Beasley Broadcast Group, Inc. — Q1 2012 Form 10-Q
Business and period: Radio broadcaster operating 42 stations across U.S. markets, one expanded-band station, and management services for two Las Vegas stations. This unaudited report covers the three months ended March 31, 2012; comparisons are with Q1 2011 unless noted.
Financial performance
- Revenue: $23.30 million, up 1.1% from $23.05 million. Management attributed the increase mainly to higher advertising revenue in Fayetteville.
- Operating results: Operating income was $5.24 million, versus $4.94 million. Operating margin was approximately 22.5%, compared with 21.4%.
- Profit: Net income rose 55.4% to $2.41 million from $1.55 million; diluted earnings per share were $0.11, versus $0.07. Net margin was approximately 10.3%, versus 6.7%.
- Expenses and tax: Station operating expenses were $15.51 million, up 0.5%; corporate G&A was $2.04 million, down 0.8%. Depreciation and amortization declined to $0.51 million from $0.62 million. Income tax expense increased to $1.56 million; the effective tax rate was approximately 39%.
- Interest: Interest expense fell 43.1% to $1.35 million from $2.37 million, reflecting debt repayments and expiration of interest-rate swaps in 2011. The prior-year expense included $0.78 million reclassified from other comprehensive income.
- Cash flow: Operating cash flow was $5.61 million, up from $4.38 million. Investing activities used $0.36 million, compared with $1.03 million; financing activities used $3.54 million, compared with $3.29 million. Cash increased $1.71 million during the quarter to $15.32 million.
- Balance sheet and liquidity: At March 31, cash was $15.32 million and current assets were $35.13 million against current liabilities of $14.88 million. Total debt was $123.38 million, down from $126.73 million at year-end 2011. The company reported $7.9 million available under its revolving facility; debt carried a 3.75% LIBOR-based rate and matures June 30, 2015.
Changes, outlook, and risks
- Management said Q1 is typically the company’s lowest-revenue quarter due to advertising seasonality; interim results are not necessarily indicative of full-year results. No specific earnings or revenue guidance was provided.
- At March 31, the company reported compliance with all credit covenants: total debt ratio 4.46x (maximum 4.75x), interest coverage 4.62x (minimum 2.0x), and fixed-charge coverage 1.78x (minimum 1.1x). Management believed liquidity would be sufficient for at least 12 months, but warned that weak results, unexpected expenses, or acquisitions could strain liquidity or covenant compliance. Covenant breach could accelerate debt maturity.
- Credit agreement restrictions limit additional borrowing, share repurchases, and dividends. Cash dividends were not paid. The quarter’s 30,754 share repurchases, costing approximately $0.1 million, funded tax withholding on restricted stock.
- Unusual items and transactions: the company acquired an Augusta translator license for $45,000; contributed $62,500 to Digital PowerRadio, an investment in which an independent director has an indirect affiliation; and reclassified $1.3 million of tower leasehold improvements to long-term prepaid rent after finalizing a Boston tower lease.
- The company was no longer party to interest-rate derivatives after its swaps expired in 2011. It disclosed routine litigation, including FCC indecency matters, but management did not expect pending or threatened proceedings to have a material adverse effect. Management reported effective disclosure controls and no material change in internal control during the quarter.
Important facts for investors to verify
- Advertising trends and whether revenue growth extends beyond the Fayetteville contribution, accounting for typical Q1 seasonality.
- Debt amortization, revolving availability, covenant headroom, and the effect of variable-rate borrowing on interest expense and liquidity.
- Whether operating cash flow and margins remain durable as debt service and scheduled repayments continue.
- Terms and implications of the Boston tower lease and the related-party Digital PowerRadio investment.
- Share-count figures: the filing reports 6,148,878 Class A shares outstanding at March 31 in the balance sheet, while the cover page reports 6,147,878 as of April 27; confirm the applicable reported count.