Beasley Broadcast Group, Inc. — 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015. This is an annual report, not a standalone fourth-quarter report. The company operated 52 radio stations across 12 U.S. markets.
Financial results and liquidity
| Metric | 2015 | 2014 |
|---|---|---|
| Net revenue | $105.9 million | $58.7 million |
| Operating income | $13.6 million | $5.6 million |
| Operating margin | 12.9% | 9.5% |
| Income from continuing operations | $6.4 million | $1.0 million |
| Net income | $6.4 million | $40.0 million |
| Net cash from operating activities | $14.4 million | $16.9 million |
| Cash and cash equivalents at year-end | $14.3 million | $14.3 million |
Reported revenue rose 80.5%, chiefly because Charlotte and Tampa-Saint Petersburg stations acquired in the December 2014 CBS Radio asset exchange contributed for a full year in 2015. The reported comparison is therefore not like-for-like; management said revenue at the remaining clusters was generally comparable. The 2014 net income included $39.0 million from discontinued operations, including a $54.3 million pretax gain on the station exchange. The filing does not provide a standalone fourth-quarter results summary.
Station operating expenses were $75.6 million, up 87.4%, mainly reflecting the acquired clusters. The 2015 results also included $3.5 million of goodwill impairment in Wilmington and $0.6 million of debt-modification loss. Interest expense declined 9.3% to $4.0 million. Capital expenditures were $2.1 million. Cash from operations decreased $2.5 million, while cash increased by $0.1 million over the year.
At December 31, 2015, total assets were $311.4 million, current assets $37.1 million, and current liabilities $10.9 million. Debt, including capital lease obligations, was $89.8 million; stockholders’ equity was $133.5 million. The new credit facility had a $89.0 million term-loan balance and a $20.0 million revolving commitment, fully available at year-end. Its LIBOR-based rate was 3.9%, and it matures November 30, 2020. The company reported compliance with covenants, a 3.23x consolidated total debt ratio and 6.58x interest coverage ratio.
Material changes and notable items
- The late-2014 CBS Radio asset exchange added stations in Charlotte and Tampa-Saint Petersburg and reshaped the company’s portfolio; former Philadelphia and Miami stations were reported as discontinued operations in 2014.
- In November 2015, the company refinanced under a new credit agreement, primarily using proceeds to repay the prior facility. The agreement includes escalating leverage limits, mandatory prepayment provisions in specified circumstances, and liens on substantially all company and subsidiary assets.
- Wilmington’s declining cash flows and ratings led to a $3.5 million impairment, eliminating all goodwill assigned to that market. No impairment was recorded for FCC licenses; selected market valuations depended on estimated cash flows and other unobservable assumptions.
- Related parties purchased two radio towers for $1.3 million and $0.4 million, respectively, and leased them back to the company under capital leases. The resulting $1.1 million combined gains were deferred due to continuing involvement.
- The board declared a $0.045-per-share dividend, totaling about $1.0 million, paid in January 2016. The company said it intended to pay quarterly dividends, subject to board discretion, covenants, and financial conditions.
Outlook, risks and contingencies
Management stated it expected sufficient liquidity to meet obligations for the next 12 months, relying on operating cash flow and credit availability. It cautioned that weaker results or unexpected expenses could reduce revolver availability or create covenant and liquidity pressure. No quantified revenue, earnings, or cash-flow guidance was provided.
- Advertising revenue is exposed to economic conditions, audience ratings, advertiser spending, seasonality, and competition from digital, satellite, and other media. First-quarter revenue is typically lowest; political advertising can make even-year results stronger.
- The business depends on FCC licenses and is subject to extensive regulation. License renewal, ownership rules, enforcement, and potential changes in regulation could affect operations.
- Debt covenants restrict certain actions, including additional borrowing and dividends; covenant breaches could trigger acceleration. A substantial portion of scheduled principal repayment is due in 2020.
- FCC licenses represented 75.4% of total assets, making impairment estimates and market-level cash-flow assumptions important. Florida stations generated 35.0% of 2015 revenue and could be affected by hurricanes.
- Transactions and leases with entities connected to the Beasley family present related-party considerations. George G. Beasley and family interests held substantial voting power; the CEO controlled 61.4% of total voting power.
- Management reported no litigation expected to have a material adverse effect and no off-balance-sheet arrangements at year-end. Disclosure controls and internal control over financial reporting were reported effective; the auditor did not attest to internal controls.
Important facts for investors to verify
- How much of reported 2015 revenue and operating-income growth reflects a full year of the acquired Charlotte and Tampa stations, and how those markets performed organically.
- Whether Wilmington’s ratings and cash flows stabilize, and whether any further goodwill or FCC-license impairment is indicated.
- Current leverage, covenant headroom, mandatory prepayment requirements, borrowing availability, and the 2020 debt maturity profile.
- Dividend capacity under credit-agreement limits and the board’s subsequent dividend decisions.
- Terms, valuation, approvals, and ongoing obligations associated with related-party tower transactions, leases, and other arrangements.