================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-29253
BEASLEY BROADCAST GROUP, INC.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 65-0960915
-------------- ----------------------
(State of (I.R.S. Employer
Incorporation) Identification Number)
3033 RIVIERA DRIVE, SUITE 200
NAPLES, FLORIDA 34103
-----------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(941) 263-5000
----------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class A Common Stock, $.001 par value, 7,252,068 Shares Outstanding as
of November 7, 2000
Class B Common Stock, $.001 par value, 17,021,373 Shares Outstanding as
of November 7, 2000
================================================================================
INDEX
PAGE NO.
--------
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).............................. 1
Balance Sheets of Beasley Broadcast Group, Inc. as of
December 31, 1999 and September 30, 2000...................... 1
Statements of Operations of Beasley Broadcast Group, Inc.
for the Three and Nine Months Ended September 30, 1999 and
September 30, 2000............................................ 2
Statements of Cash Flows of Beasley Broadcast Group, Inc.
for the Nine Months Ended September 30, 1999 and
September 30, 2000............................................ 3
Notes to Financial Statements................................. 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk.... 19
PART II
OTHER INFORMATION
Item 1. Legal Proceedings............................................. 21
Item 2. Changes in Securities and Use of Proceeds..................... 21
Item 3. Defaults Upon Senior Securities............................... 21
Item 4. Submission of Matters to a Vote of Security Holders........... 21
Item 5. Other Information............................................. 21
Item 6. Exhibits and Reports on Form 8-K.............................. 21
SIGNATURES............................................................ 23
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BEASLEY BROADCAST GROUP, INC.
BALANCE SHEETS
COMBINED CONSOLIDATED
DECEMBER 31, SEPTEMBER 30,
1999 2000
------------- -------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents .................................... $ 7,002,669 $ 7,327,130
Accounts receivable, less allowance for doubtful accounts
of $560,282 in 1999 and $480,323 in 2000 .................. 19,915,098 18,387,461
Trade sales receivable ....................................... 735,607 1,141,358
Other receivables ............................................ 676,478 949,443
Prepaid expenses and other ................................... 1,918,223 2,121,108
Deferred tax assets .......................................... -- 140,000
------------- -------------
Total current assets ...................................... 30,248,075 30,066,500
Property and equipment, net .................................... 15,773,175 19,355,241
Notes receivable from related parties .......................... 556,796 --
Intangibles, net ............................................... 137,287,291 168,884,425
Other investments .............................................. -- 3,542,481
Other assets ................................................... 1,995,819 2,343,494
------------- -------------
Total assets .............................................. $ 185,861,156 $ 224,192,141
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current installments of long-term debt ....................... $ 166,319 $ 8,188
Notes payable to related parties ............................. 10,447,454 --
Accounts payable ............................................. 5,027,145 3,485,240
Accrued expenses ............................................. 9,213,133 7,742,838
Trade sales payable .......................................... 970,108 882,424
------------- -------------
Total current liabilities ................................. 25,824,159 12,118,690
Long-term debt, less current installments ...................... 125,680,696 103,967,839
Long-term debt to related parties .............................. 37,275,622 --
Deferred tax liabilities ....................................... -- 27,169,000
------------- -------------
Total liabilities ......................................... 188,780,477 143,255,529
Preferred stock, $.001 par value, 10,000,000 shares
authorized, none issued ...................................... -- --
Class A common stock, $.001 par value, 150,000,000 shares
authorized, 7,252,068 issued and outstanding ................. -- 7,252
Class B common stock, $.001 par value, 75,000,000 shares
authorized, 17,021,373 issued and outstanding ................ -- 17,021
Common stock ................................................... 4,530,352 --
Additional paid-in capital ..................................... 34,774,928 106,654,030
Accumulated deficit ............................................ (32,818,024) (25,741,691)
Treasury stock ................................................. (548,600) --
------------- -------------
Stockholders' equity ........................................... 5,938,656 80,936,612
Notes receivable from stockholders ............................. (8,857,977) --
------------- -------------
Net stockholders' equity (deficit) ............................. (2,919,321) 80,936,612
------------- -------------
Total liabilities and stockholders' equity (deficit) ...... $ 185,861,156 $ 224,192,141
============= =============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
1
BEASLEY BROADCAST GROUP, INC.
STATEMENTS OF OPERATIONS
COMBINED CONSOLIDATED COMBINED CONSOLIDATED
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 2000 1999 2000
------------ ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
Net revenues ............................ $ 24,302,842 $ 28,032,797 $ 67,452,508 $ 77,900,520
------------ ------------ ------------ ------------
Costs and expenses:
Program and production ................ 8,253,123 8,129,023 19,813,572 20,966,406
Sales and advertising ................. 6,316,024 6,425,430 18,449,906 20,295,787
Station general and administrative .... 3,654,335 4,284,210 10,041,276 11,590,422
Corporate general and administrative... 635,502 922,834 1,934,979 2,990,008
Equity appreciation rights ............ -- -- -- 1,173,759
Depreciation and amortization ......... 4,634,003 4,662,574 11,823,892 12,921,566
------------ ------------ ------------ ------------
Total costs and expenses ........... 23,492,987 24,424,071 62,063,625 69,937,948
Operating income ................... 809,855 3,608,726 5,388,883 7,962,572
Other income (expense):
Interest expense ...................... (3,357,694) (2,093,204) (9,962,346) (6,616,605)
Other non-operating expenses .......... (135,917) (200,000) (243,071) (264,552)
Interest income ....................... 424,416 101,111 714,477 374,204
Other non-operating income ............ -- 14,444 -- 37,611
------------ ------------ ------------ ------------
Income (loss) before income taxes .. (2,259,340) 1,431,077 (4,102,057) 1,493,230
Income tax expense ...................... -- 651,000 -- 29,132,000
------------ ------------ ------------ ------------
Net income (loss) .................. $ (2,259,340) $ 780,077 $ (4,102,057) $(27,638,770)
============ ============ ============ ============
Basic and diluted net income (loss)
per share ............................. $ (0.13) $ 0.03 $ (0.24) $ (1.19)
============ ============ ============ ============
Pro forma income tax benefit ............ $ (859,000) $ -- $ (1,532,000) $ --
============ ============ ============ ============
Pro forma net loss ...................... $ (1,400,340) $ -- $ (2,570,057) $ --
============ ============ ============ ============
Pro forma basic and diluted net
loss per share ........................ $ (0.08) $ -- $ (0.15) $ --
============ ============ ============ ============
Basic common shares outstanding ......... 17,423,441 24,273,441 17,423,441 23,248,441
============ ============ ============ ============
Diluted common shares outstanding ....... 17,423,441 24,277,624 17,423,441 23,248,441
============ ============ ============ ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
2
BEASLEY BROADCAST GROUP, INC.
