# Beasley Broadcast Group Inc: Form 10-Q for the period ended Mar 31, 2013

- Company: [Beasley Broadcast Group Inc](/companies/bbgi.md) (CIK 1099160)
- Form: 10-Q
- Filed: 2013-05-03
- Accepted by EDGAR: May 3, 2013, 13:23 ET
- Period: 2013-03-31
- Accession: 0001193125-13-197909
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1099160/000119312513197909/d505739d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1099160/000119312513197909/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2013-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2013-01-01 to 2013-03-31 | $24.8m | us-gaap:Revenues |
| Operating income | 3 months, 2013-01-01 to 2013-03-31 | $5.5m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2013-01-01 to 2013-03-31 | $2.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2013-01-01 to 2013-03-31 | $1.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2013-01-01 to 2013-03-31 | $2.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2013-01-01 to 2013-03-31 | $0.11 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted shares (weighted) | 3 months, 2013-01-01 to 2013-03-31 | 22,726,909 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2013-01-01 to 2013-03-31 | $3.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2013-01-01 to 2013-03-31 | $286.9k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2013-01-01 to 2013-03-31 | $176.5k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2013-03-31 | $14.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2013-03-31 | $35.4m | us-gaap:AssetsCurrent |
| Total assets | at 2013-03-31 | $260.8m | us-gaap:Assets |
| Current liabilities | at 2013-03-31 | $13.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2013-03-31 | $175.3m | us-gaap:Liabilities |
| Long-term debt | at 2013-03-31 | $111.1m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2013-03-31 | $4.6m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2013-03-31 | $85.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 21,751 characters.

You should read the following discussion together with the financial statements and related notes included elsewhere in this report. The results discussed below are not necessarily indicative of the results to be expected in any future periods. This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including any projections of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” and other similar words. Such forward-looking statements may be contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” among other places. Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as unforeseen events that would cause us to broadcast commercial-free for any period of time and changes in the radio broadcasting industry generally. We do not intend, and undertake no obligation, to update any forward-looking statement. Key risks to our company are described in our annual report on Form 10-K, filed with the Securities and Exchange Commission on February 15, 2013.

### General

We are a radio broadcasting company whose primary business is operating radio stations throughout the United States. We own and operate 43 radio stations in the following markets: Atlanta, GA, Augusta, GA, Boston, MA, Fayetteville, NC, Fort Myers-Naples, FL, Greenville-New Bern-Jacksonville, NC, Las Vegas, NV, Miami-Fort Lauderdale, FL, Philadelphia, PA, West Palm Beach-Boca Raton, FL, and Wilmington, DE. We also operate one radio station in the expanded AM band in Augusta, GA. In addition, we provide management services to one radio station in Las Vegas, NV. We refer to each group of radio stations in each radio market as a market cluster.

### Recent Developments

On April 12, 2013, we contributed an additional $104,167 to Digital PowerRadio, LLC which maintained our ownership interest at approximately 20% of the outstanding units. Digital PowerRadio, LLC is managed by Fowler Radio Group, LLC which is partially-owned by Mark S. Fowler, an independent director of Beasley Broadcast Group, Inc.

On April 3, 2013, we amended our first lien credit agreement. The amendment waived certain restrictions to permit the prepayment of the $25.0 million second lien facility in full with $20.0 million of additional term loan borrowings, $2.0 million of additional revolving credit facility borrowings from the first lien facility and $3.0 million of cash on hand. The amendment also modified the interest rate margins on the term loan. In connection with the amended credit agreement, we expect to record a loss on extinguishment of long-term debt of $1.3 million during the second quarter of 2013.

On January 11, 2013, we acquired two FM translator licenses from Reach Communications, Inc. for $30,000. The translator licenses allow us to rebroadcast the programming of one of our radio stations in Fort Myers-Naples, FL on the FM band over an expanded area of coverage.

### Financial Statement Presentation

The following discussion provides a brief description of certain key items that appear in our financial statements and general factors that impact these items.

*Net Revenue.* Our net revenue is primarily derived from the sale of advertising airtime to local and national advertisers. Net revenue is gross revenue less agency commissions, generally 15% of gross revenue. Local revenue generally consists of advertising airtime and digital sales to advertisers in a radio station’s local market either directly to the advertiser or through the advertiser’s agency. National revenue generally consists of advertising airtime sales to agencies purchasing advertising for multiple markets. National sales are generally facilitated by our national representation firm, which serves as our agent in these transactions.

