# Beasley Broadcast Group Inc: Form 10-Q for the period ended Jun 30, 2018

- Company: [Beasley Broadcast Group Inc](/companies/bbgi.md) (CIK 1099160)
- Form: 10-Q
- Filed: 2018-08-06
- Accepted by EDGAR: Aug 6, 2018, 20:07 ET
- Period: 2018-06-30
- Accession: 0001193125-18-239661
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1099160/000119312518239661/d597700d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1099160/000119312518239661/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2018-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Operating income | 3 months, 2018-04-01 to 2018-06-30 | $10.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2018-01-01 to 2018-06-30 | $11.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2018-04-01 to 2018-06-30 | $3.8m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2018-01-01 to 2018-06-30 | $7.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2018-04-01 to 2018-06-30 | $2.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2018-01-01 to 2018-06-30 | $2.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2018-04-01 to 2018-06-30 | $4.9m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2018-01-01 to 2018-06-30 | $1.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2018-04-01 to 2018-06-30 | $0.18 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted EPS | 6 months, 2018-01-01 to 2018-06-30 | $0.06 | us-gaap:EarningsPerShareBasicAndDiluted |
| Diluted shares (weighted) | 3 months, 2018-04-01 to 2018-06-30 | 27,523,310 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2018-01-01 to 2018-06-30 | 27,710,563 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2018-01-01 to 2018-06-30 | $11.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2018-01-01 to 2018-06-30 | $2.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2018-01-01 to 2018-06-30 | $2.7m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 6 months, 2018-01-01 to 2018-06-30 | $68.4k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2018-06-30 | $14.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2018-06-30 | $73.9m | us-gaap:AssetsCurrent |
| Total assets | at 2018-06-30 | $642.9m | us-gaap:Assets |
| Current liabilities | at 2018-06-30 | $31.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2018-06-30 | $370.7m | us-gaap:Liabilities |
| Shareholders' equity | at 2018-06-30 | $272.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 30,671 characters.

### General

We are a radio broadcasting company whose primary business is operating radio stations throughout the United States. After completion of the acquisition of WXTU-FM from Entercom Communications, Corp., we will own and operate 64 radio stations in the following radio markets: Atlanta, GA, Augusta, GA, Boston, MA, Charlotte, NC, Detroit, MI, Fayetteville, NC, Fort Myers-Naples, FL, Las Vegas, NV, Middlesex, NJ, Monmouth, NJ, Morristown, NJ, Philadelphia, PA, Tampa-Saint Petersburg, FL, West Palm Beach-Boca Raton, FL, and Wilmington, DE. We refer to each group of radio stations in each radio market as a market cluster.

### Recent Developments

On July 19, 2018, we entered into an asset purchase agreement to acquire WXTU-FM in Philadelphia, PA from Entercom Communications Corp. for $38.0 million in cash. The purchase price will be partially financed with borrowings from our credit facility and partially funded with cash from operations. On July 19, 2018, we also entered into a local marketing agreement (“LMA”) and began operating WXTU-FM on July 23, 2018. During the term of the LMA agreement, we will include net revenues and station operating expenses, including the associated LMA fee, from operating WXTU-FM in our consolidated financial statements. The acquisition, which is subject to approval by the Federal Communications Commission (“FCC”) and other customary closing conditions, is expected to close during the third or fourth quarter of 2018.

### Cautionary Note Regarding Forward-Looking Statements

This report contains “forward-looking statements” about the Company within the meaning of the Private Securities Litigation Reform Act of 1995, which relate to future, not past, events. All statements other than statements of historical fact included in this document are forward-looking statements. These forward-looking statements are based on the current beliefs and expectations of the Company’s management and are subject to known and unknown risks and uncertainties. Forward-looking statements, which address the Company’s expected business and financial performance and financial condition, among other matters, contain words such as: “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” “may,” “will,” “plans,” “projects,” “could,” “should,” “would,” “seek,” “forecast,” or other similar expressions.

Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The Company undertakes no obligation to update or revise any forward-looking statements.

