest in our Austin radio partnership. We do not own any of the common equity of Digonex, but we consolidate the entity because we control its board of directors via rights granted in convertible preferred stock and convertible debt that we own.

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Noncontrolling interests represents the noncontrolling interest holders' proportionate share of the equity of the Austin radio partnership and Digonex. Noncontrolling interests are adjusted for the noncontrolling interest holders' proportionate share of the earnings or losses of the applicable entity. The noncontrolling interest continues to be attributed its share of losses even if that attribution results in a deficit noncontrolling interest balance. Below is a summary of the noncontrolling interest activity for the nine months ended November 30, 2015 and 2016:



	Austin radio partnership			Digonex			Total noncontrolling interests
Balance, February 28, 2015	$	47,883		$	(1,222	)	$	46,661
Net income (loss)	4,724			(3,150		)	1,574
Distributions to noncontrolling interests	(4,391		)	-			(4,391		)
Balance, November 30, 2015	$	48,216		$	(4,372	)	$	43,844

Balance, February 29, 2016	$	47,556		$	(9,159	)	$	38,397
Net income (loss)	4,453			(3,976		)	477
Distributions to noncontrolling interests	(4,263		)	-			(4,263		)
Balance, November 30, 2016	$	47,746		$	(13,135	)	$	34,611

Recent Accounting Pronouncements

In November, 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2016-18, Statement of Cash Flows (230): Restricted Cash. This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective in annual and quarterly periods in fiscal years beginning after December 15, 2017, with early adoption permitted, and requires a retrospective transition method. The Company is currently in the process of evaluating the impact of the adoption of this standard on its statement of cash flows.

In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers, to clarify the principles used to recognize revenue for all entities. The FASB deferred implementation of this guidance by one year with the issuance of Accounting Standards Update 2015-14. As such, this guidance will be effective for the Company in the first quarter of its fiscal year ending February 28, 2019. The Company is currently evaluating the method of adoption and impact, if any, the adoption of this guidance will have on its financial position and results of operations.

In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements - Going Concern - Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern. This update provides guidance about management's responsibility to evaluate whether there is substantial doubt about an entity's ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 is effective for the fiscal year ending February 28, 2017, and for annual periods and interim periods thereafter. Early adoption is permitted. The adoption of this update is not expected to have an impact on the Company's consolidated financial statements.

In April 2015, the FASB issued Accounting Standards Update 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. This update provides guidance as to when a company using a cloud computing service that includes a software license should capitalize and depreciate the software license. This guidance was effective for the Company as of March 1, 2016. The adoption of this guidance did not have any effect on the Company's financial position, results of operations, or cash flows.

In September 2015, the FASB issued Accounting Standards Update 2015-16, Business Combinations - Simplifying the Accounting for Measurement-Period Adjustments. This update requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined, including the cumulative effect of the change in the provisional amount as if the accounting had been completed at the acquisition date. This guidance was effective for the Company as of March 1, 2016. The adoption of this guidance did not have any effect on the Company's financial position, results of operations, or cash flows.

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (Topic 842). This update requires lessees to recognize, on the balance sheet, assets and liabilities for the rights and obligations created by leases of greater than twelve months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. This guidance will be effective for the Company as of March 1, 2019. A modified

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retrospective transition method is required. The Company is currently evaluating the impact the adoption of this guidance will have on its consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update 2016-09, Compensation-Stock Compensation (Topic 718): Improvement to Employee Share-based Payment Accounting (ASU 2016-09) to simplify the accounting for share-based payment transactions, including the income tax consequences, and standardize certain classifications on the statement of cash flows. As permitted by ASU 2016-09, the Company chose to early adopt the provisions of this update as of March 1, 2016. The adoption of this guidance did not have any effect on the Company's financial position, results of operations, or cash flows.

Note 2. Share Based Payments

The amounts recorded as share based compensation expense consist of stock option grants, restricted stock grants, and common stock issued to employees and directors in lieu of cash payments.

Stock Option Awards

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 10 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. Generally, these options either vest annually over 3 years ( one-third each year for 3 years ), or cliff vest at the end of 3 years . The Company issues new shares upon the exercise of stock options.

The fair value of each option awarded is estimated on the date of grant using a Black-Scholes option-pricing model and expensed on a straight-line basis over the vesting period. 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. The Company includes estimated forfeitures in its compensation cost and updates the estimated forfeiture rate through the final vesting date of awards. The risk-free interest 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 nine months ended November 30, 2015 and 2016 :



	Nine Months Ended November 30,
	2015	2016
Risk-Free Interest Rate:	1.3% - 1.4%	0.9% - 1.2%
Expected Dividend Yield:	0%	0%
Expected Life (Years):	4.3	4.3
Expected Volatility:	57.2% - 64.6%	55.5% - 60.0%

The following table presents a summary of the Company's stock options outstanding at November 30, 2016 , and stock option activity during the nine months ended November 30, 2016 ("Price" reflects the weighted average exercise price per share; "Aggregate Intrinsic Value" dollars in thousands):



	Options	Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding, beginning of period	1,948,384	$	6.36
Granted	179,678	2.42
Exercised	57,738	1.98
Forfeited	12,499	7.12
Expired	21,307	39.59
Outstanding, end of period	2,036,518	5.79		6.4	$	745
Exercisable, end of period	1,203,843	6.00		4.9	$	327

Cash received from option exercises for the nine months ended November 30, 2015 and 2016 was $0.1 million in both periods. The Company did not record an income tax benefit relating to the options exercised during the nine months ended November 30, 2015 or 2016.

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The weighted average per share grant date fair value of options granted during the nine months ended November 30, 2015 and 2016 , was $4.04 and $1.15 , respectively.

A summary of the Company's nonvested options at November 30, 2016 , and changes during the nine months ended November 30, 2016 , is presented below:



	Options	Weighted Average Grant Date Fair Value
Nonvested, beginning of period	830,803	$	3.71
Granted	179,678	1.15
Vested	165,307	5.31
Forfeited	12,499	3.62
Nonvested, end of period	832,675	2.84

There were 1.4 million shares available for future grants under the Company's various equity plans ( 1.1 million shares under the 2016 Equity Compensation Plan and 0.3 million shares under other plans) at November 30, 2016, not including shares that may become available for future grants upon forfeiture, lapse or surrender for taxes.

The vesting dates of outstanding options at November 30, 2016 range from January 2017 to July 2019, and expiration dates range from March 2017 to September 2026.

Restricted Stock Awards

The Company grants restricted stock awards to directors annually, and periodically grants restricted stock to employees in connection with employment agreements. Awards to directors are granted on the date of our annual meeting of shareholders and vest on the earlier of (i) the completion of the director's 3 -year term or (ii) the third anniversary of the date of grant. Restricted stock award grants are granted out of the Company's 2016 Equity Compensation Plan. The Company may also award, out of the Company's 2016 Equity Compensation Plan, stock to settle certain bonuses and other compensation that otherwise would be paid in cash. Any restrictions on these shares may be immediately lapsed on the grant date.

The following table presents a summary of the Company's restricted stock grants outstanding at November 30, 2016 , and restricted stock activity during the nine months ended November 30, 2016 ("Price" reflects the weighted average share price at the date of grant):



	Awards	Price
Grants outstanding, beginning of period	212,995	$	7.12
Granted	340,461	3.11
Vested (restriction lapsed)	328,001	4.23
Grants outstanding, end of period	225,455	5.27

The total grant date fair value of shares vested during the nine months ended November 30, 2015 and 2016 , was $2.8 million and $1.4 million , respectively.

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Recognized Non-Cash Compensation Expense

The following table summarizes stock-based compensation expense recognized by the Company during the three and nine months ended November 30, 2015 and 2016 . The Company did not recognize any tax benefits related to stock-based compensation during the periods presented below.



	Three Months Ended November 30,				Nine Months Ended November 30,
	2015		2016		2015		2016
Station operating expenses	$	365	$	221	$	1,610	$	755
Corporate expenses	539		480		3,059		1,462
Stock-based compensation expense included in operating expenses	$	904	$	701	$	4,669	$	2,217

As of November 30, 2016 , there was $1.6 million of unrecognized compensation cost, net of estimated forfeitures, related to nonvested share-based compensation arrangements. The cost is expected to be recognized over a weighted average period of approximately 1.3 years.

Note 3. Intangible Assets and Goodwill

Valuation of Indefinite-lived Broadcasting Licenses

In accordance with ASC Topic 350, Intangibles-Goodwill and Other, the Company's Federal Communications Commission ("FCC") licenses are considered indefinite-lived intangibles. These assets, which the Company determined were its only indefinite-lived intangibles, are not subject to amortization, but are tested for impairment at least annually as discussed below.

The carrying amounts of the Company's FCC licenses were $205.1 million as of February 29, 2016 and November 30, 2016 . As of November 30, 2016, $0.7 million of the Company's FCC licenses were classified as held for sale (see Note 10 for more discussion). Pursuant to Emmis' accounting policy, stations in a geographic market cluster are considered a single unit of accounting, provided that they are not being operated under an LMA with another broadcaster. The Company generally performs its annual impairment test of indefinite-lived intangibles as of December 1 of each year. When indicators of impairment are present, the Company will perform an interim impairment test. During the nine months ended November 30, 2016 , no new or additional impairment indicators emerged; hence, no interim impairment testing was warranted. These impairment tests may result in impairment charges in future periods.

Fair value of our FCC licenses is estimated to be the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. To determine the fair value of our FCC licenses, the Company uses an income valuation method when it performs its impairment tests. Under this method, the Company projects cash flows that would be generated by each of its units of accounting assuming the unit of accounting was commencing operations in its respective market 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 commenced operations at the beginning of the valuation period. 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. Each of these assumptions may change in the future based upon changes in general economic conditions, audience behavior, consummated transactions, and numerous other variables that may be beyond our control. When evaluating our radio broadcasting licenses for impairment, the testing is performed at the unit of accounting level as determined by ASC Topic 350-30-35. In our case, radio stations in a geographic market cluster are considered a single unit of accounting, provided that they are not being operated under an LMA.

Valuation of Goodwill

ASC Topic 350-20-35 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, unless indications of impairment exist during an interim period. During the quarter ended August 31, 2016, the Company lowered its growth expectations for Digonex for the next several years due to slow client adoption of dynamic pricing services. While the Company continues to believe in the long-term growth prospects of Digonex, the lengthy sales cycle has caused Digonex to perform below expectations to date. Despite lowering near-term growth expectations for Digonex in connection with our annual impairment review for fiscal 2016, which led to a goodwill impairment charge of $0.7 million , performance in the first six months of the current fiscal year indicated that a further revision was appropriate. Our projections now assume Digonex will generate cash flow losses in the

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short and medium-term. The combination of lower-than-expected current period results, coupled with downward revisions to future revenue projections, resulted in an impairment indicator that caused the Company to assess goodwill and related intangibles on an interim basis during the quarter ended August 31, 2016. The Company's discounted cash flow analysis for Digonex indicated a nominal enterprise value. Therefore, in connection with the interim impairment test, Emmis determined that Digonex's goodwill was fully impaired and recorded an impairment loss of $2.1 million during the quarter ended August 31, 2016.