Our net revenue is generally determined by the advertising rates that we are able to charge and the number of advertisements that we can broadcast without jeopardizing listener levels. Advertising rates are primarily based on the following factors:

- a radio station’s audience share in the demographic groups targeted by advertisers as measured principally by quarterly reports issued by the Arbitron Ratings Company;
- the number of radio stations, as well as other forms of media, in the market competing for the attention of the same demographic groups;
- the supply of, and demand for, radio advertising time; and
- the size of the market.

Our net revenue is affected by general economic conditions, competition and our ability to improve operations at our market clusters. Seasonal revenue fluctuations are also common in the radio broadcasting industry and are primarily due to variations in advertising expenditures by local and national advertisers. Our revenues are typically lowest in the first calendar quarter of the year.

We use trade sales agreements to reduce cash paid for operating costs and expenses by exchanging advertising airtime for goods or services; however, we endeavor to minimize trade revenue in order to maximize cash revenue from our available airtime.

We also continue to invest in digital support services to develop and promote our radio station websites. We derive revenue from our websites through the sale of advertiser promotions and advertising on our websites and the sale of advertising airtime during audio streaming of our radio stations over the internet.

*Operating Expenses.* Our operating expenses consist primarily of (1) programming, engineering, sales, advertising and promotion, and general and administrative expenses incurred at our radio stations, (2) general and administrative expenses, including compensation and other expenses, incurred at our corporate offices, and (3) depreciation and amortization. We strive to control our operating expenses by centralizing certain functions at our corporate offices and consolidating certain functions in each of our market clusters.

### Critical Accounting Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect reported amounts and related disclosures. We consider an accounting estimate to be critical if:

- it requires assumptions to be made that were uncertain at the time the estimate was made; and
- changes in the estimate or different estimates that could have been selected could have a material impact on our results of operations or financial condition.

Our critical accounting estimates are described in Item 7 of our annual report on Form 10-K for the year ended December 31, 2012. There have been no material changes to our critical accounting estimates during the first quarter of 2013.

### Recent Accounting Pronouncements

Recent accounting pronouncements are described in Note 2 to the accompanying financial statements.

### Three Months Ended March 31, 2013 Compared to the Three Months Ended March 31, 2012

The following summary table presents a comparison of our results of operations for the three months ended March 31, 2012 and 2013 with respect to certain of our key financial measures. These changes illustrated in the table are discussed in greater detail below. This section should be read in conjunction with the financial statements and notes to financial statements included in Item 1 of this report.

|  | Three months ended March 31, 2012 | 2013 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Net revenue | $23,298,608 | $24,812,469 | $1,513,861 | 6.5% |
| Station operating expenses | 15,505,304 | 16,703,004 | 1,197,700 | 7.7 |
| Corporate general and administrative expenses | 2,040,345 | 2,094,009 | 53,664 | 2.6 |
| Interest expense | 1,346,171 | 2,047,874 | 701,703 | 52.1 |
| Income tax expense | 1,559,049 | 1,028,429 | (530,620) | (34.0) |
| Net income | 2,407,996 | 2,420,487 | 12,491 | 0.5 |

11

*Net Revenue.* Net revenue increased $1.5 million during the three months ended March 31, 2013. Significant factors affecting net revenue included a $1.0 million increase in advertising revenue from our Philadelphia market cluster, a $0.3 million increase from our Fort Myers market cluster, and $0.7 million of additional net revenue from KOAS-FM in Las Vegas, NV which was acquired in the third quarter of 2012. Net revenue was comparable to the same period in 2012 at our remaining market clusters.

*Station Operating Expenses.* Station operating expenses increased $1.2 million during the three months ended March 31, 2013. Significant factors affecting station operating expenses included a $0.4 million increase at our Philadelphia market cluster and $0.4 million of additional station operating expenses from KOAS-FM in Las Vegas, NV. Station operating expenses were comparable to the same period in 2012 at our remaining market clusters.

*Corporate General and Administrative Expenses.* Corporate general and administrative expenses during the three months ended March 31, 2013 were comparable to the same period in 2012.

*Interest Expense.* Interest expense increased $0.7 million during the three months ended March 31, 2013. Significant factors affecting interest expense included an increase in borrowing costs under the credit agreements we entered into in the third quarter of 2012 and a decrease in long-term debt outstanding.

*Income Tax Expense.* Our effective tax rate was approximately 39% and 30% for the three months ended March 31, 2012 and 2013, respectively, which differ from the federal statutory rate of 34% due to the effect of state income taxes, certain expenses that are not deductible for tax purposes, and changes in the valuation allowance for certain deferred tax assets which management has determined, more likely than not, that such losses will not be utilized. The effective tax rate for the three months ended March 31, 2013, also reflects a $0.3 million decrease from a change to our state tax effective rate.

