Debt maneuvers help Emmis turn quarterly profit

Emmis Communications Corp. reported a quarterly profit today after buying back a big chunk of its own debt on the cheap,
but the outlook for the company remains grim. The radio broadcaster and magazine publisher saw revenue plunge 27 percent.

Indianapolis-based Emmis turned a profit of $7.5 million, or 20 cents per share, for the fiscal first quarter ended
May 31, compared to a loss of $1 million, or 3 cents per share, a year earlier.

Revenue, however, dropped from
$85.4 million to $62.4 million. And the company suffered an operating loss of nearly $6 million compared to a gain of $13.9
million in the same period last year.

Radio revenue fell from $63.6 million to $46.2 million and publishing revenue
dropped from $20 million to $16.6 million.

Emmis realized $31.9 million in gains by purchasing $78 million of its
own debt for about $45 million through a series of one-time Dutch auction tenders. The company said it would not be able to
pursue further tenders under its credit agreement.

“We continue to fight against the impact of a remarkably
difficult economy,” CEO Jeff Smulyan said in a public letter to employees. “While I believe we have seen the bottom
of this downturn, what no one can say is how long it will take to climb out of the trough. Therefore, we continue to do what’s
necessary to survive and prepare for better times.

“The good news is that our strategy is working. By focusing
on debt reduction, maintaining compliance with our banking agreements and reducing expenses, Emmis is protecting itself from
the financial failure that threatens so many others these days.”

Emmis also announced that it sold its unprofitable
Belgium radio operations during the quarter to Belgium company Alfacam Group NV for about $139. The operation lost $682,000
last year and $561,000 in the first quarter.

Emmis has experienced tough times in recent years. The company lost
$283.9 million, or $7.81 per share, in its fiscal year ended Feb. 28, and $10.3 million, or 74 cents per share, the previous
fiscal year.

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