When assessing its goodwill of radio and publishing operations for impairment, the Company generally 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. There are no publicly traded publishing companies that are focused predominantly on city and regional magazines as is our publishing segment. Therefore, the market multiple used as a benchmark for our publishing reporting units has been based on recently completed transactions within the city and regional magazine industry or analyst reports that include valuations of magazine divisions within publicly traded media conglomerates. Management believes this methodology for valuing radio and publishing properties is a common approach and believes that the multiples used in the valuation are reasonable given our peer comparisons and recent market transactions. To corroborate the step-one reporting unit fair values determined using the market approach described above, management also uses an income approach, which is a discounted cash flow method to determine the fair value of the reporting unit.

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 as an impairment charge in the statement of operations.

The following table summarizes the Company's goodwill by segment as of February 29, 2016 and November 30, 2016 .



	As of February 29,		As of November 30,
	2016		2016
Radio	$	4,603	$	4,603
Publishing	8,036		-
Corporate & Emerging Technologies	2,058		-
Total Goodwill	$	14,697	$	4,603

The change in publishing goodwill relates to the Company's sale of Texas Monthl y (see Note 10 for more discussion).

Definite-lived intangibles

The Company's definite-lived intangible assets consist of trademarks, customer lists, and a syndicated programming contract, 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 assets at February 29, 2016 and November 30, 2016 :



		As of February 29, 2016						As of November 30, 2016
		(in 000's)
	Weighted Average Remaining Useful Life (in years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Trademarks	8.4	$	1,240	$	727	$	513	$	756	$	558	$	198
Patents	N/A	1,815		1,141		674		-		-		-
Customer lists	0.5	1,015		543		472		315		264		51
Programming agreement	4.8	2,154		514		1,640		2,154		734		1,420
TOTAL		$	6,224	$	2,925	$	3,299	$	3,225	$	1,556	$	1,669

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In accordance with Accounting Standards Codification paragraph 360-10, the Company performs an analysis to (i) determine if indicators of impairment of a long-lived asset are present, (ii) test the long-lived asset for recoverability by comparing undiscounted cash flows of the long-lived asset to its carrying value and (iii) measure any potential impairment by comparing the long-lived asset's fair value to its current carrying value. As discussed above, performance below the Company's expectations, coupled with a downward revision of long-term forecasts for Digonex, led the Company to measure impairment for Digonex's definite-lived intangibles during the quarter ended August 31, 2016. The Company determined that the patents, customer list and trademarks of Digonex were fully impaired and recorded an impairment loss of $0.9 million .

Total amortization expense from definite-lived intangibles for the nine-month periods ended November 30, 2015 and 2016 was $0.5 million and $0.6 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),	Expected Amortization Expense
	(in 000's)
2017	$	665
2018	344
2019	317
2020	317
2021	317

Note 4. Long-term Debt

Long-term debt was comprised of the following at February 29, 2016 and November 30, 2016 :



	February 29, 2016			November 30, 2016
2014 Credit Agreement debt :
Revolver	$	3,000		$	2,000
Term Loan	181,762			156,955
Total 2014 Credit Agreement debt	184,762			158,955

98.7FM non-recourse debt	65,411			61,356
Digonex non-recourse debt (1)	4,714			5,270
Less: Current maturities	(17,573		)	(10,583		)
Less: Unamortized original issue discount	(9,287		)	(7,570		)
Total long-term debt	$	228,027		$	207,428

(1) The face value of Digonex non-recourse debt is $6.2 million

2014 Credit Agreement

On June 10, 2014, Emmis entered into the 2014 Credit Agreement, by and among the Company, EOC, as borrower (the "Borrower"), certain other subsidiaries of the Company, as guarantors (the "Subsidiary Guarantors"), the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Fifth Third Bank, as syndication agent.

The 2014 Credit Agreement includes a senior secured term loan facility (the "Term Loan") of $ 185.0 million and a senior secured revolving credit facility of $20.0 million , and contains provisions for an uncommitted increase of up to $20.0 million principal amount (plus additional amounts so long as a pro forma total net senior secured leverage ratio condition is met) of the revolving credit facility and/or the Term Loan subject to the satisfaction of certain conditions. The revolving credit facility includes a sub-facility for the issuance of up to $5.0 million of letters of credit. Pursuant to the 2014 Credit Agreement, the Borrower borrowed $185.0 million of the Term Loan on June 10, 2014; $109.0 million was disbursed to the Borrower (the "Initial Proceeds") and the remaining $76.0 million was funded into escrow (the "Subsequent Acquisition Proceeds").

The Initial Proceeds, coupled with $13.0 million of revolving credit facility borrowings, were used by the Borrower on June 10, 2014 to repay all amounts outstanding under the 2012 Credit Agreement, to make a $55.0 million initial payment

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associated with our acquisition of WBLS-FM and WLIB-AM, and to pay fees and expenses. The Subsequent Acquisition Proceeds were used to make the final $76.0 million payment related to the acquisition of WBLS-FM and WLIB-AM on February 13, 2015.

The Term Loan is due not later than June 10, 2021 and initially amortized in an amount equal to 1% per annum (subsequently amended, see below) of the original principal amount of the Term Loan, payable in quarterly installments commencing April 1, 2015, with the balance payable on the maturity date. The revolving credit facility expires not later than June 10, 2019. An unused commitment fee of 50 basis points per annum will be payable quarterly on the average unused amount of the revolving credit facility. Prior to the amendments to the 2014 Credit Agreement discussed below, the Term Loan and amounts borrowed under the revolving credit facility bore interest, at the Borrower's option, at either (i) the Alternate Base Rate (as defined in the 2014 Credit Agreement) (but not less than 2.00% ) plus 3.75% or (ii) the Adjusted LIBO Rate (as defined in the 2014 Credit Agreement) (but not less than 1.00% ) plus 4.75% .

The 2014 Credit Agreement is carried on our condensed consolidated balance sheets net of an original issue discount. The original issue discount, which was $7.1 million and $5.5 million as of February 29, 2016 and November 30, 2016 , respectively, is being amortized as additional interest expense over the life of the 2014 Credit Agreement.

The obligations under the 2014 Credit Agreement are secured by a perfected first priority security interest in substantially all of the assets of the Company, the Borrower and the Subsidiary Guarantors.

On November 7, 2014, Emmis entered into the First Amendment to the 2014 Credit Agreement. The First Amendment (i) increased the maximum Total Leverage Ratio to 6.00 :1.00 for the period February 28, 2015 through February 29, 2016, (ii) adjusted the definition of Consolidated EBITDA to exclude during the term of the 2014 Credit Agreement up to $5 million in severance and/or contract termination expenses and up to $2.5 million in losses attributable to the reformatting of the Company's radio stations, (iii) extended the requirement for the Borrower to pay a 1.00% fee on certain prepayments of the Term Loan to November 7, 2015, (iv) increased the Applicable Margin by 0.25% for at least six months from the date of the First Amendment and until the Total Leverage Ratio is less than 5.00 :1.00, and (v) made certain technical adjustments to the definition of Consolidated Excess Cash Flow and to address the Foreign Account Tax Compliance Act. Emmis paid a total of approximately $1.0 million of transaction fees to the Lenders that consented to the First Amendment, which were recorded as original issue discount and are being amortized over the remaining life of the 2014 Credit Agreement.

On April 30, 2015, Emmis entered into the Second Amendment to the 2014 Credit Agreement. The Second Amendment (i) increased the maximum Total Leverage Ratio to (A) 6.75 :1.00 during the period from May 31, 2015 through February 29, 2016, (B) 6.50 :1.00 for the quarter ended May 31, 2016, (C) 6.25 :1.00 for the quarter ended August 31, 2016, (D) 6.00 :1.00 for the quarter ended November 30, 2016, and (E) 5.75 :1.00 for the quarter ended February 28, 2017, after which it reverts to the original ratio of 4.00 :1.00 for the quarters ended May 31, 2017 and thereafter, (ii) required Emmis to pay a 2.00% fee on certain prepayments of the Term Loan prior to the first anniversary of the Second Amendment and requires Emmis to pay a 1.00% fee on certain prepayments of the Term Loan from the first anniversary of the Second Amendment until the second anniversary of the Second Amendment, (iii) increased the Applicable Margin throughout the remainder of the term of the Credit Agreement to 5.00% for ABR Loans (as defined in the Credit Agreement) and 6.00% for Eurodollar Loans (as defined in the 2014 Credit Agreement), and (iv) increased the amortization to 0.50% per calendar quarter through January 1, 2016 and to 1.25% per calendar quarter thereafter commencing April 1, 2016. Emmis paid a total of approximately $1.1 million of transaction fees to the Lenders that consented to the Second Amendment, which were recorded as original issue discount and are being amortized over the remaining life of the 2014 Credit Agreement.

On August 22, 2016, Emmis entered into the Third Amendment to the 2014 Credit Agreement. The Third Amendment made certain changes to the Credit Agreement to facilitate the Company's consideration of and, if approved by the Company's Board of Directors and shareholders, entry into a transaction that would have resulted in the Class A common stock of the Company ceasing to be registered under the Securities Act of 1934 (such potential transaction, a "Going Private Transaction"). Specifically, the Third Amendment added an exception to the covenant restricting transactions with affiliates that (i) permitted the Company to enter into a Going Private Transaction with an affiliate of the Company and (ii) permitted the Borrower to pay any costs incurred or reimbursed by an affiliate of the Company in connection with a Going Private Transaction, whether or not the transaction was consummated. The Third Amendment also allowed the Company to add certain costs and expenses incurred in connection with a Going Private Transaction to Consolidated EBITDA, as defined in the Credit Agreement, for purposes of determining compliance with the financial covenants in the Credit Agreement, subject to caps of (i) $2.5 million if a Going Private Transaction was not recommended by a special committee of the Company's Board of Directors and (ii) $8.0 million if a Going Private Transaction was recommended by a special committee of the Company's Board of Directors but not consummated. Finally, the Third Amendment made certain changes to the Credit Agreement that would have been effective only if a Going Private Transaction was consummated. The Third Amendment also required the Borrower to pay a 50 basis point fee to the lenders that consented to it either if a Going Private Transaction was consummated or if such a transaction was

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recommended by a special committee of the board of directors of the Company but not consummated. The special committee of the board of directors did not recommend the Going Private Transaction and no such transaction was consummated. See Note 10 for discussion of the Going Private Transaction.