*Net Income.* Net income during the three months ended March 31, 2013 was comparable to the same period in 2012.

### Liquidity and Capital Resources

*Overview.* Our primary sources of liquidity are internally generated cash flow and our revolving credit loan. Our primary liquidity needs have been, and for the next twelve months and thereafter are expected to continue to be, for working capital, debt service, and other general corporate purposes, including capital expenditures and radio station acquisitions. Historically, our capital expenditures have not been significant. In addition to property and equipment associated with radio station acquisitions, our capital expenditures have generally been, and are expected to continue to be, related to the maintenance of our studio and office space and the technological improvement, including upgrades necessary to broadcast HD Radio, and maintenance of our broadcasting towers and equipment. We have also purchased or constructed office and studio space in some of our markets to facilitate the consolidation of our operations.

Our credit agreement permits us to repurchase additional shares of our common stock, subject to compliance with financial covenants, up to an aggregate amount of $0.5 million per year. We paid $0.2 million to repurchase 34,380 shares during the three months ended March 31, 2013.

Our credit agreement permits us to pay cash dividends, subject to compliance with financial covenants, up to an aggregate amount of $4.0 million for 2013, $5.0 million for each of 2014 and 2015, and $6.0 million for each year thereafter. We did not pay any cash dividends during the three months ended March 31, 2013.

We expect to provide for future liquidity needs through one or a combination of the following sources of liquidity:

- internally generated cash flow;
- our credit facilities;
- additional borrowings, other than under our existing credit facilities, to the extent permitted thereunder; and
- additional equity offerings.

We believe that we will have sufficient liquidity and capital resources to permit us to provide for our liquidity requirements and meet our financial obligations for the next twelve months. However, poor financial results or unanticipated expenses could give rise to defaults under our credit facilities, additional debt servicing requirements or other additional financing or liquidity requirements sooner than we expect and we may not secure financing when needed or on acceptable terms.

Our ability to reduce our consolidated total debt ratio, as defined by our credit agreements, by increasing operating cash flow and/or decreasing long-term debt will determine how much, if any, of the remaining commitments under our revolving credit facility will be available to us in the future. Poor financial results or unanticipated expenses could result in our failure to maintain or lower our consolidated total debt ratio and we may not be permitted to make any additional borrowings under our revolving credit facility.

The following summary table presents a comparison of our capital resources for the three months ended March 31, 2012 and 2013 with respect to certain of our key measures affecting our liquidity. The changes set forth in the table are discussed in greater detail below. This section should be read in conjunction with the financial statements and notes to financial statements included in Item 1 of this report.

|  | Three months ended March 31, 2012 | 2013 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $5,605,488 | $3,934,476 |
| Net cash used in investing activities | (362,531) | (243,285) |
| Net cash used in financing activities | (3,536,000) | (1,128,387) |
| Net increase in cash and cash equivalents | $1,706,957 | $2,562,804 |

*Net Cash Provided By Operating Activities.* Net cash provided by operating activities decreased $1.7 million during the three months ended March 31, 2013. Significant factors affecting net cash provided by operating activities included a $1.2 million increase in station operating expenses, a $0.6 million increase in interest payments, and a $0.4 million increase in cash receipts from the sale of advertising airtime.

*Net Cash Used In Investing Activities.* Net cash used in investing activities during the three months ended March 31, 2013 included payments of $0.3 million for capital expenditures. Net cash used in investing activities for the same period in 2012 included payments of $0.4 million for capital expenditures.

*Net Cash Used In Financing Activities.* Net cash used in financing activities during the three months ended March 31, 2013 included repayments of $1.0 million under our credit facilities and payments of $0.2 million for repurchases of our Class A common stock. Net cash used in financing activities for the same period in 2012 included repayments of $3.4 million under our credit facility and payments of $0.1 million for repurchases of our Class A common stock.

*Credit Facilities.* As of April 26, 2013, the aggregate outstanding balance of our credit facilities was $112.7 million. As of March 31, 2013, the first lien facility consisted of a term loan with a remaining balance of $85.7 million and a revolving credit facility with a maximum commitment of $20.0 million. As of March 31, 2013, we had $15.0 million in remaining commitments under our revolving credit facility. The revolving credit facility includes a $5.0 million sub-limit for letters of credit. The first lien facility carried interest, based on the adjusted LIBOR rate, at 5.15% as of March 31, 2013 and matures on August 9, 2017.