Forward-looking statements involve a number of risks and uncertainties, and actual results or events may differ materially from those projected or implied in those statements. Factors that could cause actual results or events to differ materially from these forward-looking statements include, but are not limited to:

- external economic forces that could have a material adverse impact on the Company’s advertising revenues and results of operations;
- the ability of the Company’s radio stations to compete effectively in their respective markets for advertising revenues;
- the ability of the Company to respond to changes in technology, standards and services that affect the radio industry;
- audience acceptance of the Company’s content, particularly its radio programs;
- the Company’s substantial debt levels and the potential effect of restrictive debt covenants on the Company’s operational flexibility and ability to pay dividends;
- the Company’s dependence on federally issued licenses subject to extensive federal regulation;
- the risk that the Company’s FCC broadcasting licenses and/or goodwill could become impaired;
- the failure or destruction of the internet, satellite systems and transmitter facilities that the Company depends upon to distribute its programming;
- disruptions or security breaches of the Company’s information technology infrastructure;
- actions by the FCC or new legislation affecting the radio industry;
- the loss of key personnel;
- the fact that the Company is controlled by the Beasley family, which creates difficulties for any attempt to gain control of the Company;
- our ability to integrate acquired businesses and achieve fully the strategic and financial objectives related thereto and their impact on our financial condition and results of operations;
- other economic, business, competitive, and regulatory factors affecting the businesses of the Company, including those set forth in the Company’s filings with the SEC.

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. We do not intend, and undertake no obligation, to update any forward-looking statement.

### 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 commercial spots to advertisers directly or through national, regional or local advertising agencies. Revenues are reported at the amount we expect to be entitled to receive under the contract. Local revenue generally consists of commercial advertising sales, digital advertising sales and other 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 commercial advertising sales through advertiser agencies. National advertiser agencies generally purchase 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 periodic reports issued by Nielson Audio;
- 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. We also generate revenue from selling other digital products.

*Operating Expenses.* Our operating expenses consist primarily of (i) programming, engineering, sales, advertising and promotion, and general and administrative expenses incurred at our radio stations, (ii) general and administrative expenses, including compensation and other expenses, incurred at our corporate offices, and (iii) 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, 2017. There have been no material changes to our critical accounting estimates during the second quarter of 2018.

### Recent Accounting Pronouncements

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

### Three Months Ended June 30, 2018 Compared to the Three Months Ended June 30, 2017

The following summary table presents a comparison of our results of operations for the three months ended June 30, 2017 and 2018 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 June 30, 2017 | 2018 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Net revenue | $61,013,414 | $61,625,296 | $611,882 | 1.0% |
| Station operating expenses | 44,912,998 | 44,967,293 | 54,295 | 0.1 |
| Corporate general and administrative expenses | 4,488,482 | 4,440,299 | (48,183) | (1.1) |
| Gain on disposition | 3,977,449 | — | (3,977,449) | (100.0) |
| Change in fair value of contingent consideration | (2,391,342) | — | 2,391,342 | 100.0 |
| Termination of postretirement benefits plan | 1,812,448 | — | (1,812,448) | (100.0) |
| Interest expense | 4,752,044 | 3,805,575 | (946,469) | (19.9) |
| Income tax expense | 4,224,649 | 1,958,776 | (2,265,873) | (53.6) |
| Net income | 3,905,521 | 4,918,612 | 1,013,091 | 25.9 |

*Net Revenue.* Net revenue increased $0.6 million during the three months ended June 30, 2018 as compared to the three months ended June 30, 2017. Significant factors affecting net revenue included $2.4 million in additional advertising revenue in Boston from the asset exchange completed on December 19, 2017, partially offset by a $0.5 million decrease due to the disposition of our Greenville-New Bern-Jacksonville market cluster on May 1, 2017. Net revenue for the three months ended June 30, 2018 was comparable to net revenue for the same period in 2017 at our remaining market clusters.

*Station Operating Expenses.* Station operating expenses during the three months ended June 30, 2018 were flat compared to the same period in 2017. However, station operating expenses for the three months ended June 30, 2018 included $2.3 million in additional expenses from the asset exchange, partially offset by a $0.5 million decrease in station operating expenses due to the disposition of our Greenville-New Bern-Jacksonville market cluster and a $0.6 million decrease in station operating expenses at our Detroit market cluster. Station operating expenses for the three months ended June 30, 2018 were comparable to station operating expenses for the same period in 2017 at our remaining market clusters.

*Corporate General and Administrative Expenses.* Corporate general and administrative expenses during the three months ended June 30, 2018 were comparable to corporate general and administrative expenses for the same period in 2017.

*Gain on Disposition.* On May 1, 2017, we completed the disposition of our Greenville-New Bern-Jacksonville market cluster. As a result of the disposition we recorded a gain of $4.0 million during the three months ended June 30, 2017.