In connection with the closing of the sale of Texas Monthly on November 1, 2016, Emmis repaid $15.0 million of Term Loans and $8.5 million of Revolver borrowings (see Note 10 for more discussion of the sale of Texas Monthly ). Under the terms of the 2014 Credit Agreement, Emmis was required to use all Net Available Proceeds (as defined in the 2014 Credit Agreement) from the sale of Texas Monthly to repay Term Loans unless it exercised its right under the 2014 Credit Agreement to reinvest a portion of the Net Available Proceeds in new long-term assets of the Company. On November 1, 2016, Emmis exercised this reinvestment right for up to $10.0 million of Net Available Proceeds. This election allows the Company to reduce the amount of Net Available Proceeds by amounts used to purchase assets within 365 days of the election, or 545 days of the election so long as the asset purchase is under contract within 365 days. Routine capital expenditures qualify as a reinvestment under the terms of the 2014 Credit Agreement. The calculation of Net Available Proceeds is also reduced for transaction-related costs and certain other estimates including severance obligations that Emmis may be required to fund if employees are terminated by the buyer of Texas Monthly prior to February 28, 2017. Future changes in these estimates will impact the calculation of Net Available Proceeds. The current calculation of Net Available Proceeds, reinvestments and Term Loan repayments related to the sale of Texas Monthly is as follows:



	Term Loan Repayments Texas Monthly Sale
Gross proceeds from the sale of Texas Monthly	$	25,000
Working capital and other closing adjustments	(747		)
Estimate of transaction costs	(126		)
Estimate of employee-related transaction costs, including maximum reimbursement to buyer for severance	(2,977		)
Subtotal	21,150
Less: Reinvestments - capital expenditures since November 1, 2016	(388		)
Less: Term Loan repayment on November 1, 2016	(15,000		)
Remaining Net Available Proceeds, subject to finalization of estimates and reinvestments	$	5,762

This amount is not included as a current maturity of long-term debt in the accompanying condensed consolidated balance sheet as of November 30, 2016 because the amount, if any, of additional Net Available Proceeds required to be used to repay Term Loans within one year is not determinable primarily because such amounts are reduced by future capital expenditures that we may incur.

We were in compliance with all financial and non-financial covenants as of November 30, 2016 . Our Total Leverage Ratio and Interest Coverage Ratio (each as defined in the 2014 Credit Agreement) requirements and actual amounts as of November 30, 2016 were as follows:



	As of November 30, 2016
	Covenant Requirement	Actual Results
Maximum Total Leverage Ratio	6.00 : 1.00	5.53 : 1.00
Minimum Interest Coverage Ratio	2.00 : 1.00	2.32 : 1.00

98.7FM Non-recourse Debt

On May 30, 2012, the Company, through wholly-owned, newly-created subsidiaries, issued $82.2 million of non-recourse notes. Teachers Insurance and Annuity Association of America, through a participation agreement with Wells Fargo Bank Northwest, National Association, is entitled to receive payments made on the notes. The notes are obligations only of the newly-created subsidiaries, are non-recourse to the rest of the Company and its subsidiaries, and are secured by the assets of the newly-created subsidiaries, including the payments made to the newly-created subsidiary related to the 98.7FM LMA, which are guaranteed by Disney Enterprises, Inc. The notes bear interest at 4.1% . The 98.7FM non-recourse notes are carried on our condensed consolidated balance sheets net of an original issue discount. The original issue discount, which was $2.2 million and $2.0 million as of February 29, 2016 and November 30, 2016 , respectively, is being amortized as additional interest expense over the life of the notes.

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Digonex Non-recourse Debt

Digonex non-recourse notes payable consist of notes payable issued by Digonex, which were recorded at fair value on June 16, 2014, the date that Emmis acquired a controlling interest in Digonex. The notes payable, some of which are secured by the assets of Digonex, are non-recourse to the rest of the Company and its subsidiaries. The notes payable mature on December 31, 2017 and accrue interest at 5.0% per annum. Interest is due at maturity. The face value of the notes payable is $6.2 million . The Company is accreting the difference between this face value and the original $3.6 million fair value of the notes payable recorded in the acquisition of its controlling interest of the business as interest expense over the remaining term of the notes payable.

As a result of our mandatory repayment of Term Loans in connection with our sale of Texas Monthly , quarterly mandatory Term Loan repayments decreased from $2.3 million per quarter to $1.6 million per quarter. Also, no quarterly amortization payment is due on January 1, 2017. Quarterly amortization payments will resume effective April 1, 2017. Based on amounts outstanding at November 30, 2016 , mandatory principal payments of long-term debt for the next five years and thereafter are summarized below:



Year Ended	2014 Credit Agreement						Digonex		Total
February 28 (29),	Revolver		Term Loan		98.7FM Debt		Notes payable		Payments
2017	$	-	$	-	$	1,398	$	-	$	1,398
2018	-		6,265		6,039		6,199		18,503
2019	-		6,265		6,587		-		12,852
2020	2,000		6,265		7,150		-		15,415
2021	-		6,265		7,756		-		14,021
Thereafter	-		131,895		32,426		-		164,321
Total	$	2,000	$	156,955	$	61,356	$	6,199	$	226,510

Note 5. Liquidity

The Company continually projects its anticipated cash needs, which include its operating needs, capital needs, and principal and interest payments on its indebtedness. As of the filing of this Form 10-Q, management believes the Company can meet its liquidity needs through the end of fiscal year 2017 with cash and cash equivalents on hand and projected cash flows from operations. Based on these projections, management also believes the Company will be in compliance with its debt covenants through the end of fiscal year 2017.

Note 6. Fair Value Measurements

As defined in ASC Topic 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

Recurring Fair Value Measurements

The following table sets forth by level within the fair value hierarchy the Company's financial assets and liabilities that were accounted for at fair value on a recurring basis as of February 29, 2016 and November 30, 2016 . The financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

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	As of November 30, 2016
	Level 1		Level 2		Level 3
	Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs		Total
	(in 000's)
Available for sale securities	$	-	$	-	$	800	$	800
Total assets measured at fair value on a recurring basis	$	-	$	-	$	800	$	800

	As of February 29, 2016
	Level 1		Level 2		Level 3
	Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs		Total
	(in 000's)
Available for sale securities	$	-	$	-	$	800	$	800
Total assets measured at fair value on a recurring basis	$	-	$	-	$	800	$	800

Available for sale securities - Emmis' available for sale securities are comprised of preferred stock of a private company that is not traded in active markets and is included in other assets, net in the accompanying condensed consolidated balance sheets. The investment is recorded at fair value, which was generally estimated using significant unobservable market parameters, resulting in a level 3 categorization. The carrying value of our preferred stock investment was determined by using implied valuations of recent rounds of financing and by other corroborating evidence, which may include the application of various valuation methodologies including option-pricing and discounted cash flow based models.

The following table shows a reconciliation of the beginning and ending balances for fair value measurements using significant unobservable inputs:



	For the Nine Months Ended November 30,
	2015		2016
	Available For Sale Securities		Available For Sale Securities
Beginning Balance	$	500	$	800
Purchases	-		-
Ending Balance	$	500	$	800

Non-Recurring Fair Value Measurements

The Company has certain assets that are measured at fair value on a non-recurring basis under circumstances and events that include those described in Note 3, Intangible Assets and Goodwill, and are adjusted to fair value only when the carrying values are more than the fair values. The categorization of the framework used to price the assets is considered a Level 3 measurement due to the subjective nature of the unobservable inputs used to determine the fair value (see Note 3 for more discussion).

Fair Value of Other Financial Instruments

Certain nonfinancial assets and liabilities are measured at fair value on a nonrecurring basis and are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. Assets and liabilities acquired in business combinations are recorded at their fair value as of the date of acquisition.

The estimated fair value of financial instruments is determined using the best available market information and appropriate valuation methodologies. Considerable judgment is necessary, however, in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts that the Company

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could realize in a current market exchange, or the value that ultimately will be realized upon maturity or disposition. The use of different market assumptions may have a material effect on the estimated fair value amounts.

The following methods and assumptions were used to estimate the fair value of financial instruments:

- Cash and cash equivalents : The carrying amount of these assets approximates fair value because of the short maturity of these instruments.

- 2014 Credit Agreement debt : As of November 30, 2016 , the fair value and carrying value, excluding original issue discount, of the Company's 2014 Credit Agreement debt was $144.6 million and $159.0 million , respectively. The Company's estimate of fair value was based on quoted prices of this instrument and is considered a Level 2 measurement.

- Other long-term debt : The Company's 98.7FM non-recourse debt and Digonex non-recourse debt is not actively traded and is considered a level 3 measurement. The Company believes the current carrying value of its other long-term debt approximates its fair value.

Note 7. Segment Information

The Company's operations are aligned into three business segments: (i) Radio, (ii) Publishing and (iii) Corporate & Emerging Technologies. Emerging Technologies includes our TagStation, NextRadio and Digonex businesses. These business segments are consistent with the Company's management of these businesses and its financial reporting structure. Corporate expenses are not allocated to reportable segments. The Company's segments operate exclusively in the United States.

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 29, 2016 , and in Note 1 to these condensed consolidated financial statements, are applied consistently across segments.