STATEMENTS OF CASH FLOWS
COMBINED CONSOLIDATED
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 2000
------------- -------------
(UNAUDITED)
Cash flows from operating activities:
Net loss ................................................ $ (4,102,057) $ (27,638,770)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization ........................... 11,823,892 12,921,566
Change in assets and liabilities net of effects of
acquisitions of radio stations:
Increase in receivables .............................. (117,972) (926,336)
Increase in prepaid expense and other ................ (1,317,212) (202,885)
Increase in other assets ............................. (351,212) (660,565)
Increase (decrease) in accounts payables and
accrued expenses ................................... 1,449,628 (3,099,884)
Increase in deferred tax liabilities ................. -- 27,029,000
------------- -------------
Net cash provided by operating activities .......... 7,385,067 7,422,126
------------- -------------
Cash flows from investing activities:
Expenditures for property and equipment ................. (1,470,830) (1,744,620)
Payments for acquisitions of radio stations ............. -- (34,780,000)
Payment for purchase of equity investment ............... -- (50,002)
Payments from related parties ........................... -- 556,796
Loans to stockholders ................................... (550,108) (910,263)
Payments from stockholders .............................. -- 9,768,240
------------- -------------
Net cash used in investing activities .............. (2,020,938) (27,159,849)
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of indebtedness .................. 69,729 138,300,523
Principal payments on indebtedness ...................... (129,442) (161,888,733)
Principal payments on related party notes ............... -- (47,723,076)
Payments for loan fees .................................. -- (2,893,192)
Capital contributions ................................... -- 100,000
Stockholders distributions .............................. (4,306,351) (2,250,000)
Issuance of common stock ................................ -- 99,009,900
Payments for initial public offering costs .............. -- (2,593,238)
------------- -------------
Net cash provided by (used in) financing
activities ....................................... (4,366,064) 20,062,184
------------- -------------
Net increase in cash and cash equivalents ................. 998,065 324,461
Cash and cash equivalents at beginning of period .......... 4,759,598 7,002,669
------------- -------------
Cash and cash equivalents at end of period ................ $ 5,757,663 $ 7,327,130
============= =============
Cash paid for interest .................................... $ 6,799,000 $ 9,880,801
============= =============
Cash paid for state taxes ................................. $ 25,000 $ 26,825
============= =============
Supplement disclosure of non-cash investing and
financing activities:
Financed purchase of equity investment .................... $ -- $ 3,000,000
============= =============
Equity investment acquired through the placement of
advertising airtime ..................................... $ -- $ 492,479
============= =============
Minority interests acquired through issuance of Class A
common stock ............................................ $ -- $ 8,370,064
============= =============
Principal payments on indebtedness through the placement
of advertising airtime .................................. $ -- $ 1,282,778
============= =============
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
3
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying financial statements include
all adjustments deemed necessary to summarize fairly and reflect the financial
position and results of operations of Beasley Broadcast Group, Inc. ("the
Company") for the interim periods presented. Results of the third quarter of
2000 are not necessarily indicative of results for the full year. These
financial statements should be read in conjunction with the financial statements
and notes thereto contained on Form 10-K for the year ended December 31, 1999.
(b) CORPORATE REORGANIZATION
Prior to February 11, 2000, the Company's radio stations were operated
through a series of subchapter S corporations, partnerships and limited
liability companies related to one another through common ownership and control.
These subchapter S corporations, partnerships and limited liability companies
were collectively known as Beasley FM Acquisition Corp. and related companies
("BFMA") through February 10, 2000. The accompanying financial statements
reflect the financial position of BFMA as of December 31, 1999 and include the
results of operations of BFMA from January 1, 2000 to February 10, 2000.
The Company completed an initial public offering of common stock and the
corporate reorganization on February 11, 2000. Immediately prior to the initial
public offering, pursuant to the reorganization, affiliates of BFMA contributed
their equity interests in those entities to the Company, a newly formed holding
company, in exchange for common stock. Immediately after these transactions, the
Company contributed the capital stock and partnership interests acquired to
Beasley Mezzanine Holdings, LLC ("BMH") and BMH became a wholly-owned subsidiary
of the Company. All S corporation elections were terminated and the resulting
entities became C corporations. The reorganization and contribution of equity
interests was accounted for in a manner similar to a pooling of interests as to
the majority owners, and as an acquisition of minority interest using the
purchase method of accounting.
Changes in stockholders' equity (deficit) from December 31, 1999 to
September 30, 2000 are as follows:
NOTES
CLASS A CLASS B ADDITIONAL RECEIVABLE NET
COMMON COMMON COMMON PAID-IN ACCUMULATED TREASURY FROM STOCKHOLDERS'
STOCK STOCK STOCK CAPITAL DEFICIT STOCK STOCKHOLDERS EQUITY (DEFICIT)
-------- -------- ------------ ------------- ------------- ---------- ------------ ----------------
Balances as of December 31,
1999.................... $ -- $ -- $ 4,530,352 $ 34,774,928 $(32,818,024) $ (548,600) $(8,857,977) $ (2,919,321)
Net loss.................. -- -- -- -- (1,897,079) -- -- (1,897,079)
Capital contributions..... -- -- -- 100,000 -- -- -- 100,000
Stockholder distributions. -- -- -- -- (2,250,000) -- -- (2,250,000)
Loans to stockholders..... -- -- -- -- -- -- (910,263) (910,263)
------- -------- ----------- ------------- ------------ ---------- ----------- ------------
Balances as of February 10,
2000.................... $ -- $ -- $ 4,530,352 $ 34,874,928 $(36,965,103) $ (548,600) $(9,768,240) $ (7,876,663)
Distributions to and
contributions from
subchapter S corporation
stockholders in exchange
for Class B common stock -- 17,021 (4,530,352) (33,000,372) 36,965,103 548,600 -- --
Issuance of Class A common
stock................... 7,252 -- -- 99,002,648 -- -- -- 99,009,900
Initial public offering
costs................... -- -- -- (2,593,238) -- -- -- (2,593,238)
Acquisitions of minority
interests............... -- -- -- 8,370,064 -- -- -- 8,370,064
Payments of notes
receivable from
stockholders............. -- -- -- -- -- -- 9,768,240 9,768,240
Net loss.................. -- -- -- -- (25,741,691) -- -- (25,741,691)
------- -------- ----------- ------------- ------------ ---------- ----------- ------------
Balances as of September
30, 2000 $ 7,252 $ 17,021 $ -- $ 106,654,030 $(25,741,691) $ -- $ -- $ 80,936,612
======== ======== =========== ============= ============ ========== =========== ============
4
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Proceeds from the initial public offering, net of underwriters discount of
$7,165,100, were used as follows:
Repayment of the revolving credit loan .............. $58,508,421
Repayment of long-term debt, including accrued
interest, to related parties ...................... 38,228,843
Net repayment of payables and receivables, including
accrued interest, to related parties .............. 2,272,636
-----------
Net proceeds......................................... $99,009,900
===========
(c) DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company uses
interest rate collar and swap agreements to specifically hedge against the
potential impact of increases in interest rates on the credit facility. Interest
differentials are recorded as adjustments to interest expense in the period they
occur.
(d) REVENUE RECOGNITION
Revenue is recognized as advertising airtime is broadcast and is net of
advertising agency commissions.
(e) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
BFMA had elected to be treated as a subchapter S corporation under
provisions of the Internal Revenue Code. Under this corporate status, the
stockholders of BFMA were individually responsible for reporting their share of
taxable income or loss. Accordingly, no deferred tax assets or liabilities have
been reflected in the accompanying balance sheet as of December 31, 1999. Pro
forma income tax benefit in the accompanying statements of operations from
January 1, 1999 to September 30, 1999 includes pro forma income tax benefit
computed in accordance with SFAS 109, ACCOUNTING FOR INCOME TAXES, as if BFMA
had been subject to Federal and state income taxes for that period.
(f) EARNINGS PER SHARE
Basic earnings per share are computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflect the potential dilution that could
occur if options or other contracts to issue common stock were exercised or
converted into common stock.
Earnings per share from January 1, 1999 to September 30, 1999 and from
January 1, 2000 to February 10, 2000 is based on the number of common shares
issued immediately prior to the initial public offering.
(g) STOCK-BASED COMPENSATION
Stock-based compensation is measured and recognized in accordance with APB
Opinion 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES and disclosed in accordance
with SFAS 123, ACCOUNTING FOR STOCK-BASED COMPENSATION.
5
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(h) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. SFAS 133 establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts, and for hedging activities. SFAS 133 was amended by
SFAS 137 in June 1999 and is effective, as amended, for all fiscal quarters of
fiscal years beginning after June 15, 2000. The Company has not completed its
evaluation of SFAS 133; however, management does not anticipate that the
adoption of SFAS 133 will have a material impact on the Company's earnings or
financial position upon adoption.
In September 2000, the FASB issued SFAS No. 140, ACCOUNTING FOR TRANSFERS
AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENT OF LIABILITIES. SFAS 140
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. SFAS 140 replaces SFAS No.
125 and is effective for transfers and servicing of financial assets and
extinguishments occurring after March 31, 2001. SFAS 140 is effective for
recognition and reclassification of collateral and for disclosures relating to
securitization transactions and collateral for fiscal years ending after
December 15, 2000. The Company has not completed its evaluation of SFAS 140;
however, management does not anticipate that the adoption of SFAS 140 will have
a material impact on the Company's earnings or financial position upon adoption.
(2) ACQUISITIONS
(a) CURRENT ACQUISITIONS
On January 6, 2000, the Company acquired the assets of WAEC-AM and WWWE-AM
in the Atlanta market for approximately $10.0 million. This acquisition was
financed through the Company's credit facility and accounted for by the
purchase method of accounting.