The first lien credit agreement requires mandatory prepayments equal to 50% of consolidated excess cash flow, as defined in the first lien credit agreement, when our consolidated total debt is equal to or greater than three times our consolidated operating cash flow as defined in the first lien credit agreement. The mandatory prepayments decrease to 25% of excess cash flow when our consolidated total debt is less than three times our consolidated operating cash flow. Mandatory prepayments of consolidated excess cash flow are due 120 days after year end. The credit agreement also requires mandatory prepayments for defined amounts from net proceeds of asset sales, net insurance proceeds, and net proceeds of debt issuances.

The first lien facility requires us to comply with certain financial covenants which are defined in the first lien credit agreement. These financial covenants include:

- *Consolidated Total Debt Ratio.* Our consolidated total debt on the last day of each fiscal quarter through March 31, 2013 must not have exceeded 5.25 times our consolidated operating cash flow for the four quarters then ended. The maximum ratio is 5.0 times for the period from April 1, 2013 through December 31, 2013. The maximum ratio is 4.5 times for 2014, 4.0 times for 2015, 3.5 times for 2016, and 3.0 times for 2017.
- *Interest Coverage Ratio.* Our consolidated operating cash flow for the four quarters ending on the last day of each fiscal quarter through maturity must not be less than 2.0 times our consolidated cash interest expense for the four quarters then ended.

As of March 31, 2013, the second lien facility consisted of a term loan of $25.0 million. The second lien facility carried interest, based on the adjusted LIBOR rate, at 11.25% as of March 31, 2013.

Failure to comply with financial covenants, scheduled interest payments, scheduled principal repayments, or any other terms of our credit agreements could result in the acceleration of the maturity of our outstanding debt, which could have a material adverse effect on our business or results of operations. As of March 31, 2013, we were in compliance with all applicable financial covenants under our credit agreements; our consolidated total debt ratio was 3.46 times, and our interest coverage ratio was 4.62 times.

On April 3, 2013, we amended our first lien credit agreement. The amendment waived certain restrictions to permit the prepayment of the $25.0 million second lien facility in full with $20.0 million of additional term loan borrowings and $2.0 million of additional revolving credit facility borrowings from the first lien facility and $3.0 million of cash on hand. The amendment also modified the interest rate margins on the term loan. In connection with the amended credit agreement, we expect to record a loss on extinguishment of long-term debt of $1.3 million during the second quarter of 2013.

The amended first lien facility consists of a term loan with a remaining balance of $105.7 million and a revolving credit facility with a maximum commitment of $20.0 million. As of April 3, 2013, we had $13.0 million in remaining commitments available under our revolving credit facility. At our election, the first lien facility may bear interest at either (i) the adjusted LIBOR rate, as defined in the first lien credit agreement, plus a margin ranging from 3.5% to 5.0% that is determined by our consolidated total debt ratio, as defined in the first lien credit agreement or (ii) the base rate, as defined in the first lien credit agreement, plus a margin ranging from 2.5% to 4.0% that is determined by our consolidated total debt ratio. Interest on adjusted LIBOR rate loans is payable at the end of each applicable interest period and, for those interest periods with a duration in excess of three months, the three month anniversary of the beginning of such interest period. Interest on base rate loans is payable quarterly in arrears.

The amended first lien facility is secured by a first-priority lien on substantially all of the Company’s assets and the assets of substantially all of its subsidiaries and is guaranteed jointly and severally by the Company and substantially all of its subsidiaries. The guarantees were issued to our lenders for repayment of the outstanding balance of the first lien facility. If we default under the terms of the first lien credit agreement, the Company and its applicable subsidiaries may be required to perform under their guarantees. As of April 3, 2013, the maximum amount of undiscounted payments the Company and its applicable subsidiaries would have had to make in the event of default was $112.7 million. The guarantees for the first lien facility expire on August 9, 2017.

The aggregate scheduled principal repayments of the amended credit facility for the remainder of 2013 and the next four years are as follows:

|  | Term loan | Revolving credit facility | Total |
| --- | ---: | ---: | ---: |
| 2013 | $3,250,000 | $— | $3,250,000 |
| 2014 | 6,875,000 | — | 6,875,000 |
| 2015 | 8,250,000 | — | 8,250,000 |
| 2016 | 9,625,000 | — | 9,625,000 |
| 2017 | 77,750,000 | 7,000,000 | 84,750,000 |
| Total | $105,750,000 | $7,000,000 | $112,750,000 |

## Controls and procedures

As filed, 749 characters.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective as of the end of the period covered by this report. There were no changes in our internal control over financial reporting during the quarter ended March 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 233 characters.

The risks affecting our Company are described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2012. There have been no material changes to the risks affecting our Company during the first quarter of 2013.

Filed May 3, 2013.
Source: SEC EDGAR, the filing index for accession 0001193125-13-197909. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.