Three Months Ended November 30, 2016	Radio		Publishing			Corporate & Emerging Technologies			Consolidated
Net revenues	$	42,462	$	13,633		$	204		$	56,299
Station operating expenses excluding and depreciation and amortization expense	28,979		13,828			2,619			45,426
Corporate expenses excluding depreciation and amortization expense	-		-			3,397			3,397
Depreciation and amortization	854		59			219			1,132
Gain on sale of publishing assets, net of disposition costs	-		(17,491		)	-			(17,491		)
Operating income (loss)	$	12,629	$	17,237		$	(6,031	)	$	23,835



Three Months Ended November 30, 2015	Radio		Publishing		Corporate & Emerging Technologies			Consolidated
Net revenues	$	42,634	$	16,658	$	322		$	59,614
Station operating expenses excluding LMA fees and depreciation and amortization expense	27,352		14,310		1,992			43,654
Corporate expenses excluding depreciation and amortization expense	-		-		2,810			2,810
Depreciation and amortization	934		68		530			1,532
Operating income (loss)	$	14,348	$	2,280	$	(5,010	)	$	11,618

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Nine Months Ended November 30, 2016	Radio		Publishing			Corporate & Emerging Technologies			Consolidated
Net revenues	$	131,133	$	39,344		$	598		$	171,075
Station operating expenses excluding depreciation and amortization expense	87,915		40,265			7,226			135,406
Corporate expenses excluding depreciation and amortization expense	-		-			8,894			8,894
Impairment loss	-		-			2,988			2,988
Depreciation and amortization	2,642		201			903			3,746
Gain on sale of publishing assets, net of disposition costs	-		(17,491		)	-			(17,491		)
Loss on disposal of property and equipment	125		-			-			125
Operating income (loss)	$	40,451	$	16,369		$	(19,413	)	$	37,407



Nine Months Ended November 30, 2015	Radio		Publishing		Corporate & Emerging Technologies			Consolidated
Net revenues	$	132,789	$	46,775	$	985		$	180,549
Station operating expenses excluding depreciation and amortization expense	87,925		43,557		5,449			136,931
Corporate expenses excluding depreciation and amortization expense	-		-		10,116			10,116
Depreciation and amortization	2,528		192		1,665			4,385
Operating income (loss)	$	42,336	$	3,026	$	(16,245	)	$	29,117



Total Assets	Radio		Publishing		Corporate & Emerging Technologies		Consolidated
As of February 29, 2016	$	271,336	$	22,060	$	23,210	$	316,606
As of November 30, 2016	$	273,654	$	10,578	$	17,835	$	302,067

Note 8. Regulatory, Legal and Other Matters

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

On July 7, 2014, individuals who had been seeking to overturn the FCC's approval of the transfer of the broadcast licenses for WBLS-FM and WLIB-AM from entities associated with Inner City Broadcasting to YMF (the entities that subsequently sold the two stations to Emmis) filed with the U.S. Court of Appeals for the District of Columbia Circuit a Notice of Appeal of the FCC's approval of the transfer. The U.S. Court of Appeals for the District of Columbia upheld the license transfer, but the plaintiffs filed a Petition for Writ of Certiorari with the United States Supreme Court. The United States Supreme Court declined to hear the appeal on October 17, 2016.

In March 2015, an individual filed a lawsuit in the Federal District Court in New York challenging the transfer of the assets of WBLS-FM and WLIB-AM from Inner City to YMF, and claimed that Emmis had exerted undue influence in securing the FCC's consent to the transfer of the FCC licenses of WBLS-FM and WLIB-AM from YMF to Emmis. The United States District Court for the Southern District of New York dismissed this case on September 14, 2016, and no appeal was timely filed.

Note 9. Income Taxes

Our effective income tax rate was 17% and 9% for the nine-month periods ended November 30, 2015 and 2016. The Company recorded a valuation allowance for its net deferred tax assets generated during the period, including its net operating loss carryforwards, but excluding deferred tax liabilities related to indefinite-lived intangibles. The provision associated with deferred tax liabilities related to indefinite-lived intangibles is estimated to be approximately $2.5 million for the year ending February 28, 2017.

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Note 10. Other Significant Events

Sale of Texas Monthly

On November 1, 2016, Emmis closed on its sale of Texas Monthly for gross proceeds of $25.0 million in cash to a subsidiary of Genesis Park, LP. The Company previously announced that it was exploring strategic alternatives for its publishing division, excluding Indianapolis Monthly . Emmis believes that its publishing portfolio has significant brand value and plans to use proceeds from the sale of its publishing properties to repay debt. Emmis received net proceeds of $23.5 million , consisting of the stated purchase price of $25.0 million , net of estimated purchase price adjustments totaling $0.7 million and disposition costs totaling $0.8 million . The $0.8 million of disposition costs primarily relate to Emmis' agreement to reimburse the buyer for severance costs pursuant to a predetermined schedule to the extent that the buyer terminates employees of Texas Monthly prior to February 28, 2017. This amount represents the Company's estimate of the probable amount of exposure under this agreement, which has been accrued and recorded as a reduction of the disposal gain. Additional severance amounts of up to $1.8 million could be incurred during the quarter ended February 28, 2017, if the buyer chooses to terminate additional employees. Any additional severance amounts will be recorded during the quarter ended February 28, 2017, as an adjustment to the disposal gain. Substantially all of the proceeds were used to repay term and revolving loan indebtedness under Emmis' senior credit facility. Emmis recorded a $17.5 million gain on the sale of Texas Monthly . Texas Monthly had historically been included in our Publishing segment. The following table summarizes certain operating results of Texas Monthly for all periods presented. Pursuant to Accounting Standards Codification 205-20-45-6, interest expense associated with the required Term Loan repayment associated with the sale of Texas Monthly is included in the magazine's results below. The Term Loan repayment is preliminary and may be adjusted for revisions to estimates and the Company's reinvestment of proceeds of the Texas Monthly transaction. See Note 4 for more discussion.



	Three months ended November 30,					Nine Months ended November 30,
	2015		2016			2015			2016
Net revenues	$	6,525	$	4,146		$	19,454		$	14,774
Station operating expenses, excluding depreciation and amortization expense	5,415		4,284			16,545			14,367
Depreciation and amortization	30		21			87			84
Operating income	1,080		(159		)	2,822			323
Interest expense	287		195			840			782
Other expense (income)	3		-			(361		)	(7		)
Income before income taxes	790		(354		)	2,343			(452		)

The following table presents unaudited pro forma consolidated financial information as if the closing of our disposition of Texas Monthly and the related $15.0 million mandatory debt repayment had occurred on March 1, 2015 (in thousands, except per share data):



	Three Months Ended November 30,				Nine Months Ended November 30,
	2015		2016		2015		2016
Net revenues	$	53,089	$	52,153	$	161,095	$	156,301
Station operating expenses, excluding depreciation and amortization	38,239		41,142		120,386		121,039
Consolidated net income	5,178		1,120		10,698		4,135
Net income attributable to the Company	4,758		539		9,124		3,658
Net income per share - basic	$	0.43	$	0.04	$	0.83	$	0.31
Net income per share - diluted	$	0.40	$	0.04	$	0.77	$	0.30

Sale of Terre Haute radio stations

On October 12, 2016, Emmis entered into agreements to sell its radio stations in Terre Haute, Indiana. Emmis previously announced that it was exploring strategic alternatives for its Terre Haute radio stations and WLIB-AM in New York. Emmis believes selling these non-core radio stations will help the company to continue to de-lever its balance sheet. Under one purchase agreement, Emmis will sell the assets of WTHI-FM and the intellectual property of WWVR-FM to Midwest Communications, Inc. for gross proceeds of $4.3 , subject to working capital and other closing adjustments. Under another purchase agreement, Emmis will sell the assets of WFNF-AM, WFNB-FM, WWVR-FM (other than the intellectual property for that station) and an FM translator to DLC Media, Inc. for gross proceeds of $0.9 million , subject to working capital and

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other closing adjustments. The purchase agreements contain customary representations, warranties, covenants and indemnities. Because Midwest Communications is currently at the FCC ownership limits for FM radio stations in the Terre Haute market, Midwest contemporaneously entered into an agreement to sell one of its stations, WDKE-FM, to DLC Media. The closings under these three transactions are cross conditioned. The transactions are subject to FCC approval and other customary closing conditions, and are expected to close on January 30, 2017. The Terre Haute radio stations are included in our Radio segment. The following table summarizes certain operating results for the Terre Haute radio stations for all periods presented:



	Three months ended November 30,				Nine Months ended November 30,
	2015		2016		2015			2016
Net revenues	$	614	$	849	$	1,950		$	2,035
Station operating expenses, excluding depreciation and amortization expense	556		741		1,883			1,796
Depreciation and amortization	42		29		119			117
Operating income	16		79		(52		)	122

Emmis determined that the Terre Haute radio stations met the requirements for held for sale classification as of November 30, 2016. Noncurrent assets related to our Terre Haute radio stations as of February 29, 2016 and November 30, 2016 consisted of property and equipment and FCC Licenses as summarized in the following table. Terre Haute assets held for sale of $1.4 million as of November 30, 2016 are included in other current assets in the accompanying condensed consolidated balance sheets as the Company expects to close on the sale of the stations within the next twelve months. No reclassifications were made to classify Terre Haute assets as held for sale as of February 29, 2016.



	As of February 29, 2016	As of November 30, 2016
	(included in Property and equipment, net and Indefinite-lived intangibles)	(included in Other current assets)
Property and equipment, net	809	700
Indefinite-lived intangibles	721	721
Total Terre Haute assets held for sale	1,530	1,421

Nasdaq listing requirements

On July 26, 2016, the Nasdaq Stock Market LLC ("Nasdaq") informed the Company that the Company was in compliance with all applicable requirements for continued listing of its Class A common stock on Nasdaq. The Company requested and received a hearing before the Nasdaq Hearing Panel regarding the Nasdaq Listing Qualifications Staff's June 7, 2016, determination to delist the Company's Class A common stock due to the Company's non-compliance with the minimum bid price requirement. The Hearing Panel determined the Company had regained compliance with the minimum bid price requirement as a result of the one-for-four reverse stock split adopted July 8, 2016, and is otherwise compliant with all applicable Nasdaq listing criteria.

On March 17, 2016, Nasdaq filed with the United States Securities and Exchange Commission Form 25-NSE to formally delist the Company's Preferred Stock from the Nasdaq Global Select Market (formerly listed under the symbol "EMMSP"). The delisting occurred on March 28, 2016. Subsequently, the Company filed a Certification and Notice of Termination of Registration to cause the Preferred Stock to be deregistered under Section 12(g) of the Securities Exchange Act of 1934. Pursuant to the Company's articles of incorporation, each outstanding share of Preferred Stock was automatically converted on April 4, 2016, into the Company's Class A common stock at a ratio of 2.80 shares of Class A common stock for each share of Preferred Stock.

Digonex investment

On March 1, 2016, June 7, 2016, and September 1, 2016, Emmis contributed an additional $0.5 million to Digonex in the form of convertible debt. As of November 30, 2016. Emmis owns rights that are convertible into at least 79% of the common equity of Digonex.

Going private offer

On August 18, 2016, the Board of Directors of the Company received a letter from E Acquisition Corporation ("EAC"), an Indiana corporation owned by Jeffrey H. Smulyan, the Company's Chairman of the Board, Chief Executive Officer and controlling shareholder, setting forth a non-binding proposal by which E Acquisition Corporation (the "Proposing Person"),

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would acquire all the outstanding shares of Class A Common Stock of the Company that are not owned by the Proposing Person at a cash purchase price of $4.10 per share (the "Proposal"). The Proposal contemplated that, following the closing of the proposed transaction, the Company's shares would no longer be registered with the Securities and Exchange Commission and the Company would no longer be a reporting company or have any public shares traded on Nasdaq.

The Company's Board of Directors formed a special committee of independent and disinterested directors (the "Special Committee") to review and evaluate the Proposal. The members of the Special Committee were Susan Bayh and Peter Lund. On October 14, 2016, EAC delivered to the Special Committee a letter (the "Proposal Expiration Letter") confirming that the offer had expired on October 14, 2016 and had not been extended.