On May 2, 2000, the Company acquired the assets of WRCA-AM in the Boston
market for approximately $6.0 million. This acquisition was financed through
the Company's credit facility and accounted for by the purchase method of
accounting.
On May 3, 2000 the Company acquired the assets of WRFN-FM and WRDW-AM in the
Augusta market for approximately $0.8 million. This acquisition was funded
by surplus working capital and accounted for by the purchase method of
accounting.
On June 2, 2000 the Company acquired the assets of WHSR-AM and WWNN-AM in
the Miami-Ft. Lauderdale market and WSBR-AM in the West Palm Beach market
for approximately $18.0 million. This acquisition was financed through the
Company's credit facility and accounted for by the purchase method of
accounting.
The aggregate purchase price for the current acquisitions was allocated as
follows:
Property and equipment ..... $ 4,088,173
FCC broadcasting licenses .. 30,606,827
Goodwill.................... 85,000
-----------
$34,780,000
===========
6
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(b) UNAUDITED PRO FORMA RESULTS OF OPERATIONS
The following unaudited pro forma information presents the results of
operations for the three and nine months ended September 30, 1999 and 2000,
with pro forma adjustments as if the acquisitions of the stations in 1999
and 2000 had occurred prior to January 1 in the prior year.
This unaudited pro forma information is not necessarily indicative of what
would have occurred had the acquisitions occurred prior to January 1 in the
prior year or of the results that may occur in the future.
COMBINED CONSOLIDATED COMBINED CONSOLIDATED
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1999 2000 1999 2000
------------ ------------ ------------ ------------
Net revenues ............................. $ 25,700,027 $ 28,032,797 $ 71,567,785 $ 79,586,034
------------ ------------ ------------ ------------
Costs and expenses:
Program and production ................. 8,372,077 8,129,023 20,162,276 21,099,933
Sales and advertising .................. 6,466,178 6,425,430 18,762,445 20,410,227
Station general and administrative ..... 3,921,685 4,284,210 10,784,231 11,879,025
Corporate general and administrative ... 635,502 922,834 1,934,979 2,990,008
Equity appreciation rights ............. -- -- -- 1,173,759
Depreciation and amortization .......... 5,243,170 4,662,574 13,651,392 13,614,148
------------ ------------ ------------ ------------
Total costs and expenses ....... 24,638,612 24,424,071 65,295,323 71,167,100
Operating income .................... 1,061,415 3,608,726 6,272,462 8,418,934
Other income (expense):
Interest expense ....................... (4,033,444) (2,093,204) (11,989,596) (7,377,640)
Other non-operating expenses ........... (135,917) (200,000) (243,071) (264,552)
Interest income ........................ 424,416 101,111 714,477 374,204
Other non-operating income ............. -- 14,444 -- 37,611
------------ ------------ ------------ ------------
Income (loss) before income taxes ...... (2,683,530) 1,431,077 (5,245,728) 1,188,557
Income tax expense ....................... -- 651,000 -- 29,014,000
------------ ------------ ------------ ------------
Net income (loss) ...................... $ (2,683,530) $ 780,077 $ (5,245,728) $(27,825,443)
============ ============ ============ ============
Basic and diluted net income (loss)
per share .............................. $ (0.15) $ 0.03 $ (0.30) $ (1.20)
============ ============ ============ ============
Pro forma income tax benefit ............. $ (1,023,000) $ -- $ (1,974,000) $ --
============ ============ ============ ============
Pro forma net loss ....................... $ (1,660,530) $ -- $ (3,271,728) $ --
============ ============ ============ ============
Pro forma basic and diluted net loss
per share .............................. $ (0.10) $ -- $ (0.19) $ --
============ ============ ============ ============
Basic common shares outstanding .......... 17,423,441 24,273,441 17,423,441 23,248,441
============ ============ ============ ============
Diluted common shares outstanding ........ 17,423,441 24,277,624 17,423,441 23,248,441
============ ============ ============ ============
(c) PENDING ACQUISITIONS
On June 2, 2000, the Company entered into an agreement to acquire all of the
outstanding common stock of Centennial Broadcasting Nevada, Inc. and all of
the membership interests in Centennial Broadcasting, LLC for an aggregate
purchase price, subject to certain adjustments, of approximately $137.5
million. Centennial Broadcasting Nevada, Inc. owns approximately 18.5% of
the membership interests in Centennial Broadcasting, LLC. Centennial
Broadcasting, LLC owns the radio stations KJUL-FM, KSTJ-FM and KKLZ-FM in
Las Vegas, Nevada and WBYU-AM, WRNO-FM and KMEZ-FM in New Orleans,
Louisiana.
7
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(3) INTANGIBLES
Intangibles, at cost, is comprised of the following:
ESTIMATED
DECEMBER 31, SEPTEMBER 30, USEFUL LIVES
1999 2000 (YEARS)
------------- ------------- ------------
FCC broadcasting licenses.. $ 157,700,379 $ 188,307,206 10-15
Goodwill................... 16,763,990 25,219,054 15
Advertising base........... 4,139,251 4,139,251 5
Loan fees.................. 2,975,681 5,868,873 7
Noncompete agreements...... 1,120,000 1,120,000 2-8
Other intangibles.......... 5,666,932 5,979,822 5-15
------------- -------------
188,366,233 230,634,206
Less accumulated amortization (51,078,942) (61,749,781)
------------- -------------
$ 137,287,291 $ 168,884,425
============= =============
On February 11, 2000, the Company computed the fair value of minority
stockholder interests based on the number of shares issued to the stockholders
and the estimated net book values of the radio stations at the close of business
on February 10, 2000. The computed amount of $8,370,064 was recorded using the
purchase method of accounting and is included in goodwill and additional paid-in
capital in the accompanying balance sheet as of September 30, 2000.
(4) OTHER INVESTMENTS
In December 1999, the Company entered into an agreement to purchase 750,000
shares of preferred stock of eTour, Inc. in exchange for $3.0 million of
advertising airtime. The Company will earn these shares as advertisements are
placed over the term of the agreement. For the three and nine months ended
September 30, 2000, eTour, Inc. placed advertising airtime totaling
approximately $384,000 and $492,000, respectively and for the three and nine
months ended September 30, 2000, the Company earned approximately 96,000 and
123,000 shares, respectively. The shares contain restrictions that generally
limit the Company's ability to sell or otherwise dispose of them. The investment
was recorded using the cost method of accounting.
On January 14, 2000, the Company purchased 600,000 shares of common stock of
FindWhat.com in exchange for a $3.0 million promissory note. The shares contain
restrictions that generally limit the Company's ability to sell or otherwise
dispose of them. The investment was recorded using the cost method of
accounting.
On April 4, 2000, the Company purchased 5,394 shares of preferred stock of
iBiquity Digital for $50,002. The shares contain restrictions that generally
limit the Company's ability to sell or otherwise dispose of them. The investment
was recorded using the cost method of accounting.
(5) LONG-TERM DEBT
On August 31, 2000, the Company refinanced its $150.0 million revolving
credit loan. Under terms of the new credit agreement, the Company was provided a
credit facility with a maximum commitment of $300.0 million. The credit facility
includes a $150.0 million revolving credit loan and a $150.0 million term loan.
The revolving credit loan includes a $50.0 million sub-limit for letters of
credit. As of September 30, 2000, the maximum commitment under the credit
facility is $300.0 million and the outstanding balance is $102.2 million. The
loans bear interest at either the base rate or LIBOR plus a margin that is
determined by the Company's debt to cash flow ratio. The base rate is equal to
the higher of the prime rate or the overnight federal funds effective rate plus
0.5%. As of December 31, 1999, the old revolving credit loan carried interest at
an average rate of 7.95%. As of September 30, 2000, the new credit facility
carried interest at an average rate of 7.875%. Interest is generally payable
monthly through maturity on June 30, 2008. The scheduled reductions in the
amount available under the credit facility may require principal repayments if
the outstanding balance at that time exceeds the new maximum amount available
under the credit facility. The Company has entered into interest rate hedge
agreements as discussed in note 8. The credit agreement requires the Company to
maintain certain financial ratios and includes restrictive covenants. The
restrictive covenants prohibit the payment of dividends. The loans are secured
by substantially all assets of the Company.