*Change in Fair Value of Contingent Consideration.* In connection with the acquisition of Greater Media, a certain number of shares of our Class A common stock placed in escrow on the acquisition date were forfeited based on a working capital adjustment. The fair value of the estimated number of shares to be forfeited decreased $1.2 million due to a change in our stock price over the three months ended June 30, 2017. In addition, a number of shares of our Class A common stock were returned to us by the former stockholders of Greater Media based on certain proceeds from the sale of Greater Media’s tower assets. The fair value of the estimated number of shares to be returned decreased $1.2 million due to a change in our stock price over the three months ended June 30, 2017.

*Termination of Postretirement Benefits Plan.* Effective May 31, 2017, we terminated the Greater Media postretirement medical and life insurance benefits plan. As a result of the plan termination, we reversed the accrued liability of $1.8 million during the three months ended June 30, 2017.

*Interest Expense.* Interest expense decreased $0.9 million during the three months ended June 30, 2018 as compared to the three months ended June 30, 2017. The primary factors affecting interest expense was the decrease in long-term debt outstanding and the applicable interest rate.

*Income Tax Expense.* Our effective tax rate was approximately 52% and 28% for the three months ended June 30, 2017 and 2018, respectively. These rates differ from the federal statutory rate of 35% and 21% in 2017 and 2018, respectively, due to the effect of state income taxes and certain expenses that are not deductible for tax purposes. The effective tax rate for the three months ended June 30, 2017 also reflects a $0.9 million increase due to the change in fair value of contingent consideration during that time period.

*Net Income.* Net income during the three months ended June 30, 2018 was $4.9 million, an increase of $1.0 million compared to net income of $3.9 million during the three months ended June 30, 2017 as a result of the factors described above.

### Six Months Ended June 30, 2018 Compared to the Six Months Ended June 30, 2017

The following summary table presents a comparison of our results of operations for the six months ended June 30, 2017 and 2018 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.

|  | Six Months ended June 30, 2017 | 2018 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Net revenue | $114,753,965 | $116,778,923 | $2,024,958 | 1.8% |
| Station operating expenses | 88,862,592 | 90,480,140 | 1,617,548 | 1.8 |
| Corporate general and administrative expenses | 7,718,579 | 7,722,772 | 4,193 | 0.1 |
| Gain on dispositions, net | 3,707,993 | — | (3,707,993) | (100.0) |
| Change in fair value of contingent consideration | 5,141,950 | (4,415,925) | (9,557,875) | (185.9) |
| Termination of postretirement benefits plan | 1,812,448 | — | (1,812,448) | (100.0) |
| Interest expense | 9,579,383 | 7,430,815 | (2,148,568) | (22.4) |
| Income tax expense | 3,809,791 | 2,339,277 | (1,470,514) | (38.6) |
| Net income | 11,392,017 | 1,757,420 | (9,634,597) | (84.6) |

*Net Revenue.* Net revenue increased $2.0 million during the six months ended June 30, 2018 as compared to the six months ended June 30, 2017. Significant factors affecting net revenue included $6.8 million in additional advertising revenue in Boston from the asset exchange completed on December 19, 2017, partially offset by a $2.0 million decrease due to the disposition of our Greenville-New Bern-Jacksonville market cluster on May 1, 2017. Net revenue for the six months ended June 30, 2018 was comparable to net revenue for the same period in 2017 at our remaining market clusters.

*Station Operating Expenses.* Station operating expenses increased $1.6 million during the six months ended June 30, 2018 as compared to the six months ended June 30, 2017. Significant factors affecting station operating expenses included $6.3 million in additional expenses from the asset exchange, partially offset by a $1.8 million decrease in station operating expenses due to the disposition of our Greenville-New Bern-Jacksonville market cluster and a $0.8 million decrease in station operating expenses at our Detroit market cluster. Station operating expenses for the six months ended June 30, 2018 were comparable to station operating expenses for the same period in 2017 at our remaining market clusters.

*Corporate General and Administrative Expenses.* Corporate general and administrative expenses during the six months ended June 30, 2018 were comparable to the same period in 2017. However, corporate general and administrative expenses included a $0.7 million increase in cash compensation expense, which was primarily due to an increase in the number of employees at our corporate offices, offset by a $1.0 million gain as a result of the Greater Media pension plan termination.

*Gain on Dispositions, Net.* On May 1, 2017, we completed the disposition of our Greenville-New Bern-Jacksonville market cluster. As a result of the disposition we recorded a gain of $4.0 million during the second quarter of 2017. On January 6, 2017, we completed the sale of substantially all of the assets used or useful in the operations of WBT-AM, WBT-FM, WFNZ-AM and WLNK-FM in Charlotte, NC. As a result of the disposition we recorded a $0.3 million loss during the first quarter of 2017.