The Special Committee engaged independent legal counsel and independent financial advisors to assist the Special Committee in the evaluation of the Proposal. Through November 30, 2016, the Company incurred $0.9 million of costs associated with the Proposal, which are included in corporate expenses, excluding depreciation and amortization expense in the accompanying condensed consolidated statements of operations. No further costs are expected to be incurred in connection with the going private offer as it has expired.

Note 11. Subsequent Events

Amendment of NextRadio LLC agreement with Sprint

On August 9, 2013, NextRadio LLC, a wholly-owned subsidiary of Emmis, entered into an agreement with Sprint whereby Sprint agreed to pre-load the Company's NextRadio smartphone application in a minimum of 30 million FM-enabled wireless devices on the Sprint wireless network over a three-year period. In return, NextRadio LLC agreed to serve as a conduit for the radio industry to pay Sprint $15 million per year in equal quarterly installments over the three year term and to share with Sprint certain revenue generated by the NextRadio application. Emmis has not guaranteed NextRadio LLC's performance under this agreement and Sprint does not have recourse to any Emmis related entity other than NextRadio LLC. Through November 30, 2016, NextRadio LLC had remitted $33.2 million to Sprint under the terms of this agreement.

Effective December 8, 2016, NextRadio LLC and Sprint entered into an Amendment of their original agreement. The Amendment calls for NextRadio LLC to make installment payments totaling $6.0 million commencing with a $0.6 million payment that was made on December 12, 2016. Installment payments are to be made periodically, with the last one due on March 15, 2017. Once the installment payments are completed, Sprint will forgive the remaining $5.8 million that it was due under the original agreement. Also in connection with this amendment, NextRadio LLC and Sprint agreed to increase Sprint's share of certain revenue generated by the NextRadio application. NextRadio LLC has received a loan of up to $4.0 million for the sole purpose of fulfilling the payment obligations to Sprint under the Amendment. The loan is to be repaid out of proceeds from sales of enhanced advertising through the NextRadio application. On December 22, 2016, NextRadio LLC received $1.4 million under the loan, which was promptly remitted to Sprint. NextRadio is in discussions with radio broadcasters and other companies involved in the radio industry to fund the remaining installment payments due to Sprint.

Modification of Digonex non-recourse debt

In December 2016, holders of Digonex secured notes payable agreed to extend the maturity date of the notes from December 31, 2017 to December 31, 2020, provided that the holders of Digonex's unsecured notes payable agree to a similar extension. The notes will continue to accrue interest at 5.0% per annum with interest payable at maturity.

Additional investment in Digonex

On January 3, 2017, Emmis contributed an additional $0.5 million to Digonex in the form of convertible debt. Subsequent to this contribution, Emmis owns rights that are convertible into approximately 80% of the common equity of Digonex.

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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;


•	competition from new or different media and technologies;


•	loss of key personnel;


•	increased competition in our markets and the broadcasting industry, including our competitors changing the format of a station they operate to more directly compete with a station we operate in the same market;


•	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;


•	fluctuations in the market price of publicly traded and other securities;


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


•	changes in radio audience measurement methodologies;


•	war, terrorist acts or political instability; and other factors mentioned in other documents filed by the Company with the Securities and Exchange Commission.

For a more detailed discussion of these and other risk factors, see the Risk Factors section of our Annual Report on Form 10-K, for the year ended February 29, 2016 . 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 are a diversified media company. We own and operate radio and publishing properties located in the United States. Our revenues are mostly affected by the advertising rates our entities charge, as advertising sales represent approximately 70% 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. The Nielsen Company generally measures radio station ratings in our domestic markets on a weekly basis using a passive digital system of measuring listening (the Portable People Meter ™ ). 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.

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 preempt 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 nine-month periods ended November 30, 2015 and 2016. 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 related to our TagStation and Digonex businesses, network revenues and barter.

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	Three Months Ended November 30,								Nine Months Ended November 30,
	2015		% of Total		2016		% of Total		2015		% of Total		2016		% of Total
	(Dollars in thousands)
Net revenues:
Local	$	33,673	56.5	%	$	31,636	56.2	%	$	101,299	56.1	%	$	96,153	56.2	%
National	7,599		12.7	%	5,842		10.4	%	21,706		12.0	%	17,349		10.1	%
Political	186		0.3	%	927		1.6	%	468		0.3	%	2,091		1.2	%
Publication Sales	1,419		2.4	%	1,048		1.9	%	4,187		2.3	%	3,742		2.2	%
Non Traditional	5,664		9.5	%	6,208		11.0	%	21,059		11.7	%	19,772		11.6	%
LMA Fees	2,582		4.3	%	2,582		4.6	%	7,748		4.3	%	7,748		4.5	%
Digital	3,444		5.8	%	3,713		6.6	%	10,195		5.6	%	11,828		6.9	%
Other	5,047		8.5	%	4,343		7.7	%	13,887		7.7	%	12,392		7.3	%
Total net revenues	$	59,614			$	56,299			$	180,549			$	171,075

As previously mentioned, we derive approximately 70% of our net revenues from advertising sales. In the nine-month period ended November 30, 2016 , local sales, excluding political revenues, represented approximately 84% and 86% 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 60% of our radio division's total advertising net revenues for the nine-month periods ended November 30, 2015 and 2016. The automotive industry was the largest category for our radio division for the nine-month periods ended November 30, 2015 and 2016, representing approximately 12% of our radio net revenues.

The majority of our expenses are fixed in nature, principally consisting of salaries and related employee benefit costs, office and tower rent, utilities, property and casualty insurance and programming-related expenses. However, approximately 20% of our expenses vary in connection with changes in revenues. These variable expenses primarily relate to sales commissions, music license fees and bad debt reserves. In addition, costs related to our marketing and promotions department are highly discretionary and incurred primarily to maintain and/or increase our audience and market share.

KNOWN TRENDS AND UNCERTAINTIES

Although advertising revenues have stabilized following the 2008 economic recession, radio revenue growth remains challenged. Management believes this is principally the result of two factors: (1) new media, such as various media distributed via the Internet, telecommunication companies and cable interconnects, as well as social networks, have gained advertising share against radio and other traditional media and created a proliferation of advertising inventory and (2) the fragmentation of the radio audience and time spent listening caused by satellite radio, audio streaming services and podcasts has led some investors and advertisers to conclude that the effectiveness of radio advertising has diminished.

The Company and the radio industry are leading several initiatives to address these issues. The radio industry is working aggressively to increase the number of smartphones and other wireless devices that contain an enabled FM tuner. Most smartphones currently sold in the United States contain an FM tuner. However, most wireless carriers in the United States have not historically permitted the FM tuner to receive the free over-the-air local radio stations it was designed to receive. Furthermore, in many countries outside the United States, enabled FM tuners are made available to smartphone consumers; consequently, radio listening increases. Activating FM as a feature on smartphones sold in the United States has the potential to increase radio listening and improve perception of the radio industry while offering wireless network providers the benefits of a proven emergency notification system, reduced network congestion from audio streaming services, and a host of new revenue generating applications. Emmis is at the leading edge of this initiative and has developed TagStation ® , a cloud-based software platform that allows a broadcaster to manage album art, meta data and enhanced advertising on its various broadcasts, and NextRadio ® , a smartphone application that marries over-the-air FM radio broadcasts with visual and interactive features, as an industry solution to enrich the user experience of listening to free over-the-air radio broadcasts on their FM-enabled smartphones.

On August 9, 2013, NextRadio LLC entered into an agreement with Sprint whereby Sprint agreed to pre-load the Company's NextRadio smartphone application in a minimum of 30 million FM-enabled wireless devices on the Sprint wireless network over a three-year period. In return, NextRadio LLC agreed to serve as a conduit for the radio industry to pay Sprint $15 million per year in equal quarterly installments over the three year term and to share with Sprint certain revenue generated by the NextRadio application. NextRadio LLC collects money from the radio industry and forwards it to Sprint. During the nine months ended November 30, 2015, Emmis' funding of its share of NextRadio's payment to Sprint was $0.3 million. This

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amount is included in station operating expenses in the accompanying condensed consolidated statements of operations. Emmis did not fund any of NextRadio's payment to Sprint during the nine months ended November 30, 2016 as it had already fully funded its share through that date. Emmis has not guaranteed NextRadio LLC's performance under this agreement and Sprint does not have recourse to any Emmis related entity other than NextRadio LLC. Additionally, the agreement does not limit the ability of NextRadio LLC to place the NextRadio application on FM-enabled devices on other wireless networks. Through November 30, 2016, the NextRadio application had not generated a material amount of revenue.

Since the inception of NextRadio LLC's agreement with Sprint, NextRadio LLC has remitted to Sprint approximately $33.2 million through November 30, 2016. Effective December 8, 2016, NextRadio LLC and Sprint entered into an Amendment of their original agreement. The Amendment calls for NextRadio LLC to make installment payments totaling $6.0 million commencing with a $0.6 million payment that was made on December 12, 2016. Installment payments are to be made periodically, with the last one due on March 15, 2017. Once the installment payments are completed, Sprint will forgive the remaining $5.8 million that it was due under the original agreement. Also in connection with this amendment, NextRadio LLC and Sprint agreed to increase Sprint's share of certain revenue generated by the NextRadio application. NextRadio LLC has received a loan of up to $4.0 million for the sole purpose of fulfilling the payment obligations to Sprint under the Amendment. The loan is to be repaid out of proceeds from sales of enhanced advertising through the NextRadio application. On December 22, 2016, NextRadio LLC received $1.4 million under the loan, which was promptly remitted to Sprint. NextRadio is in discussions with radio broadcasters and other companies involved in the radio industry to fund the remaining installment payments due to Sprint.

On July 27, 2015, NextRadio LLC entered into an agreement with AT&T whereby AT&T agreed to include FM chip activation in its Android device specifications to wireless device manufacturers. In exchange, AT&T will receive a share of certain revenue generated by the NextRadio application. This agreement was subsequently assigned to TagStation LLC (the parent entity of NextRadio LLC and owner of the TagStation and NextRadio applications). In August 2015, T-Mobile expressed its intent to include FM chip activation in its device specifications. On September 9, 2016, TagStation LLC entered into an agreement with T-Mobile whereby T-Mobile agreed to include FM chip activation in its Android device specifications to wireless device manufacturers. In exchange, T-Mobile will receive a share of certain revenue generated by the NextRadio application. TagStation LLC has been working directly with numerous device manufacturers to accelerate the availability of NextRadio to consumers. BLU Products, an American mobile phone manufacturer, has chosen to make NextRadio the native FM tuner on its Android smartphones. In April 2016, Alcatel entered into a similar arrangement for NextRadio. The Samsung Galaxy S7 and S7 Edge smartphones are now FM-enabled and NextRadio compatible across all major U.S. wireless networks. TagStation LLC and the radio industry continue to work with other leading United States wireless network providers, device manufacturers, regulators and legislators to cause FM tuners to be enabled in all smartphones.