8
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
As of September 30, 2000, the scheduled reductions of the maximum commitment
of the credit facility for the next five fiscal years and thereafter are as
follows:
REVOLVING TOTAL
CREDIT TERM CREDIT
LOAN LOAN FACILITY
------------ ------------ ------------
2002 $ -- $15,000,000 $15,000,000
2003 -- 22,500,000 22,500,000
2004 15,000,000 22,500,000 37,500,000
2005 22,500,000 30,000,000 52,500,000
Thereafter 112,500,000 60,000,000 172,500,000
------------ ------------ ------------
Total $150,000,000 $150,000,000 $300,000,000
============ ============ ============
On January 14, 2000, the Company executed a $3.0 million promissory note in
favor of FindWhat.com as consideration for the purchase of 600,000 shares of
common stock. The note bears interest at 5.73% per annum and matures on January
14, 2002. All outstanding principal and accrued interest is due at maturity,
however the Company may repay the note in full with an equivalent amount of
advertising airtime as specified in the loan agreement and a related advertising
agreement with FindWhat.com. As of September 30, 2000, the outstanding principal
amount has been reduced by approximately $1,283,000 through the placement of
advertising airtime. The note is guaranteed by BFMA.
On February 16, 2000, all long-term debt, except the old revolving credit
loan, the promissory note to FindWhat.com and capital lease obligations, was
repaid in full.
(6) RELATED PARTY TRANSACTIONS
BFMA had a management agreement with Beasley Broadcasting Management Corp.,
an affiliate of BFMA's principal stockholder, George G. Beasley. For the three
and nine months ended September 30, 1999, management fee expense under the
agreement was approximately $636,000 and $1,935,000, respectively. From January
1, 2000 to February 10, 2000, management fee expense under the agreement was
approximately $447,000.
The Company leases certain office space from its principal stockholder,
George G. Beasley. For the three and nine months ended September 30, 1999,
rental expense paid to Mr. Beasley was approximately $39,000 and $85,000,
respectively. For the three and nine months ended September 30, 2000, rental
expense paid to Mr. Beasley was approximately $24,000 and $72,000, respectively.
Distributions to stockholders of BFMA during the three and nine months ended
September 30, 1999 were approximately $1,339,000 and $4,306,000, respectively.
From January 1, 2000 to February 10, 2000, distributions to stockholders of BFMA
were approximately $2,250,000.
Notes receivable from related parties were repaid in full on February 16,
2000.
Notes payable to related parties bore interest at 7.67% to 9.25% and were
repaid in full on February 16, 2000. For the three and nine months ended
September 30, 1999, interest expense on notes payable to related parties was
approximately $82,000 and $453,000, respectively. From January 1, 2000 to
February 16, 2000, interest expense on notes payable to related parties was
approximately $80,000.
Notes receivable from stockholders bore interest at 9.25% and were repaid in
full on February 16, 2000. For the three and nine months ended September 30,
1999, interest income on notes receivable from related parties was approximately
$416,000 and $585,000, respectively. From January 1, 2000 to February 16, 2000,
interest income on notes receivable from related parties was approximately
$135,000.
The Company has reached a set of agreements to sell its radio towers and
related real estate assets to Beasley Family Towers, Inc. (BFT) for
approximately $5,100,000. No material gain or loss is expected to be recognized.
In conjunction with this sale, the agreements provide for the Company to enter
into long-term agreements to leaseback the towers from BFT.
9
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(7) COMMITMENTS AND CONTINGENCIES
In 1997, the Company entered into contracts for the radio broadcast rights
relating to the Miami Dolphins, Florida Marlins and Florida Panthers sports
franchises. These contracts grant WQAM-AM the exclusive, English language rights
for live radio broadcasts of the sporting events of these franchises for a
five-year term that began in 1997. The contracts require the Company to pay
certain fees and to provide commercial advertising and other considerations. For
the three and nine months ended September 30, 1999, the contract expense
calculated on a straight-line basis and other direct expenses exceeded related
revenues by $1,127,000 and $2,077,000, respectively. For the three and nine
months ended September 30, 2000, the contract expense calculated on a
straight-line basis and other direct expenses exceeded related revenues by
$1,627,000 and $3,399,000, respectively. Unless the Company is able to generate
significantly more revenues under these contracts in future periods, the
contracts are likely to have a material adverse effect on the Company's results
of operations on a going-forward basis. However, in light of the uncertainty
regarding future revenues, the amount of any future loss cannot be determined at
this time.
In the normal course of business, the Company is party to various legal
matters. The ultimate disposition of these matters will not, in management's
judgment, have a material adverse effect on the Company's financial position.
(8) DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses interest rate collar and swap agreements to hedge against
the potential impact of increases in interest rates on the credit facility. For
the three and nine months ended September 30, 1999, the Company paid additional
interest of approximately $63,000 and $126,000, respectively. For the three and
nine months ended September 30, 2000, the Company received additional interest
of approximately $25,000 and $113,000, respectively. The amount paid is based on
the differential between the specified rate of the swap agreements and the
variable interest rate of the credit facility.
In October 2000, the Company entered into two interest rate collar and swap
agreements as follows:
NOTIONAL EXPIRATION
AGREEMENT AMOUNT FLOOR CAP SWAP DATE
--------- ------ ----- --- ---- ----
Interest rate collar... $20,000,000 5.85% 7.5% -- October 2002
Interest rate swap..... $20,000,000 -- -- 6.48% October 2002
(9) INCOME TAXES
Income tax expense (benefit) from continuing operations is as follows:
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------- -------------------------------
1999 2000 1999 2000
------------ ------------ ------------ ------------
(PRO FORMA) (PRO FORMA)
Federal:
Current ..... $ (1,231,000) $ 957,000 $ (865,000) $ 1,722,000
Deferred .... 528,000 (424,000) (389,000) 22,130,000
------------ ------------ ------------ ------------
(703,000) 533,000 (1,254,000) 23,852,000
State:
Current ..... (273,000) 212,000 (192,000) 381,000
Deferred .... 117,000 (94,000) (86,000) 4,899,000
------------ ------------ ------------ ------------
(156,000) 118,000 (278,000) 5,280,000
------------ ------------ ------------ ------------
$ (859,000) $ 651,000 $ (1,532,000) $ 29,132,000
============ ============ ============ ============
10
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Income tax expense (benefit) differs from the amounts that would result from
applying the federal statutory rate of 34% to the Company's net income (loss) as
follows:
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------- -------------------------------
1999 2000 1999 2000
------------ ------------ ------------ ------------
(PRO FORMA) (PRO FORMA)
Expected pro forma tax expense
(benefit) ................................ $ (768,000) $ 487,000 $ (1,395,000) $ 508,000
State income taxes, net of federal
benefit .................................. (109,000) 66,000 (189,000) 69,000
Establishment of deferred tax assets
and liabilities upon conversion
from a subchapter S to a subchapter C
corporation on February 11, 2000 ......... -- -- -- 28,297,000
Non-deductible amortization of minority
interest acquisitions .................... -- 54,000 -- 140,000
Other ...................................... 18,000 44,000 52,000 118,000
------------ ------------ ------------ ------------
$ (859,000) $ 651,000 $ (1,532,000) $ 29,132,000
============ ============ ============ ============
Temporary differences that give rise to the components of deferred tax
assets and liabilities, as of December 31, 1999 and September 30, 2000 are as
follows:
1999 2000
------------ ------------
(PRO FORMA)
Allowance for doubtful accounts .............. $ 2,623,000 $ 140,000
Accrued interest on notes receivable from
related parties ............................ 1,457,000 --
Notes receivable from related parties ........ 478,000 --
------------ ------------
Gross deferred tax assets .................. 4,558,000 140,000
Intangibles .................................. (27,929,000) (25,993,000)
Property and equipment ....................... (1,113,000) (1,176,000)
------------ ------------
Gross deferred tax liabilities ............. (29,042,000) (27,169,000)
------------ ------------
Net deferred tax liabilities ............... (24,484,000) (27,029,000)
============ ============
(10) SEGMENT INFORMATION
Segment information is as follows:
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------ -----------------------------
1999 2000 1999 2000
------------ ------------ ------------ ------------
Net revenues:
Radio Group One .............................. $ 16,041,457 $ 18,573,723 $ 42,951,883 $ 49,794,648
Radio Group Two .............................. 8,261,385 9,459,074 24,500,625 28,105,872
------------ ------------ ------------ ------------
Total ........................................ 24,302,842 28,032,797 67,452,508 77,900,520
------------ ------------ ------------ ------------
Broadcast cash flow:
Radio Group One .............................. $ 4,446,761 $ 5,795,527 $ 13,064,698 $ 15,144,024
Radio Group Two .............................. 1,632,599 3,398,607 6,083,056 9,903,881
------------ ------------ ------------ ------------
Total ........................................ 6,079,360 9,194,134 19,147,754 25,047,905
------------ ------------ ------------ ------------
Reconciliation to income (loss) before income taxes:
Corporate general and administrative expenses .. $ (635,502) $ (922,834) $ (1,934,979) $ (2,990,008)
Equity appreciation rights ..................... -- -- -- (1,173,759)
Depreciation and amortization .................. (4,634,003) (4,662,574) (11,823,892) (12,921,566)
Interest expense ............................... (3,357,694) (2,093,204) (9,962,346) (6,616,605)
Other non-operating income (expense) ........... 288,499 (84,445) 471,406 147,263
------------ ------------ ------------ ------------
Income (loss) before income taxes .............. $ (2,259,340) $ 1,431,077 $ (4,102,057) $ 1,493,230
============ ============ ============ ============
Radio Group One includes radio stations located in Miami-Ft. Lauderdale, Ft.