*Change in Fair Value of Contingent Consideration.* In connection with the acquisition of Greater Media, a certain number of shares of our Class A common stock placed in escrow on the acquisition date were forfeited based on a working capital adjustment. The fair value of the forfeited shares decreased $2.9 million due to a change in our stock price from January 1, 2018 to March 15, 2018, the date the forfeited shares were recorded in treasury stock. The fair value of the estimated number of shares to be forfeited increased $2.5 million over the six months ended June 30, 2017. In addition, a number of shares of our Class A common stock were returned to us by the former stockholders of Greater Media based on certain proceeds from the sale of Greater Media’s tower assets. The fair value of the returned shares decreased $1.6 million due to a change in our stock price from January 1, 2018 to March 15, 2018, the date the returned shares were recorded in treasury stock. The fair value of the estimated number of shares to be returned increased $2.6 million over the six months ended June 30, 2017.

*Termination of Postretirement Benefits Plan.* Effective May 31, 2017, we terminated the Greater Media postretirement medical and life insurance benefits plan. As a result of the plan termination, we reversed the accrued liability of $1.8 million during the six months ended June 30, 2017.

*Interest Expense.* Interest expense decreased $2.1 million during the six months ended June 30, 2018 as compared to the six months ended June 30, 2017. The primary factors affecting interest expense was the decrease in long-term debt outstanding and the applicable interest rate.

*Income Tax Expense.* Our effective tax rate was approximately 25% and 57% for the six months ended June 30, 2017 and 2018, respectively. These rates differ from the federal statutory rate of 35% and 21% in 2017 and 2018, respectively, due to the effect of state income taxes and certain expenses that are not deductible for tax purposes. The effective tax rate for the six months ended June 30, 2018 also reflects a $1.2 million increase due to the change in fair value of contingent consideration during that time period. The effective tax rate for the six months ended June 30, 2017 also reflects a $2.0 million decrease due to the change in fair value of contingent consideration during that time period.

*Net Income.* Net income during the six months ended June 30, 2018 was $1.8 million, a decrease of $9.6 million compared to net income of $11.4 million during the six months ended June 30, 2017 as a result of the factors described above.

### Liquidity and Capital Resources

*Overview.* Our primary sources of liquidity are internally generated cash flow and our revolving credit facility. 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 sufficient shares of our common stock to fund withholding taxes in connection with the vesting of restricted stock units and shares of restricted stock, subject to compliance with financial covenants, up to an aggregate amount of $2.5 million per year. We paid approximately $68,000 to repurchase 6,328 shares during the six months ended June 30, 2018.

Our credit agreement restricts our ability to pay cash dividends and to repurchase additional shares of our common stock. The credit agreement does permit, however, (i) additional dividends of up to an aggregate amount of $7.5 million each year if our Total Leverage Ratio is greater than 3.5x and up to an aggregate amount of $10.0 million each year if our Total Leverage Ratio is less than or equal to 3.5x, (ii) an amount equal to our excess cash flow each year that is not required to prepay the credit agreement, subject to maintaining a Total Leverage Ratio of no greater than 3.75x and (iii) unlimited dividends each year if our Total Leverage Ratio is less than 3.5x and our First Lien Leverage Ratio (as defined in the credit agreement) is less than 2.5x. We paid cash dividends of $2.7 million during the six months ended June 30, 2018. Also, on May 31, 2018, our board of directors declared a cash dividend of $0.05 per share on our Class A and Class B common stock. The dividend of $1.4 million in the aggregate was paid on July 6, 2018, to stockholders of record on June 29, 2018.

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

- internally generated cash flow;
- our revolving credit facility;
- additional borrowings, other than under our revolving credit facility, to the extent permitted; 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 facility, 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 total leverage ratio, as defined by our credit agreement, 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 total leverage ratio and we may not be permitted to make any additional borrowings under our revolving credit facility.

*Cash Flows*. The following summary table presents a comparison of our capital resources for the six months ended June 30, 2017 and 2018 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.

|  | Six Months ended June 30, 2017 | 2018 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $10,656,422 | $10,982,567 |
| Net cash provided by (used in) investing activities | 32,139,890 | (2,329,499) |
| Net cash used in financing activities | (46,074,363) | (7,753,709) |
| Net increase (decrease) in cash and cash equivalents | $(3,278,051) | $899,359 |

*Net Cash Provided By Operating Activities.* Net cash provided by operating activities increased $0.3 million during the six months ended June 30, 2018 as compared to the six months ended June 30, 2017. Significant factors affecting this increase in net cash provided by operating activities included a $2.1 million decrease in interest payments, a $1.4 million decrease in income tax payments, and a $1.3 million decrease in expenses related to acquisitions and dispositions in 2017, partially offset by a $3.8 million decrease in cash receipts from the sale of advertising airtime and a $0.9 million increase in cash paid for corporate general and administrative expenses.