Emmis granted the U.S. radio industry (as defined in the funding agreements) a call option on substantially all of the assets used in the NextRadio and TagStation businesses in the United States. The call option may be exercised in August 2017 or August 2019 by paying Emmis a purchase price equal to the greater of (i) the appraised fair market value of the NextRadio and TagStation businesses, or (ii) two times Emmis' cumulative investments in the development of the businesses through the second anniversary of the signing of the Sprint agreement. If the call option is exercised, the businesses will continue to be subject to the operating limitations applicable today, and no radio operator will be permitted to own more than 30% of the NextRadio and TagStation businesses.

Along with the rest of the radio industry, the majority of our stations have deployed HD Radio ® . HD Radio offers listeners advantages over standard analog broadcasts, including improved sound quality and additional digital channels. In addition to offering secondary channels, the HD Radio spectrum allows broadcasters to transmit other forms of data. We are participating in a joint venture with other broadcasters to provide the bandwidth that a third party uses to transmit location-based data to hand-held and in-car navigation devices. The number of radio receivers incorporating HD Radio has increased in the past year, particularly in new automobiles. It is unclear what impact HD Radio will have on the markets in which we operate.

The Company has also aggressively worked to harness the power of broadband and mobile media distribution in the development of emerging business opportunities by growing our streaming audio audience in the United States, developing highly interactive websites with content that engages our listeners, using SMS texting and deploying mobile applications, harnessing the power of digital video on our websites and YouTube channels, and delivering real-time traffic to navigation devices.

The results of our radio operations are heavily dependent on the results of our stations in the New York and Los Angeles markets. These markets account for approximately 50% of our radio net revenues. Our acquisition of WBLS-FM and WLIB-AM in New York in fiscal 2015 enhanced our ability to adapt to competitive environment shifts in that market, but our single station in the Los Angeles market, KPWR-FM, has less ability to adapt. Furthermore, some of our competitors that operate

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larger station clusters in New York and Los Angeles are able to leverage their market share to extract a greater percentage of available advertising revenue through packaging a variety of advertising inventory at discounted unit rates and may be able to realize operating efficiencies by programming multiple stations in these markets. In February 2015, one of our large competitors changed the format of one of its radio stations in the Los Angeles radio market to more directly compete with our radio station in Los Angeles. In addition, the new station hired our former KPWR-FM morning radio host to be its morning radio host. This development in Los Angeles negatively impacted our financial performance in fiscal 2016 and the current fiscal year, and could continue to negatively impact our results in Los Angeles in future periods.

Both the Los Angeles and New York radio markets showed signs of improvement during the nine months ended November 30, 2016. Market revenues for Los Angeles and New York as measured by Miller Kaplan Arase LLP ("Miller Kaplan"), an independent public accounting firm used by the radio industry to compile revenue information, were up 4.2% and 0.4%, respectively, for the nine months ended November 30, 2016 as compared to the same period of the prior year. However, during the same period, our station in Los Angeles, KPWR-FM, and our cluster in New York both lagged their respective market performance. As discussed above, KPWR-FM has been adversely affected by the introduction of a format competitor. While the performance of our New York cluster, which includes WQHT-FM, WBLS-FM and WLIB-AM, lagged the New York radio market, our performance in New York has improved subsequent to several leadership changes in January 2016.

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. However, Emmis' 2014 Credit Agreement substantially limits our ability to make acquisitions. We also regularly review our portfolio of assets and may opportunistically dispose of assets when we believe it is appropriate to do so. In that respect, on August 19, 2016, we announced that we are exploring strategic alternatives for our publishing division (except Indianapolis Monthly ), our radio stations in Terre Haute, Indiana, and WLIB-AM in New York. We completed our sale of Texas Monthly on November 1, 2016 and expect to complete our sale of radio stations in Terre Haute, Indiana on January 30, 2017. We continue to explore our options with the remainder of the publishing division (except Indianapolis Monthly ) and WLIB-AM in New York.

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.

Revenue Recognition

Broadcasting revenue is recognized as advertisements are aired. Publication revenue is recognized in the month of delivery of the publication. Both broadcasting revenue and publication revenue recognition is subject to meeting certain conditions such as persuasive evidence that an arrangement exists and collection is reasonably assured. These criteria are generally met at the time the advertisement is aired for broadcasting revenue and upon delivery of the publication for publication revenue. Advertising revenues presented in the financial statements are reflected on a net basis, after the deduction of advertising agency fees, usually at a rate of 15% of gross revenues. LMA fee revenue is recognized on a straight-line basis over the term of the LMA.

Digonex provides a dynamic pricing service to online retailers, attractions, live event producers and other customers. Revenue is recognized as recommended prices are delivered to customers. In some cases, this is upon initial delivery of prices, such as for implementations, or over the period of the services agreement for fee-based pricing. Revenue pursuant to some service agreements is not earned until tickets or merchandise are sold and, therefore, revenue is recognized as tickets are sold for the related events or as merchandise is sold.

FCC Licenses and Goodwill

We have made acquisitions in the past for which a significant amount of the purchase price was allocated to FCC licenses and goodwill assets. As of November 30, 2016 , we have recorded approximately $209.8 million in goodwill and FCC licenses, which represents approximately 69% of our total assets.

In the case of our 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. We consider our FCC licenses to be indefinite-lived intangibles.

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We do not amortize goodwill or other indefinite-lived intangible assets, but rather test for impairment at least annually or more frequently if events or circumstances indicate that an asset may be impaired. When evaluating our radio broadcasting licenses for impairment, the testing is performed at the unit of accounting level as determined by Accounting Standards Codification ("ASC") Topic 350-30-35. In our case, radio stations in a geographic market cluster are considered a single unit of accounting, provided that they are not being operated under an LMA by another broadcaster. Major assumptions involved in the valuation of our FCC licenses include market revenue, market revenue growth rates, unit of accounting audience share, unit of accounting revenue share and discount rate. Each of these assumptions may change in the future based upon changes in general economic conditions, audience behavior, consummated transactions, and numerous other variables that may be beyond our control. A change in one or more of our major assumptions could result in an impairment charge related to our FCC Licenses.

We complete our annual impairment tests as of December 1 of each year and perform additional interim impairment testing whenever triggering events suggest such testing is warranted.

Valuation of Indefinite-lived Broadcasting Licenses

Fair value of our FCC licenses is estimated to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To determine the fair value of our FCC licenses, the Company uses an income valuation method when it performs its impairment tests. Under this method, the Company projects cash flows that would be generated by each of its units of accounting assuming the unit of accounting was commencing operations in its respective market 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 commenced operations at the beginning of the valuation period. 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. Each of these assumptions may change in the future based upon changes in general economic conditions, audience behavior, consummated transactions, and numerous other variables that may be beyond our control. The projections incorporated into our license valuations take current economic conditions into consideration.

Valuation of Goodwill

ASC Topic 350 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, unless indications of impairment exist during an interim period. 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, excluding any stations being operated pursuant to an LMA, 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. There are no publicly traded publishing companies that are focused predominantly on city and regional magazines as is our publishing segment. Therefore, 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 or analyst reports that include valuations of magazine divisions within publicly traded media conglomerates. Management believes this methodology for valuing radio and publishing properties is a common approach and believes that the multiples used in the valuation are reasonable given our peer comparisons and recent market transactions. To corroborate the step-one reporting unit fair values determined using the market approach described above, management also uses an income approach, which is a discounted cash flow method to determine the fair value of the reporting unit.

Deferred Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequence of events that have been recognized in the Company's

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financial statements or income tax returns. Income taxes are recognized during the year in which the underlying transactions are reflected in the consolidated statements of operations. Deferred taxes are provided for temporary differences between amounts of assets and liabilities as recorded for financial reporting purposes and amounts recorded for income tax purposes. After determining the total amount of deferred tax assets, the Company determines whether it is more likely than not that some portion of the deferred tax assets will not be realized. If the Company determines that a deferred tax asset is not likely to be realized, a valuation allowance will be established against that asset to record it at its expected realizable value.

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 $0.7 million for employee healthcare claims as of February 29, 2016 and November 30, 2016, respectively. The Company also maintains large deductible programs (ranging from $10 thousand to $2 million per occurrence) for general liability, property, director and officer liability, crime, fiduciary liability, workers' compensation, employment liability, automotive liability and media liability claims.

Results of Operations for the Three-Month and Nine-Month Periods Ended November 30, 2016 , Compared to November 30, 2015

Net revenues:



	For the Three Months Ended November 30,									For the Nine Months Ended November 30,
	2015		2016		$ Change			% Change		2015		2016		$ Change			% Change
	(As reported, amounts in thousands)
Net revenues:
Radio	$	42,634	$	42,462	$	(172	)	(0.4	)%	$	132,789	$	131,133	$	(1,656	)	(1.2	)%
Publishing	16,658		13,633		(3,025		)	(18.2	)%	46,775		39,344		(7,431		)	(15.9	)%
Emerging Technologies	322		204		(118		)	(36.6	)%	985		598		(387		)	(39.3	)%
Total net revenues	$	59,614	$	56,299	$	(3,315	)	(5.6	)%	$	180,549	$	171,075	$	(9,474	)	(5.2	)%

Radio net revenues were down for the three-month and nine-month periods ended November 30, 2016. We typically monitor the performance of our stations against the aggregate performance of the markets in which we operate based on reports for the period prepared by Miller Kaplan. Miller Kaplan reports are generally prepared on a gross revenues basis and exclude revenues from barter and syndication arrangements. Miller Kaplan reported gross revenues for our radio markets increased 2.2% for the nine-month period ended November 30, 2016 as compared to the same period of the prior year. Our gross revenues reported to Miller Kaplan were down 2.0% for the nine-month period ended November 30, 2016 as compared to the same period of the prior year. For the nine-month period ended November 30, 2016, our performance exceeded the market average in St. Louis, but we lagged the market average in New York, Los Angeles, Indianapolis and Austin. Miller Kaplan does not report gross revenue market data for our Terre Haute market.

Our weak performance in Los Angeles mostly related to a format competitor that began directly competing against our station there in February 2015. The revenue impact has been most pronounced since the fall of 2015. Emmis expects net revenues in Los Angeles will be up slightly from prior year for the three-month period ended February 28, 2017. Excluding Los Angeles, our radio revenues would have been up 0.9% in markets that were up 0.6% according to Miller Kaplan.

For the nine-month period ended November 30, 2016, as compared to the same period of the prior year, our average rate per minute for our domestic radio stations was down 1.3%, and our minutes sold were down 2.6%.

