Business context and reporting period
Beasley Broadcast Group, Inc. filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2011. The company operates 42 radio stations across 11 U.S. markets, operates an additional expanded-band AM station, and provides management services to two Las Vegas stations. Revenue primarily comes from local and national advertising. Radio advertising is seasonal, and results for the quarter are not necessarily indicative of full-year results.
Financial performance
| Metric | Q2 2011 | Q2 2010 | Six months 2011 | Six months 2010 |
|---|---|---|---|---|
| Net revenue | $25.5 million | $24.9 million | $48.6 million | $46.8 million |
| Operating income | $6.4 million | $5.8 million | $11.4 million | $9.1 million |
| Operating margin | 25.2% | 23.3% | 23.4% | 19.5% |
| Interest expense | $1.8 million | $2.5 million | $4.2 million | $5.1 million |
| Net income | $2.8 million | $2.0 million | $4.4 million | $2.6 million |
| Diluted EPS | $0.12 | $0.09 | $0.19 | $0.11 |
For the first half of 2011, operating cash flow was $8.9 million, capital expenditures were $0.6 million, and cash used in investing and financing activities was $1.3 million and $6.4 million, respectively. Cash increased $1.2 million to $11.9 million.
Financial position and liquidity
At June 30, 2011, total debt was $135.7 million, down from $142.0 million at December 31, 2010; cash was $11.9 million. Current assets were $34.2 million and current liabilities $15.2 million. The credit facility matures June 30, 2015; $10.2 million of revolving commitments remained available at quarter-end. The facility’s June 30 LIBOR-based rates were 3.6967%. Management said it expects sufficient liquidity to meet obligations for at least 12 months, while cautioning that weak results or unexpected expenses could create financing or covenant pressure.
Changes, outlook, and risks
- Q2 revenue rose 2.3%; management attributed the increase mainly to Miami-Fort Lauderdale and Philadelphia. First-half revenue rose 3.8%, with increases in 10 of 11 market clusters and the largest cited increase in Philadelphia.
- Station expenses were broadly stable; first-half station operating expenses declined 1.2%. Lower interest expense reflected debt repayments and expiration of a swap agreement. Net income rose 37.7% in Q2 and 69.9% for the first half.
- No specific earnings or revenue guidance was provided. Management noted the usual seasonal weakness in first-quarter advertising and identified economic conditions, competition, audience share, and advertising demand as factors affecting revenue.
- The company was in compliance with its financial covenants at June 30: total debt ratio 4.71x versus a 7.0x maximum, interest coverage 3.26x versus a 1.875x minimum, and fixed-charge coverage 1.74x versus a 1.05x minimum. Covenant thresholds tighten over time; breaches could accelerate debt maturity. Debt is secured by substantially all company assets and guaranteed by subsidiaries.
- Interest-rate swaps had $50 million notional value at quarter-end; a $0.4 million pre-tax unrealized loss was expected to be reclassified into earnings over the next three months. The filing reports routine litigation, including FCC indecency matters, but no proceeding management considered likely to materially harm financial condition or results. No material risk-factor changes were reported.
- The company invested $250,000 for an approximately 20% interest in Digital PowerRadio, LLC, managed by an entity partially owned by an independent director. Share repurchases and dividends are restricted by the credit agreement.
Important facts for investors to verify
- Whether advertising growth and operating-margin improvement continue across markets, given seasonality and economic and competitive risks.
- Debt repayment capacity, revolving-credit availability, and compliance with tightening leverage and coverage covenants.
- Exposure to variable interest rates as swaps expire, and the timing and earnings impact of hedge-loss reclassification.
- Details and performance of the Digital PowerRadio related-party investment and any material developments in FCC or other litigation.