Myers-Naples, Fl, Greenville-New Bern-Jacksonville, NC and West Palm Beach, FL.
Radio Group Two includes radio stations located in Philadelphia, PA,
Fayetteville, NC, Augusta, GA, Atlanta, GA and Boston, MA.
Broadcast cash flow consists of operating income before corporate general
and administrative expenses, equity appreciation rights, and depreciation and
amortization.
11
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(11) EQUITY PLAN
On February 11, 2000, the Company adopted The 2000 Equity Plan of Beasley
Broadcast Group, Inc. (the "Equity Plan"). A total of 3,000,000 shares of Class
A common stock were reserved for issuance under the Equity Plan, of which
2,500,000 stock options were granted on February 11, 2000 with an exercise price
per share equal to the initial public offering price. On May 30, 2000, the
Company granted 25,000 stock options with an exercise price per share equal to
the closing stock price on that date. On August 17, 2000, the Company granted
20,000 stock options with an exercise price per share equal to the closing stock
price on that date. On October 23, 2000, the Company granted 15,000 stock
options with an exercise price per share equal to the closing stock price on
that date. The issued stock options generally vest ratably over four years,
however some contain performance-related provisions that may delay vesting
beyond four years. Under the Equity Plan, a variety of compensation awards,
including non-qualified stock options, incentive stock options, stock
appreciation rights, restricted stock, deferred stock, dividend equivalents,
performance awards, stock payments and other stock-related benefits may be
granted to selected officers, employees, consultants and directors. The Equity
Plan is administered by a committee of independent directors.
(12) SUBSEQUENT EVENT
On November 6, 2000, the Company changed the format at WWDB-FM in the
Philadelphia market. In conjunction with this format change, the Company will
incur certain one-time costs, which will be recorded in the statement of
operations during the fourth quarter of 2000.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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. CERTAIN MATTERS DISCUSSED HEREIN ARE FORWARD-LOOKING
STATEMENTS. CERTAIN, BUT NOT NECESSARILY ALL, OF SUCH FORWARD-LOOKING STATEMENTS
CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY, SUCH AS "BELIEVES,"
"EXPECTS," "MAY," "WILL," "SHOULD," "ESTIMATES," OR "ANTICIPATES," OR THE
NEGATIVE THEREOF OR OTHER VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY. ALL
FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND
OTHER FACTORS WHICH MAY CAUSE OUR ACTUAL TRANSACTIONS, RESULTS, PERFORMANCE OR
ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE TRANSACTIONS, RESULTS,
PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. ALTHOUGH WE BELIEVE THE EXPECTATIONS REFLECTED IN SUCH
FORWARD-LOOKING STATEMENTS ARE BASED UPON REASONABLE ASSUMPTIONS, WE CAN GIVE NO
ASSURANCE THAT OUR EXPECTATIONS WILL BE ATTAINED OR THAT ANY DEVIATIONS WILL NOT
BE MATERIAL. UNLESS REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATION TO PUBLICLY
RELEASE THE RESULT OF ANY REVISIONS TO THESE FORWARD-LOOKING STATEMENTS THAT MAY
BE MADE TO REFLECT ANY FUTURE EVENTS OR CIRCUMSTANCES.
GENERAL
A radio broadcasting company derives its revenues primarily from the sale of
broadcasting time to local and national advertisers. The advertising rates that
a radio station is able to charge and the number of advertisements that can be
broadcast without jeopardizing listener levels largely determine those revenues.
Advertising rates are primarily based on three factors:
o 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;
o the number of radio stations in the market competing for the same
demographic groups; and
o the supply of and demand for radio advertising time.
Several factors may adversely affect a radio broadcasting company's
performance in any given period. In the radio broadcasting industry, seasonal
revenue fluctuations are common and are due primarily to variations in
advertising expenditures by local and national advertisers. Typically, revenues
are lowest in the first calendar quarter of the year. We generally incur
advertising and promotional expenses to increase listenership and Arbitron
ratings. However, because Arbitron reports ratings quarterly in most of our
markets, any increased ratings, and therefore increased advertising revenues,
tend to lag behind the incurrence of advertising and promotional spending.
In the broadcasting industry, radio stations often utilize trade or barter
agreements to reduce expenses by exchanging advertising time for goods or
services. In order to maximize cash revenue from our spot inventory, we minimize
our use of trade agreements and during the past five years have held barter
revenues under 5% of our gross revenues and barter related broadcast cash flow
under 3% of our broadcast cash flow. However, we expect barter revenues to
increase as a percentage of our gross revenues and barter related broadcast cash
flow to increase as a percentage of our broadcast cash flow due to our
investments in eTour, Inc. and FindWhat.com.
We calculate same station results by comparing the performance of radio
stations operated by us at the end of a relevant period to the performance of
those same stations, whether or not operated by us, in the prior year's
corresponding period, including the effect of barter revenues and expenses.
Broadcast cash flow consists of operating income before corporate general and
administrative expenses, equity appreciation rights, and depreciation and
amortization and may not be comparable to similarly titled measures employed by
other companies. Same station broadcast cash flow is the broadcast cash flow of
the radio stations included in our same station calculations.
For purposes of the following discussion, pro forma net income represents
historical income before income taxes adjusted as if we were treated as a
subchapter C corporation during all relevant periods at an effective tax rate of
38.62%, applied to income before income taxes.
13
RECENT EVENTS
On June 2, 2000, we agreed to acquire three FM radio stations in the Las
Vegas market and two FM and one AM radio stations in the New Orleans market for
an aggregate purchase price of approximately $137.5 million. We intend to
finance these acquisitions through the increased capacity of our new credit
facility. The consummation of these acquisitions is subject to the satisfaction
of certain closing conditions, including the approval of the FCC. As of November
7, 2000, not all of the conditions to closing in the purchase agreement have
been satisfied. While we are continuing to discuss this matter with the sellers,
we cannot assure you that the purchase will occur.
On January 14, 2000, we purchased 600,000 shares of common stock of
FindWhat.com in exchange for a $3.0 million promissory note. As of November 7,
2000, the quoted market price of FindWhat.com is below our purchase price;
however, we do not believe this investment to be permanently impaired
at this time.
On November 6, 2000, the Company changed the format at WWDB-FM in the
Philadelphia market. In conjunction with this format change, the Company will
incur certain one-time costs, which will be recorded in the statement of
operations during the fourth quarter of 2000. The Company expects revenues,
station operating expenses, and broadcast cash flow at WWDB-FM to decrease
during the early stages of this transition.