Publishing net revenues decreased during the three-month and nine-month periods ended November 30, 2016. The decline in both periods mostly relates to the sale of our largest magazine, Texas Monthly , which was sold on November 1, 2016. Excluding the results of Texas Monthly , our publishing net revenues would have decreased $0.6 million, or 6.4%, for the three-month period ended November 30, 2016, and decreased $2.8 million, or 10.1%, for the nine-month period ended November 30, 2016. A significant portion of the revenue decline can be attributed to our magazine in Los Angeles, which has lagged prior year performance for most of fiscal 2017.

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Emerging technologies net revenues, which primarily relates to licensing fees of our TagStation software and pricing services provided by Digonex, decreased during the three-month and nine-month periods ended November 30, 2016. This decrease relates to Digonex, as a large retail customer did not renew for this fiscal year.

Station operating expenses excluding depreciation and amortization expense:



	For the Three Months Ended November 30,									For the Nine Months Ended November 30,
	2015		2016		$ Change			% Change		2015		2016		$ Change			% Change
	(As reported, amounts in thousands)
Station operating expenses excluding depreciation and amortization expense:
Radio	$	27,352	$	28,979	$	1,627		5.9	%	$	87,925	$	87,915	$	(10	)	-	%
Publishing	14,310		13,828		(482		)	(3.4	)%	43,557		40,265		(3,292		)	(7.6	)%
Emerging Technologies	1,992		2,619		627			31.5	%	5,449		7,226		1,777			32.6	%
Total station operating expenses excluding depreciation and amortization expense	$	43,654	$	45,426	$	1,772		4.1	%	$	136,931	$	135,406	$	(1,525	)	(1.1	)%

The increase in station operating expenses excluding depreciation and amortization expense for our radio division for the three-month periods ended November 30, 2016 is mostly due to higher promotional spending in both New York and Los Angeles to improve the ratings of our radio stations in those markets. For the nine-month period ended November 30, 2016, expenses were flat as the additional promotional spending was offset by savings realized from our cost reduction plan implemented in January 2016.

Station operating expenses excluding depreciation and amortization expense for publishing decreased during the three-month and nine-month periods ended November 30, 2016 mostly due to the sale of Texas Monthly . Excluding the results of Texas Monthly , our station operating expenses excluding depreciation and amortization expense would have decreased $1.1 million, or 4.1%, for the nine-month period ended November 30, 2016, and increased $0.6 million, or 7.3%, for the three-month period ended November 30, 2016. Excluding the results of Texas Monthly , the decrease in the nine-month period is mostly due to savings realized from the cost reduction plan that the Company implemented in January 2016, coupled with lower commission and revenue-related costs as a result of lower net revenues. Excluding the results of Texas Monthly , the increase in the three-month period is mostly due to production costs of various ancillary publications that were produced earlier in the year in fiscal 2016.

Station operating expenses excluding depreciation and amortization expense for emerging technologies increased during the three-month and nine-month periods ended November 30, 2016 mostly due to costs associated with enhancements to the NextRadio application and TagStation platform, including its data reporting capabilities, and additional personnel costs for TagStation in anticipation of increased activity in fiscal 2018.

Corporate expenses excluding depreciation and amortization expense:



	For the Three Months Ended November 30,								For the Nine Months Ended November 30,
	2015		2016		$ Change		% Change		2015		2016		$ Change			% Change
	(As reported, amounts in thousands)
Corporate expenses excluding depreciation and amortization expense	$	2,810	$	3,397	$	587	20.9	%	$	10,116	$	8,894	$	(1,222	)	(12.1	)%

Corporate expenses excluding depreciation and amortization expense increased during the three-month period ended November 30, 2016 mostly due to $0.9 million of costs associated with the Company's evaluation of an offer to purchase all of the Company's outstanding Class A common stock. Corporate expenses excluding depreciation and amortization expense decreased during the nine-month period ended November 30, 2016 mostly due to a decrease in noncash compensation expense and savings realized from the cost reduction plan implemented in January 2016, which includes a voluntary 5% reduction in salary for all of our executive officers.

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Impairment loss on intangible assets:



	For the Three Months Ended November 30,							For the Nine Months Ended November 30,
	2015		2016		$ Change		% Change	2015		2016		$ Change		% Change
	(As reported, amounts in thousands)
Impairment loss on intangible assets	$	-	$	-	$	-	N/A	$	-	$	2,988	$	2,988	N/A

In connection with an interim review for impairment during the quarter ended August 31, 2016, the Company recorded an impairment loss of $2.1 million related to goodwill and $0.9 million related to definite-lived intangible assets, all of which related to Digonex. This impairment loss reduced the carrying value of Digonex goodwill and definite-lived intangible assets to zero.

Depreciation and amortization:



	For the Three Months Ended November 30,									For the Nine Months Ended November 30,
	2015		2016		$ Change			% Change		2015		2016		$ Change			% Change
	(As reported, amounts in thousands)
Depreciation and amortization:
Radio	$	934	$	854	$	(80	)	(8.6	)%	$	2,528	$	2,642	$	114		4.5	%
Publishing	68		59		(9		)	(13.2	)%	192		201		9			4.7	%
Corporate & Emerging Technologies	530		219		(311		)	(58.7	)%	1,665		903		(762		)	(45.8	)%
Total depreciation and amortization	$	1,532	$	1,132	$	(400	)	(26.1	)%	$	4,385	$	3,746	$	(639	)	(14.6	)%

The increase in radio depreciation and amortization expense for the nine-month period ended November 30, 2016 is mostly related to depreciation of broadcasting equipment and other equipment placed into service in the latter portion of the prior fiscal year. The decrease in radio depreciation and amortization expense for the three-month period ended November 30, 2016 is mostly related to the cessation of depreciation expense on certain equipment that has reached the end of its depreciable life.

The decrease in corporate & emerging technologies is mostly due to reduced amortization expense of Digonex-related definite-lived intangible assets. The Company recorded impairment charges related to these definite-lived intangible assets in connection with its annual review of impairment during Fiscal 2016 and with its interim review of impairment as of August 31, 2016, the latter of which reduced the carrying value of these definite-lived intangibles to zero.

Gain on sale of publishing assets, net of disposition costs:



	For the Three Months Ended November 30,									For the Nine Months Ended November 30,
	2015		2016			$ Change			% Change	2015	2016			$ Change			% Change
	(As reported, amounts in thousands)
Gain on sale of publishing assets, net of disposition costs	$	-	$	(17,491	)	$	(17,491	)	N/A	-	$	(17,491	)	$	(17,491	)	N/A

On November 1, 2016, the Company sold Texas Monthly to a subsidiary of Genesis Park L.P. for gross proceeds of $25.0 million in cash. The Company recorded a $17.5 million gain on the sale of Texas Monthly .

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Loss on disposal of assets:



	For the Three Months Ended November 30,							For the Nine Months Ended November 30,
	2015		2016		$ Change		% Change	2015		2016		$ Change		% Change
	(As reported, amounts in thousands)
Loss on disposal of assets	$	-	$	-	$	-	N/A	$	-	$	125	$	125	N/A

During the three months ended August 31, 2016, the Company sold land and equipment in southwest Illinois that it was no longer using for its own radio broadcasting operations. The Company received approximately $0.3 million of net proceeds and recorded a $0.1 million loss on disposal of assets.

Operating income:



	For the Three Months Ended November 30,											For the Nine Months Ended November 30,
	2015			2016			$ Change			% Change		2015			2016			$ Change			% Change
	(As reported, amounts in thousands)
Operating income:
Radio	$	14,348		$	12,629		$	(1,719	)	(12.0	)%	$	42,336		$	40,451		$	(1,885	)	(4.5	)%
Publishing	2,280			17,237			14,957			656.0	%	3,026			16,369			13,343			440.9	%
Corporate & Emerging Technologies	(5,010		)	(6,031		)	(1,021		)	(20.4	)%	(16,245		)	(19,413		)	(3,168		)	(19.5	)%
Total operating income:	$	11,618		$	23,835		$	12,217		105.2	%	$	29,117		$	37,407		$	8,290		28.5	%

Radio operating income decreased in the three-month and nine-month periods ended November 30, 2016 mostly due to net revenue declines. Radio operating income during the three-month period ended November 30, 2016 also declined due to increased promotional spending. This additional spending is largely offset during the nine-month period ended November 30, 2016 by costs savings realized from the cost reduction plan implemented in January 2016.

Publishing operating income increased in both the three-month and nine-month periods ended November 30, 2016 due to the $17.5 million gain on sale of Texas Monthly . Absent the sale of Texas Monthly , publishing operating income would have decreased in both periods due to revenue declines as previously discussed.

Corporate and emerging technologies operating loss increased in the nine-month period ended November 30, 2016 mostly due to the $3.0 million impairment loss on intangible assets related to Digonex. Corporate and emerging technologies operating loss increased in the three-month period ended November 30, 2016 mostly due to $0.9 million of expenses incurred by the Company in its evaluation of an offer to purchase all of the Company's outstanding Class A common stock.

Interest expense:



	For the Three Months Ended November 30,										For the Nine Months Ended November 30,
	2015			2016			$ Change		% Change		2015			2016			$ Change		% Change
	(As reported, amounts in thousands)
Interest expense	$	(4,768	)	$	(4,481	)	$	287	(6.0	)%	$	(14,259	)	$	(13,929	)	$	330	(2.3	)%

Interest expense was down slightly for the three-month and nine-month periods ended November 30, 2016 due to lower debt balances as compared to the prior year. In connection with the closing of the sale of Texas Monthly on November 1, 2016, we paid repaid $23.5 million of our 2014 Credit Agreement debt. The increase in interest rates in connection with the Second Amendment of the Credit Agreement on April 30, 2015 partially offsets the decrease in interest expense associated with lower overall debt balances. The weighted-average interest rate of debt outstanding under our 2014 Credit Agreement was 7.0% at November 30, 2015 and 2016.

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Loss on debt extinguishment:



	For the Three Months Ended November 30,									For the Nine Months Ended November 30,
	2015		2016			$ Change			% Change	2015		2016			$ Change			% Change
	(As reported, amounts in thousands)
Loss on debt extinguishment	$	-	$	(478	)	$	(478	)	N/A	$	-	$	(478	)	$	(478	)	N/A

In connection with the Company's permanent reduction of the 2014 Credit Agreement Term Loan as a result of its November 1, 2016, $15.0 mandatory repayment with a portion of the proceeds from the sale of Texas Monthly , the Company recorded a pro-rata write-off of its original issue discount related to the Term Loan totaling $0.5 million.

