Business context and reporting period
Beasley Broadcast Group, Inc. operates 52 radio stations across 12 U.S. markets. This Form 10-Q reports the quarter and six months ended June 30, 2016; comparisons are with the same periods in 2015. Results are unaudited, and the company notes that radio revenue is seasonal and interim results may not indicate full-year performance.
Financial performance and position
| Metric | Q2 2016 | Q2 2015 | Six months 2016 | Six months 2015 |
|---|---|---|---|---|
| Net revenue | $27.8 million | $27.0 million | $55.2 million | $51.3 million |
| Operating income | $4.8 million | $5.1 million | $8.9 million | $7.7 million |
| Operating margin | 17.2% | 18.9% | 16.1% | 15.0% |
| Net income | $2.5 million | $2.5 million | $4.3 million | $3.8 million |
| Diluted EPS | $0.11 | $0.11 | $0.19 | $0.17 |
Q2 station operating expenses were $19.7 million, up 5.3%; corporate G&A was $2.4 million, up 6.1%. Six-month expenses included $39.7 million in station operating costs and $4.9 million in corporate G&A. The filing does not report EBITDA.
For the six months, operating cash flow was $8.8 million, versus $5.5 million a year earlier. Investing used $0.8 million and financing used $8.2 million, including $6.0 million of debt repayments and $2.1 million of dividends. Cash declined $0.2 million to $14.1 million. Capital expenditures were $1.4 million.
At June 30, cash was $14.1 million, current assets $37.7 million, and current liabilities $11.5 million. Debt consisted of an $83.0 million term loan and $0.7 million of capital lease obligations; the balance-sheet debt carrying amount, net of issuance costs and current installments, was $82.0 million. The $20.0 million revolving facility was undrawn. The existing facility bore interest at 3.5% and matures November 2020. The company reported covenant compliance, a 2.90x consolidated total debt ratio, and 6.75x interest coverage.
Material changes and management commentary
- Q2 revenue rose 2.8%, driven principally by Tampa–St. Petersburg and Charlotte, but operating expenses grew faster, reducing operating income 6.3% and net income 2.5% year over year.
- Six-month revenue increased 7.7%, with growth concentrated in Tampa–St. Petersburg and Charlotte. Operating income increased 16.1% and net income increased 12.0%. Lower depreciation and no repeat of 2015 radio-station exchange costs contributed to the improvement.
- Q2 other income included approximately $0.3 million of insurance proceeds for fire damage at Greenville offices. Six-month other income was lower year over year, primarily because 2015 included approximately $0.4 million of insurance proceeds for weather damage to an Augusta tower.
- Management said it expects sufficient liquidity for the next 12 months, excluding the proposed Greater Media acquisition, but cautioned that weak results or unexpected expenses could constrain liquidity or threaten covenant compliance. It intends to continue quarterly dividends, subject to board review; the $0.045-per-share dividend declared in May was paid July 8.
Outlook, transaction, and risks
On July 19, 2016, after the reporting period, Beasley agreed to acquire Greater Media for stated aggregate consideration of $239.875 million, including refinancing approximately $80 million of Greater Media debt and transaction expenses. Expected consideration to Greater Media stockholders includes approximately $100 million cash and $25 million in Beasley shares, with adjustments possible; stockholders are also expected to receive an estimated $20 million of net proceeds from tower-asset sales. The transaction remains subject to closing conditions, including FCC approval.
Committed financing comprises a $265 million term loan B and a $20 million revolving facility, subject to customary conditions and closing. The company identified execution and integration, financing availability, transaction costs, potential termination fees, dilution, and the risk that the acquisition may not deliver expected synergies or be accretive as material uncertainties. Estimated transaction costs were approximately $9.5 million, including estimated debt issuance costs of $8.5 million. Potential termination fees are $6.39 million or $12.78 million in specified circumstances. The filing provides no standalone earnings guidance.
Other noted risks include advertising-market competition and economic conditions, seasonal revenue patterns, and the possibility that poor performance could limit borrowing capacity or lead to a debt covenant default. Management reported no legal proceeding expected to have a material adverse effect and concluded disclosure controls were effective; no material internal-control changes were reported for the quarter.
Important facts for investors to verify
- Whether the Greater Media acquisition closed, its final consideration and financing terms, and any subsequent adjustments or station divestitures.
- Post-acquisition leverage, debt service, covenant headroom, and the impact of the committed $265 million term loan B.
- Whether revenue growth and operating performance in Tampa–St. Petersburg and Charlotte persisted, and whether expense growth moderated.
- Cash generation, capital needs, dividend decisions, and availability of revolving credit under the applicable covenants.
- Any transaction-related costs, termination-fee exposure, integration issues, or impairment indicators affecting reported results.