RESULTS OF OPERATIONS
Several factors have affected our results of operations in the three and
nine months ended September 30, 2000 that did not affect the comparable periods
of the previous year. First, we redeemed, for cash, equity appreciation rights
previously granted to two of our station managers, as we do not believe this
form of compensation is well suited to public companies. In connection with this
redemption, we recorded an expense of approximately $606,000 and $1,174,000 in
the fourth quarter of 1999 and first quarter of 2000, respectively. Second, in
connection with our reorganization on February 11, 2000, our net stockholders'
equity was reduced by approximately $27.6 million to establish the net deferred
tax liability resulting from the termination of our subchapter S status.
Additionally, corporate general and administrative expenses have increased
as we incur the reporting and compliance costs of operating as a public company.
In 1997, we entered into contracts for the radio broadcast rights relating
to the Miami Dolphins, Florida Marlins and Florida Panthers sports franchises.
These contracts grant WQAM-AM the exclusive, English language rights for live
radio broadcasts of the sporting events of these franchises for a five-year
term, which began in 1997. The contracts require us to pay fees and to provide
commercial advertising and other considerations. As of December 31, 1999,
remaining payments of fees are as follows: $8.5 million in 2000, $8.8 million in
2001 and $359,000 in 2002. For the years ended December 31, 1997, 1998 and 1999,
the contract expense calculated on a straight-line basis and other direct
expenses exceeded related revenues by $2,882,000, $3,617,000 and $2,770,000,
respectively. Unless we are able to generate significantly more revenues under
these contracts in the future, they are likely to have a material adverse effect
on our results of operations on a going-forward basis. However, in light of the
uncertainty regarding future revenues, the amount of any future loss cannot be
determined at this time.
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1999
NET REVENUE. Net revenue increased 15.3% to $28.0 million for the three
months ended September 30, 2000 from $24.3 million for three months ended
September 30, 1999. The increase was primarily due to the revenue growth at most
of our existing radio stations, particularly in the Greenville-New
Bern-Jacksonville, Miami-Ft. Lauderdale and Philadelphia markets. In addition,
net revenues increased due to our radio station acquisitions in the Atlanta,
Boston, Miami-Ft. Lauderdale and West Palm Beach markets. On a same station
basis, net revenues increased 9.1% to $28.0 million for the three months ended
September 30, 2000 from $25.7 million for three months ended September 30, 1999.
STATION OPERATING EXPENSES. Station operating expenses increased 3.4% to
$18.8 million for the three months ended September 30, 2000 from $18.2 million
for three months ended September 30, 1999. The increase was primarily due to
increased station operating expenses at most of our existing radio stations
associated with generating the growth in net revenues. In addition, station
operating expenses increased due to our radio station acquisitions in the
Atlanta, Boston, Miami-Ft. Lauderdale and West Palm Beach markets. Station
operating expenses decreased at WWDB-FM and WTEL-AM in the Philadelphia market
due to programming
14
changes. On a same station basis, station operating expenses remained constant
at $18.8 million for the three months ended September 30, 2000 and 1999.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES. Corporate general and
administrative expenses increased 45.2% to $0.9 million for the three months
ended September 30, 2000 from $0.6 million for three months ended September 30,
1999. The increase was primarily due to additional reporting and compliance
costs of operating as a public company.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 0.6%
to $4.7 million for the three months ended September 30, 2000 from $4.6 million
for three months ended September 30, 1999. The increase was primarily due to
additional amortization and depreciation associated with the acquisitions of
radio stations in Atlanta, Boston, Miami-Ft. Lauderdale and West Palm Beach
markets.
INTEREST EXPENSE. Interest expense decreased 37.7% to $2.1 million for the
three months ended September 30, 2000 from $3.4 million for three months ended
September 30, 1999. The decrease was primarily due to the repayment of $58.5
million of the credit facility as well as the repayment of all outstanding notes
payable to related parties with proceeds from the initial public offering. This
decrease was partially offset by an increase in interest expense due to
financing the radio station acquisitions in the Atlanta, Boston, Miami-Ft.
Lauderdale and West Palm Beach markets with borrowings from our credit facility.
BROADCAST CASH FLOW. Broadcast cash flow increased 51.2% to $9.2 million for
the three months ended September 30, 2000 from $6.1 million for three months
ended September 30, 1999. The increase was primarily due to the additional
broadcast cash flow generated through revenue growth and increased operating
efficiencies at most of our existing radio stations, particularly in the
Philadelphia, Greenville-New Bern-Jacksonville and Augusta markets. In addition,
broadcast cash flow increased due to our radio station acquisitions in the
Atlanta, Boston, Miami-Ft. Lauderdale and West Palm Beach markets. On a same
station basis, broadcast cash flow increased 32.7% to $9.2 million for the three
months ended September 30, 2000 from $6.9 million for three months ended
September 30, 1999.
INCOME (LOSS) BEFORE INCOME TAXES. We experienced income before income taxes
of $1.4 million for the three months ended September 30, 2000 versus a loss
before pro forma income taxes of $2.3 million for three months ended September
30, 1999. The increase was primarily due to the additional income before income
taxes generated through the revenue growth, increased operating efficiencies at
most of our existing radio stations and a decrease in interest expense due to
reduced borrowings from our credit facility.
NET INCOME (LOSS). Net income for the three months ended September 30, 2000
was $0.8 million compared to a pro forma net loss of $1.4 million for three
months ended September 30, 1999. The increase was primarily due to the
additional net income generated through the revenue growth and increased
operating efficiencies at most of our existing radio stations as well as the
decrease in interest expense due to reduced borrowings from our credit facility.
This increase was partially offset by the increase in amortization and
depreciation associated with the acquisition of radio stations in Atlanta,
Boston, Miami-Ft. Lauderdale and West Palm Beach markets.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 1999
NET REVENUE. Net revenue increased 15.5% to $77.9 million for the nine
months ended September 30, 2000 from $67.5 million for nine months ended
September 30, 1999. The increase was primarily due to the revenue growth at most
of our existing radio stations, particularly in the Miami-Ft. Lauderdale and
Greenville-New Bern-Jacksonville markets. In addition, net revenues increased
due to our radio station acquisitions in the Atlanta, Boston, Miami-Ft.
Lauderdale and West Palm Beach markets. On a same station basis, net revenues
increased 11.2% to $79.6 million for the nine months ended September 30, 2000
from $71.6 million for nine months ended September 30, 1999.
STATION OPERATING EXPENSES. Station operating expenses increased 9.4% to
$52.9 million for the nine months ended September 30, 2000 from $48.3 million
for nine months ended September 30, 1999. The increase was primarily due to
increased station operating expenses related to the radio broadcast rights for
the Miami Dolphins, Florida Marlins and Florida Panthers sports franchises and
the University of Miami Hurricanes football team at WQAM-AM in the Miami-Ft.
Lauderdale market. The increase was also due to increased station operating
expenses at most of our existing radio stations associated with generating the
growth in net revenues. In addition, station operating expenses increased due to
our radio station acquisitions in the Atlanta, Boston, Miami-Ft. Lauderdale and
West Palm Beach markets. Station operating expenses decreased in the
Philadelphia market due to programming changes. On a same station basis, station
operating expenses increased 7.3% to $53.3 million for the nine months ended
September 30, 2000 from $49.7 million for nine months ended September 30, 1999.
15
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES. Corporate general and
administrative expenses increased 54.5% to $3.0 million for the nine months
ended September 30, 2000 from $1.9 million for nine months ended September 30,
1999. The increase was primarily due to additional reporting and compliance
costs of operating as a public company.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 9.3%
to $12.9 million for the nine months ended September 30, 2000 from $11.8 million
for nine months ended September 30, 1999. The increase was primarily due to
additional amortization and depreciation associated with the acquisitions of
radio stations in Atlanta, Boston, Miami-Ft. Lauderdale and West Palm Beach
markets.
INTEREST EXPENSE. Interest expense decreased 33.6% to $6.6 million for the
nine months ended September 30, 2000 from $10.0 million for nine months ended
September 30, 1999. The decrease was primarily due to the repayment of $58.5
million of the credit facility as well as the repayment of all outstanding notes
payable to related parties with proceeds from the initial public offering. This
decrease was partially offset by an increase in interest expense due to
financing the radio station acquisitions in Atlanta, Boston, Miami-Ft.
Lauderdale and West Palm Beach with borrowings from our credit facility.