Provision for income taxes:



	For the Three Months Ended November 30,								For the Nine Months Ended November 30,
	2015		2016		$ Change			% Change	2015		2016		$ Change			% Change
	(As reported, amounts in thousands)
Provision for income taxes	$	889	$	629	$	(260	)	(29.2)%	$	2,662	$	1,968	$	(694	)	(26.1	)%

The Company records a valuation allowance for its net deferred tax assets, including its net operating loss carryforwards, but excluding deferred tax liabilities related to indefinite-lived intangibles. The provision associated with deferred tax liabilities related to indefinite-lived intangibles is estimated to be approximately $2.5 million for the year ending February 28, 2017.

Consolidated net income:



	For the Three Months Ended November 30,								For the Nine Months Ended November 30,
	2015		2016		$ Change		% Change		2015		2016		$ Change		% Change
	(As reported, amounts in thousands)
Consolidated net income	$	5,968	$	18,257	$	12,289	205.9	%	$	13,041	$	21,174	$	8,133	62.4	%

Consolidated net income for the three-month and nine-month periods ended November, 2016 increased due to the $17.5 million gain on the sale of Texas Monthly . The $3.0 million impairment charge related to Digonex intangibles partially offsets the gain on sale of Texas Monthly for the nine-month period ended November 30, 2016, as does lower revenues for our radio and publishing segments in both the three-month and nine-month periods ended November 30, 2016.

Liquidity and Capital Resources

Our primary sources of liquidity are cash provided by operations and cash available through revolver borrowings under our 2014 Credit Agreement. Our primary uses of capital during the past few years have been, and are expected to continue to be, investments in our growth businesses, strategic acquisitions, capital expenditures, working capital, debt service requirements and the repayment of debt.

At November 30, 2016 , we had cash and cash equivalents of $2.1 million and net working capital of $14.6 million . At February 29, 2016 , we had cash and cash equivalents of $4.5 million and net working capital of $0.4 million . The increase in net working capital is largely due to a reduction of current maturities of our 2014 Credit Agreement debt. Mandatory amortization payments of our Term Loan decreased as a result of our repayment of Term Loans in connection with the sale of Texas Monthly . The Company continually projects its anticipated cash needs, which include its operating needs, capital needs, and principal and interest payments on its indebtedness. As of the filing of this Form 10-Q, management believes the Company can meet its liquidity needs through the end of fiscal year 2017 with cash and cash equivalents on hand and projected cash flows from operations. Based on these projections, management also believes the Company will be in compliance with its debt covenants through the end of fiscal year 2017.

In recent years, the Company has recorded significant impairment charges, mostly attributable to our FCC licenses, goodwill and other definite-lived intangible assets. These impairment charges have had no impact on our liquidity or compliance with debt covenants.

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On August 18, 2016, the Company announced it was exploring strategic alternatives for its publishing division, (excluding Indianapolis Monthly ), WLIB-AM in New York City, and its Terre Haute radio stations. The Company completed the sale of Texas Monthly on November 1, 2016 for gross proceeds of $25.0 million in cash. The Company also announced that it was selling its four radio stations in Terre Haute for gross proceeds of $5.2 million in cash. The closing of the sale of the Terre Haute radio stations is expected to occur on January 30, 2017.

On July 26, 2016, Nasdaq informed the Company that the Company was in compliance with all applicable requirements for continued listing of its Class A common stock on Nasdaq. The Company had requested and received a hearing before the Nasdaq Hearing Panel regarding the Nasdaq Listing Qualifications Staff's June 7, 2016, determination to delist the Company's Class A common stock due to the Company's non-compliance with the minimum bid price requirement. The Hearing Panel determined the Company had regained compliance with the minimum bid price requirement as a result of the one-for-four reverse stock split enacted on July 8, 2016, and is otherwise compliant with all applicable Nasdaq listing criteria.

Operating Activities

Cash provided by operating activities was $16.7 million and $9.7 million for the nine months ended November 30, 2015 and 2016, respectively. The decrease in cash provided by operating activities is mostly due to the decrease in operating income (excluding the gain on sale of Texas Monthly ) as previously discussed.

Investing Activities

Cash used in investing activities was $1.8 million during the nine months ended November 30, 2015 versus cash provided by investing activities of $22.4 million for the nine months ended November 30, 2016. During the quarter ended November 30, 2016, we sold Texas Monthly and received $23.5 million of cash after certain adjustments and disposition costs. We expect capital expenditures to be approximately $3.5 million in the current fiscal year, compared to $3.4 million in fiscal 2016. We expect that future requirements for capital expenditures will be limited to capital expenditures incurred during the ordinary course of business. We expect to fund future investing activities with cash generated from operating activities and borrowings under our 2014 Credit Agreement.

Financing Activities

Cash used in financing activities was $14.2 million and $34.5 million for the nine months ended November 30, 2015 and 2016, respectively. During the nine months ended November 30, 2015, cash used in financing activities related to net repayments of debt of $8.0 million, $4.4 million of distributions paid to noncontrolling interests, $1.1 million of debt-related costs and $0.8 million of tax withholding settlements on stock issued to employees. During the nine months ended November 30, 2016, cash used in financing activities related to net repayments of debt of $29.9 million, $4.3 million of distributions paid to noncontrolling interests, and $0.4 million of tax withholding settlements on stock issued to employees.

As of November 30, 2016 , Emmis had $159.0 million of borrowings under the 2014 Credit Agreement and $67.6 million ($61.4 million related to 98.7FM in New York and $6.2 million related to Digonex) of non-recourse debt. Borrowings under the 2014 Credit Agreement bear interest, at our option, at a rate equal to the Eurodollar rate or an alternative Base Rate plus a margin. As of November 30, 2016, our weighted average borrowing rate under our 2014 Credit Agreement was approximately 7.0%. The non-recourse debt related to 98.7FM in New York bears interest at 4.1% per annum and the non-recourse debt related to Digonex bears interest at 5.0% per annum.

The debt service requirements of Emmis over the next twelve-month period are expected to be $16.0 million related to our 2014 Credit Agreement, as amended, ($4.7 million of principal repayments and $11.3 million of interest payments) and $8.3 million related to our 98.7FM non-recourse debt ($5.9 million of principal repayments and $2.4 million of interest payments). Required principal repayments under our 2014 Credit Agreement during the next twelve months may increase based on the final determination of Net Available Proceeds of the Texas Monthly sale and the Company's reinvestment of the sale proceeds (see Note 4 for more discussion). There are no debt service requirements of our Digonex non-recourse debt until the debt matures in December 2017. In December 2016, holders of Digonex secured notes payable agreed to extend the maturity date of the notes from December 31, 2017 to December 31, 2020, provided that the holders of Digonex's unsecured notes payable agree to a similar extension. The Company expects that proceeds from the 98.7FM LMA will be sufficient to pay all

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debt service related to the 98.7FM non-recourse debt. The 2014 Credit Agreement debt bears interest at variable rates. The Company estimated interest payments for the 2014 Credit Agreement above by using the amounts outstanding under the 2014 Credit Agreement as of November 30, 2016 and the weighted average interest rate as of the same date.

At January 3, 2017, we had $16.0 million available for additional borrowing under our 2014 Credit Agreement. No letters of credit were outstanding. Availability under the 2014 Credit Agreement depends upon our continued compliance with certain operating covenants and financial ratios. Emmis was in compliance with these covenants as of November 30, 2016. As part of our business strategy, we continually evaluate potential acquisitions of radio stations and other businesses that we believe hold promise for long-term appreciation in value and leverage our strengths. However, the 2014 Credit Agreement substantially limits our ability to make acquisitions. We also regularly review our portfolio of assets and may opportunistically dispose of assets when we believe it is appropriate to do so. On August 18, 2016, the Company announced it was exploring strategic alternatives for its publishing division (excluding Indianapolis Monthly ), WLIB-AM in New York City, and its Terre Haute radio stations. We closed on the sale of Texas Monthly on November 1, 2016, and expect to close on the sale of our Terre Haute stations on January 30, 2017. We are still evaluating our options with the remaining properties.

Intangibles

As of November 30, 2016 , approximately 69% of our total assets consisted of FCC broadcast licenses and goodwill, the values of which depend significantly upon various factors including, among other things, market revenues, market growth rates and 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 or after the end of their respective periods, and we expect that all FCC licenses will continue to be renewed in the future.

Regulatory, Legal and Other Matters

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide this information.

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 November 30, 2016 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,

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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.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Refer to Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of various legal proceedings pending against the Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended November 30, 2016 , there was withholding of shares of common stock upon vesting of restricted stock to cover withholding tax obligations. The following table provides information on our repurchases during the three months ended November 30, 2016 :



Period	(a) Total Number of Shares Purchased	(b) Average Price Paid Per Share		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (in 000's)
Class A Common Stock
September 1, 2016 - September 30, 2016	24,298	$	4.11	-	$	-
October 1, 2016 - October 31, 2016	20,875	$	3.40	-	$	-
November 1, 2016 - November 30, 2016	-	$	-	-	$	-
	45,173			-

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Item 6. Exhibits


(a)	Exhibits.

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



Exhibit		Filed Herewith		Incorporated by Reference
Number	Exhibit Description		Form		Period Ending		Exhibit		Filing Date
3.1	Second Amended and Restated Articles of Incorporation of Emmis Communications Corporation, as amended effective July 7, 2016			8-K				3.1		7/7/2016
3.2	Second Amended and Restated Bylaws of Emmis Communications Corporation			10-K		2/28/2013		3.2		5/8/2013
4.1	Form of stock certificate for Class A common stock			S-1				3.5		12/22/1993
10.1	Asset Purchase Agreement, dated as of October 13, 2016, by and between Emmis Publishing, L.P., Emmis Operating Company, GP TM Acquisition LLC and Genesis Park II LP	X
10.2	Asset Purchase Agreement, dated as of October 12, 2016, by and between Emmis Indiana Broadcasting, L.P., Emmis Radio License, LLC, Emmis Communications Corporation, and Midwest Communications, Inc.	X
10.3	Asset Purchase Agreement, dated as of October 12, 2016, by and between Emmis Indiana Broadcasting, L.P., Emmis Radio License, LLC, Emmis Communications Corporation, and DLC Media, Inc.	X
31.1	Certification of Principal Executive Officer of Emmis Communications Corporation pursuant to Rule 13a-14(a) under the Exchange Act	X
31.2	Certification of Principal Financial Officer of Emmis Communications Corporation pursuant to Rule 13a-14(a) under the Exchange Act	X
32.1	Certification of Principal Executive Officer of Emmis Communications Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
32.2	Certification of Principal Financial Officer of Emmis Communications Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
101.INS	XBRL Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema Document	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	X
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	X

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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: January 5, 2017	By:	/s/ RYAN A. HORNADAY
		Ryan A. Hornaday
		Executive Vice President, Chief Financial Officer and Treasurer

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Emmis Communications Corp (EMMS) SEC Quarterly Report (10-Q) for Q4 2016

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

EMMIS COMMUNICATIONS CORPORATION