Beasley Broadcast Group, Inc. — Q1 2013 Form 10-Q
Reporting period: Three months ended March 31, 2013; balance-sheet figures are as of March 31, 2013. Beasley operated 43 radio stations across 11 U.S. markets, plus one expanded-band AM station, and provided management services to one Las Vegas station. Results are unaudited and interim; management notes that radio revenue is seasonal and typically lowest in Q1.
Financial performance and position
| Metric | Q1 2013 | Q1 2012 / comparison |
|---|---|---|
| Net revenue | $24.81 million | $23.30 million; up 6.5% |
| Operating income | $5.45 million | $5.24 million; up 4.0% |
| Operating margin | 22.0% | 22.5% |
| Interest expense | $2.05 million | $1.35 million; up 52.1% |
| Income before taxes | $3.45 million | $3.97 million |
| Income tax expense / effective rate | $1.03 million / approximately 30% | $1.56 million / approximately 39% |
| Net income | $2.42 million; $0.11 per share | $2.41 million; $0.11 per share |
| Operating cash flow | $3.93 million | $5.61 million |
| Capital expenditures | $0.29 million | $0.37 million |
Station operating expenses rose 7.7% to $16.70 million, faster than revenue; corporate G&A increased 2.6% to $2.09 million. Net margin was approximately 9.8%, versus 10.3% in Q1 2012. Management attributed revenue growth mainly to Philadelphia (+$1.0 million), Fort Myers (+$0.3 million), and $0.7 million from KOAS-FM, acquired in 2012. Station expenses increased notably in Philadelphia (+$0.4 million) and at KOAS-FM (+$0.4 million). Management said remaining market-cluster revenue and expenses were generally comparable.
Operating cash flow fell about 30%, with management citing higher station costs and interest payments, partly offset by increased cash receipts from advertising. Cash increased by $2.56 million during the quarter to $14.22 million. Investing activities used $0.24 million; financing activities used $1.13 million, including $1.0 million of debt principal payments and $0.18 million of treasury-stock purchases.
At March 31, total debt was $115.75 million, comprising $85.75 million of first-lien term debt, $5.0 million drawn on the revolver, and $25.0 million of second-lien debt. Cash was $14.22 million. Current assets were $35.35 million and current liabilities $13.04 million. The revolver had a $20.0 million commitment, with $15.0 million available at quarter-end. The first-lien facility’s LIBOR-based rate was 5.15%; the second-lien rate was 11.25%. The company reported covenant compliance, a consolidated total debt ratio of 3.46x, and interest coverage of 4.62x.
Material changes, outlook, and risks
- April 3 refinancing: After quarter-end, Beasley amended its first-lien agreement and repaid the $25.0 million second-lien facility using $20.0 million of additional term borrowings, $2.0 million of revolver borrowings, and $3.0 million of cash. The amended facility had $105.75 million of term debt and $13.0 million of remaining revolver availability. The company expected a $1.3 million loss on extinguishment of debt in Q2 2013. The amended debt is secured by substantially all company and subsidiary assets and guaranteed by substantially all subsidiaries.
- Debt and liquidity risks: Management believed liquidity would be sufficient for at least 12 months, but warned that weak results or unexpected expenses could cause covenant breaches, restrict revolver access, or require additional financing. Debt covenants tighten over time; noncompliance could accelerate debt maturity. Scheduled repayments under the amended facility total $3.25 million for the remainder of 2013 and are heavily concentrated in 2017.
- Other items: Beasley acquired two Fort Myers-Naples FM translator licenses for $30,000 in January. On April 12 it contributed a further $104,167 to Digital PowerRadio, maintaining an approximately 20% interest; the entity is managed by a firm partly owned by an independent director. The Q1 tax rate included a $0.3 million benefit from a change in the state tax effective rate. Interest-rate caps covered $57.5 million of variable-rate debt through September 2014.
- Contingencies and controls: The company reported routine litigation, including FCC indecency matters, but no proceeding management believed likely to have a material adverse effect. It reported no material change in risk factors and stated that disclosure controls were effective, with no material change in internal control over financial reporting.
- Guidance: The filing provides no numerical revenue or earnings guidance. Management’s liquidity outlook is an expectation, not a guarantee; it also cautions that Q1 results are not necessarily indicative of full-year results.
Investor facts to verify
- Whether the April refinancing reduces borrowing costs as intended, and the realized Q2 debt-extinguishment loss.
- Quarterly covenant headroom and the effect of tightening leverage limits on revolver availability and future repayments.
- Whether revenue gains in Philadelphia, Fort Myers, and KOAS-FM persist while expenses and interest costs are controlled.
- Whether operating cash flow recovers from the year-over-year decline, considering seasonal advertising patterns.
- The assumptions behind management’s 12-month liquidity assessment and any material developments in litigation or related-party investments.