BROADCAST CASH FLOW. Broadcast cash flow increased 30.8% to $25.0 million
for the nine months ended September 30, 2000 from $19.1 million for nine months
ended September 30, 1999. The increase was primarily due to the additional
broadcast cash flow generated through revenue growth and increased operating
efficiencies at most of our existing radio stations, particularly in the
Philadelphia and Greenville-New Bern-Jacksonville markets. In addition,
broadcast cash flow increased due to our radio station acquisitions in the
Atlanta, Boston, Miami-Ft. Lauderdale and West Palm Beach markets. On a same
station basis, broadcast cash flow increased 20.1% to $26.3 million for the nine
months ended September 30, 2000 from $21.9 million for nine months ended
September 30, 1999.
INCOME (LOSS) BEFORE INCOME TAXES. We experienced income before income taxes
of $1.5 million for the nine months ended September 30, 2000 versus a loss
before pro forma income taxes of $4.1 million for nine months ended September
30, 1999. The increase was primarily due to the additional income before income
taxes generated through the revenue growth, increased operating efficiencies at
most of our existing radio stations, and a decrease in interest expense due to
reduced borrowings from our credit facility. The revenue growth and increased
operating efficiencies were partially offset by the redemption of equity
appreciation rights for $1.2 million and the increase in amortization and
depreciation associated with the acquisition of radio stations in Atlanta,
Boston, Miami-Ft. Lauderdale and West Palm Beach markets.
NET LOSS. Net loss for the nine months ended September 30, 2000 was $27.6
million compared to a pro forma net loss of $2.6 million for nine months ended
September 30, 1999. The decrease was primarily due to the establishment of a
$27.6 million net deferred tax liability upon conversion from a series of
subchapter S corporations to a series of subchapter C corporations and the $1.2
million redemption of equity appreciation rights as a result of the initial
public offering and corporate reorganization. The net loss for the nine months
ended September 30, 2000 was partially offset by the additional net income
generated through the revenue growth, increased operating efficiencies at most
of our existing radio stations, the decrease in interest expense due to reduced
borrowings from our credit facility and the increase in amortization and
depreciation associated with the acquisition of radio stations in Atlanta,
Boston, Miami-Ft. Lauderdale and West Palm Beach markets.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW. Historically, we have used a significant portion of our liquidity
to consummate acquisitions. These acquisitions have been funded from one or a
combination of the following sources:
o our credit facility;
o disposing of radio stations in transactions which are intended to
qualify as like-kind exchanges under Section 1031 of the Internal
Revenue Code;
o internally-generated cash flow; and
o advances to us from George G. Beasley, members of his family and
affiliated entities.
16
Other liquidity needs have been for debt service, working capital,
distributions to equity holders and general corporate purposes, including
capital expenditures. In the future, we expect that our principal liquidity
requirements will be for working capital and general corporate purposes,
including acquisitions of additional radio stations. We expect to finance future
acquisitions through a combination of bank borrowings, internally generated
funds and our stock.
We used approximately $58.5 million of the net proceeds from our initial
public offering to pay down debt on our old credit facility. We also used
approximately $40.5 million of the proceeds of our initial public offering to
repay the indebtedness owed to our Chairman and Chief Executive Officer, George
G. Beasley, and affiliated companies. The repayment of approximately $40.5
million is net of the repayment at the closing of the initial public offering of
approximately $10.3 million owed to us by members of the Beasley family.
As of September 30, 2000, we held $7.3 million in cash and cash equivalents
and had $197.8 million in availability under our new credit facility we obtained
on August 31, 2000, as described below. We believe that the cash available from
operations as well as the availability under our credit facility should be
sufficient to permit us to meet our financial obligations for at least the next
twelve months. Under our credit facility, we can borrow up to $300.0 million,
subject to compliance with financial ratios and other restrictive covenants.
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES. Net cash provided by
operating activities remained constant at $7.4 million for the nine months ended
September 30, 1999 and 2000. Equity appreciation rights totaling $1.2 million
were redeemed during the nine months ended September 30, 2000; however this
redemption was offset by the additional net income generated through the revenue
growth, increased operating efficiencies at most of our existing radio stations,
and the decrease in interest expense due to reduced borrowings from our credit
facility.
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES. Net cash used in
investing activities was $2.0 million and $27.2 million for the nine months
ended September 30, 1999 and 2000, respectively. The change was partially due to
loans to the former S corporation stockholders and the subsequent repayment of
these loans and all other outstanding notes receivable from related parties and
stockholders as a result of our initial public offering. The change was also
partially due to the radio station acquisitions in the Atlanta, Boston,
Miami-Ft. Lauderdale and West Palm Beach markets and expenditures for property
and equipment.
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES. Net cash used in
financing activities was $4.4 million for the nine months ended September 30,
1999 compared to net cash provided by financing activities of $20.1 million for
the nine months ended September 30, 2000. The change was partially due to
distributions made to the former S corporation stockholders prior to our initial
public offering. The change was also partially due to the proceeds from our
initial public offering, less related costs, which were used for repayment of
approximately $58.5 million of the credit facility and all outstanding notes
payable to related parties. The change was also partially due to additional
borrowings from our credit facility to complete the radio station acquisitions
in the Atlanta, Boston, Miami-Ft. Lauderdale and West Palm Beach markets. The
change was also partially due to payments of loan fees related to the
refinancing of our credit facility.
CREDIT FACILITY. On August 31, 2000, we refinanced our $150.0 million credit
facility. Under terms of the new credit agreement, we were provided a credit
facility with a maximum commitment of $300.0 million. The credit facility
includes a $150.0 million revolving credit loan and a $150.0 million term loan.
The revolving credit loan includes a $50.0 million sub-limit for letters of
credit. The loans bear interest at either the base rate or LIBOR plus a margin
that is determined by the Company's debt to cash flow ratio. The base rate is
equal to the higher of the prime rate or the overnight federal funds effective
rate plus 0.5%. Interest is generally payable monthly through maturity on June
30, 2008. The scheduled reductions in the amount available under the credit
facility may require principal repayments if the outstanding balance at that
time exceeds the new maximum available amount under the credit facility. The
credit agreement requires the Company to maintain certain financial ratios and
includes restrictive covenants. The loans are secured by substantially all
assets of the Company.
17
As of September 30, 2000, the scheduled reductions of the maximum commitment
of the credit facility for the next five fiscal years and thereafter are as
follows:
REVOLVING TOTAL
CREDIT TERM CREDIT
LOAN LOAN FACILITY
----------- ----------- -----------
2002 $ -- $15,000,000 $15,000,000
2003 -- 22,500,000 22,500,000
2004 15,000,000 22,500,000 37,500,000
2005 22,500,000 30,000,000 52,500,000
Thereafter 112,500,000 60,000,000 172,500,000
------------ ------------ ------------
Total $150,000,000 $150,000,000 $300,000,000
============ ============ ============
As of September 30, 2000, we had an outstanding balance under our credit
facility of approximately $102.2 million and availability under our credit
facility of $197.8 million for future acquisitions and other corporate purposes.
As of September 30, 2000, the weighted average annual interest rate
applicable to our credit facility was approximately 7.875%. The credit facility
expires on June 30, 2008.
We must pay a quarterly unused commitment fee, which is based upon our total
leverage to operating cash flow ratio and ranges from 0.25% to 0.375% of the
unused portion of the maximum commitment. Beginning on December 31, 2000, if the
unused portion exceeds 50% of the maximum commitment the fee is increased by
0.375%. For the three and nine months ended September 30, 2000, our unused
commitment fee was approximately $57,000 and $163,000, respectively.
We are required to satisfy financial covenants, which require us to maintain
specified financial ratios and to comply with financial tests, such as ratios
for maximum total leverage, minimum interest coverage and minimum fixed charges.
These financial covenants include:
o MAXIMUM TOTAL LEVERAGE TEST. From closing through March 31, 2001, our
total debt as of the last day of each fiscal quarter must not exceed
6.75 times our operating cash flow for the four quarters ending on that
day. For the period from April 1, 2001 through September 30, 2001, the
required maximum ratio is 6.5 times. For the period from October 1, 2001
through March 31, 2002, the required maximum ratio is 6.25 times. For
the period from April 1, 2002 through December 31, 2002, the required
maximum ratio is 6.0 times. For each twelve-month period after December
31, 2002, the maximum ratio will decrease by 0.5 times. For all periods
after January 1, 2006, the maximum ratio is 4.0 times.
o MINIMUM INTEREST COVERAGE TEST. From closing through June 30, 2001, our
operating cash flow for the four quarters ending on the last day of each
fiscal quarter must not be less than 1.75 times the amount of our
interest expense. For all periods after July 1, 2001, the minimum ratio
is 2.0 times.
o MINIMUM FIXED CHARGES TEST. Our operating cash flow for any four
consecutive quarters must not be less than 1.10 times the amount of our
fixed charges.