*Net Cash Provided By (Used In) Investing Activities.* Net cash used in investing activities during the six months ended June 30, 2018 included payments of $2.1 million for capital expenditures. Net cash provided by investing activities for the same period in 2017 included proceeds of $35.0 million from the disposition of radio stations in Charlotte and Greenville-New Bern-Jacksonville, partially offset by payments of $1.6 million for capital expenditures and payments of $1.1 million for translator licenses.

*Net Cash Used In Financing Activities.* Net cash used in financing activities during the six months ended June 30, 2018 included repayments of $5.0 million under our credit facility and payments of $2.7 million for cash dividends. Net cash used in financing activities for the same period in 2017 included repayments of $43.0 million under our credit facility, payments of $2.6 million for cash dividends and payments of $0.5 million for repurchases of our Class A common stock.

*Credit Facility.* As of June 30, 2018, the credit facility consisted of a term loan with a remaining balance of $220.0 million and a revolving credit facility with a maximum commitment of $20.0 million. As of June 30, 2018, we had $20.0 million in available commitments under our revolving credit facility. At our option, the credit facility may bear interest at either (i) LIBOR plus a margin of 4.0% or (ii) the base rate plus a margin of 3.0%. The LIBOR interest rate for the term loan is subject to a 1% floor. Interest payments are, for loans based on LIBOR, due at the end of each applicable interest period unless the interest period is longer than three months, in which case they are due at the end of each three month period. Interest payments for loans based on the base rate are due quarterly. The revolving credit facility carried interest, based on LIBOR, at 6.1% as of June 30, 2018 and matures on November 17, 2022. The term loan carried interest, based on LIBOR, at 6.1% as of June 30, 2018 and matures on November 1, 2023.

Commencing with the year ending December 31, 2018, the credit agreement requires mandatory prepayments equal to 50% of Excess Cash Flow (as defined in the credit agreement) when our Total Leverage Ratio (as defined in the credit agreement) is greater than 3.5x; mandatory prepayments equal to 25% of Excess Cash Flow when our Total Leverage Ratio is less than or equal to 3.5x but greater than 3.0x; and no mandatory prepayments when our Total Leverage Ratio is less than or equal to 3.0x. Mandatory prepayments of Excess Cash Flow are due 95 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 credit agreement requires us to comply with certain financial covenants which are defined in the credit agreement. These financial covenants include a First Lien Leverage Ratio that will be tested at the end of each quarter. For the period from June 30, 2018 through December 31, 2018, the maximum First Lien Leverage Ratio is 6.0x. For the period from March 31, 2019 through December 31, 2019, the maximum First Lien Leverage Ratio is 5.75x. The maximum First Lien Leverage Ratio is 5.25x for March 31, 2020 and thereafter.

The credit facility is secured by substantially all assets of the Company and its subsidiaries and is guaranteed jointly and severally by the Company and its subsidiaries. If we default under the terms of the credit agreement, the Company and its subsidiaries may be required to perform under their guarantees. As of June 30, 2018, the maximum amount of undiscounted payments the Company and its applicable subsidiaries would have been required to make in the event of default was $220.0 million. The guarantees for the credit facility expire on November 17, 2022 for the revolving credit facility and on November 1, 2023 for the term loan.

Failure to comply with financial covenants, scheduled interest payments, scheduled principal repayments, or any other terms of our credit agreement 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 June 30, 2018, we were in compliance with all applicable financial covenants under our credit agreement.

The aggregate scheduled principal repayments of the credit facility and capital lease obligations for the remainder of 2018, the next four years and thereafter are as follows:

|  |  |
| --- | ---: |
| 2018 | $32,010 |
| 2019 | 67,101 |
| 2020 | 1,820,326 |
| 2021 | 2,323,700 |
| 2022 | 2,253,332 |
| Thereafter | 214,102,395 |
| Total | $220,598,864 |

20

## 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 June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 241 characters.

The risk factors affecting our Company are described in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2017. There have been no material changes to the risks affecting our Company during the second quarter of 2018.

Filed Aug 6, 2018.
Source: SEC EDGAR, the filing index for accession 0001193125-18-239661. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.