The new credit facility also prohibits us from paying cash dividends and
restricts our ability to make other distributions with respect to our capital
stock. The credit facility also contains other customary restrictive covenants.
These covenants limit our ability to:
o incur additional indebtedness and liens;
o enter into certain investments or joint ventures;
o consolidate, merge or effect asset sales;
o make overhead expenditures;
o enter sale and lease-back transactions;
o sell or discount accounts receivable;
18
o enter into transactions with affiliates or stockholders;
o sell, assign, pledge, encumber or dispose of capital stock; or
o change the nature of our business.
RECENT PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133 entitled "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting designation. In
June 1999, the FASB issued SFAS No. 137, which extends the effective date of
SFAS No. 133 to fiscal quarters of fiscal years beginning after June 15, 2000
and should not be applied retroactively to financial statements of prior
periods. We do not anticipate that the adoption of SFAS No. 133 will have a
material impact on our earnings or financial position upon adoption.
In September 2000, the FASB issued SFAS No. 140 entitled "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of Liabilities."
SFAS 140 provides accounting and reporting standards for transfers and servicing
of financial assets and extinguishments of liabilities. SFAS 140 replaces SFAS
No. 125 and is effective for transfers and servicing of financial assets and
extinguishments occurring after March 31, 2001. SFAS 140 is effective for
recognition and reclassification of collateral and for disclosures relating to
securitization transactions and collateral for fiscal years ending after
December 15, 2000. The Company has not completed its evaluation of SFAS 140;
however, management does not anticipate that the adoption of SFAS 140 will have
a material impact on the Company's earnings or financial position upon adoption.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is the risk of loss arising from adverse changes in market rates
and prices such as interest rates, foreign currency exchange rate and commodity
prices. Our primary exposure to market risk is interest rate risk associated
with our credit facility. Amounts borrowed under the credit facility incurs
interest at the London Interbank Offered Rate, or LIBOR, plus additional basis
points depending on the outstanding principal balance under the credit facility.
As of December 31, 1999, $124.7 million was outstanding under our old credit
facility. On February 16, 2000, we repaid approximately $58.5 million of the
outstanding balance under our old credit facility. As of September 30, 2000,
$102.2 million was outstanding under our new credit facility. We evaluate our
exposure to interest rate risk by monitoring changes in interest rates in the
market place.
To manage interest rate risk associated with our credit agreement, we have
entered into interest rate swap and collar agreements.
An interest rate swap is a combined series of forward rate agreements
calling for exchange of interest payments on a number of specified future dates.
In October 2000, we purchased an interest rate swap. Under this agreement, we
pay a fixed rate of 6.48%, on the notional amount, and the other party pays to
us a variable amount rate equal to the three-month LIBOR on a quarterly basis.
An interest rate collar is the combined purchase and sale of an interest
rate cap and an interest rate floor so as to keep interest rate exposure within
a defined range. In the third quarter of 2000, we had one interest rate collar.
Under this agreement, our base LIBOR cannot exceed 8% and our base LIBOR cannot
fall below 6.69%. In October 2000, we purchased another interest rate collar.
Under the new agreement, our base LIBOR cannot exceed 7.5% and our base LIBOR
cannot fall below 5.85%.
Notional amounts are used to calculate the contractual payments to be
exchanged under the contract. As of December 31, 1999, the notional amount upon
maturity of our swap and collar agreements then outstanding was approximately
$50.0 million. As of September 30, 2000, the notional amount upon maturity of
our collar agreement is approximately $20.0 million and as of October 31, 2000,
the notional amount upon maturity of our collar and swap agreements is
approximately $60.0 million.
19
Our collar agreement is summarized in the following chart:
ESTIMATED
NOTIONAL EXPIRATION FAIR
AGREEMENT AMOUNT FLOOR CAP SWAP DATE VALUE
--------- ------ ----- --- ---- ---- -----
Interest rate collar..... $20,000,000 6.69% 8% -- May 2002 --
Our new collar and swap agreements, purchased in October 2000, are
summarized in the following chart:
NOTIONAL EXPIRATION
AGREEMENT AMOUNT FLOOR CAP SWAP DATE
--------- ------ ----- --- ---- ----
Interest rate collar..... $20,000,000 5.85% 7.5% -- October 2002
Interest rate swap....... $20,000,000 -- -- 6.48% October 2002
20
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We currently and from time to time are involved in litigation incidental to
the conduct of our business, but we are not a party to any lawsuit or proceeding
which, in the opinion of management, is likely to have a material adverse effect
on us.
On December 29, 1998, we filed a lawsuit in the Circuit Court of the
Eleventh Judicial Circuit, Miami-Dade County, against the Florida Marlins Inc.,
Florida Marlins Baseball Team, Ltd., and Front Row Communications for breach of
contract and other related claims. The lawsuit is based on actions taken by the
Florida Marlins major league baseball team to trade or release key players of
the Marlins after the 1997 season, thereby transforming the Marlins into a
non-competitive team. On January 14, 2000, the court dismissed the Marlins'
motion for summary judgment. On May 22, 1999, the Marlins counter sued for
breach of contract. We intend to pursue our legal action against the Marlins and
seek dismissal of their counter suit. We cannot yet determine the outcome of
these lawsuits.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
- ----- -----------------------------------------------------------------
2.1** Equity Interest Purchase Agreement of Radio Stations KJUL-FM,
KSTJ-FM and KKLZ-FM in Las Vegas, Nevada and WBYU-AM, WRNO-FM and
KMEZ-FM in New Orleans, Louisiana, dated June 2, 2000.
10.1* Form of Agreement of Sale of Four Communications Towers between
Beasley FM Acquisition Corp. and Beasley Family Towers, Inc.
10.2* Form of Agreement of Sale of a Communications Tower between
Beasley Broadcasting of Eastern North Carolina, Inc. and Beasley
Family Towers, Inc.
10.3* Form of Agreement of Sale of a Communications Tower between
Beasley Broadcasting of New Jersey, Inc. and Beasley Family
Towers, Inc.
10.4* Form of Agreement of Sale of a Communications Tower between
Beasley Broadcasting of Eastern Pennsylvania, Inc. and Beasley
Family Towers, Inc.
10.5* Form of Agreement of Sale of a Communications Tower between
Beasley Broadcasting of Coastal Carolina, Inc. and Beasley Family
Towers, Inc.
10.6* Form of Agreement of Sale of a Communications Tower between
Beasley Reed Acquisition Partnership and Beasley Family Towers,
Inc.
10.7* Form of Agreement of Sale of Three Communications Towers between
Beasley FM Acquisition Corp. and Beasley Family Towers, Inc.
10.8 Credit Agreement between Beasley Mezzanine Holdings, LLC and
21
Fleet National Bank, as syndication agent, Bank of America, as
documentation agent, the Bank of New York, as co-documentation
agent and managing agent, and the Bank of Montreal, Chicago
Branch, as administrative agent, dated August 31, 2000
27.1 Financial Data Schedule.
- ----------
* Incorporated by reference to Beasley Broadcast Groups Registration
Statement on Form S-1 (333-91683).
** Incorporated by reference to Exhibit 2.1 to Beasley Broadcast Group's
Current Report on Form 8-K dated June 2, 2000 (0-29253).
(b) No reports on Form 8-K were filed during the three month period ended
September 30, 2000.
22
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.
Date: November 8, 2000 BEASLEY BROADCAST GROUP, INC.
/s/ GEORGE G. BEASLEY
--------------------------------------
Name: George G. Beasley
Title: Chairman of the Board and Chief
Executive Officer
Date: November 8, 2000
/s/ CAROLINE BEASLEY
--------------------------------------
Name: Caroline Beasley
Title: Vice President, Chief Financial Officer,
Secretary, Treasurer and Director
23