BEASLEY BROADCAST GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2015
|
|
|
2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,318,494
|
|
|
$
|
14,121,452
|
|
Accounts receivable, less allowance for doubtful accounts of $596,380 in 2015 and $593,084 in
2016
|
|
|
19,847,536
|
|
|
|
18,945,682
|
|
Prepaid expenses
|
|
|
1,896,491
|
|
|
|
3,762,425
|
|
Other current assets
|
|
|
1,017,059
|
|
|
|
895,772
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
37,079,580
|
|
|
|
37,725,331
|
|
Restricted cash
|
|
|
743,195
|
|
|
|
|
|
Property and equipment, net
|
|
|
27,523,353
|
|
|
|
27,335,806
|
|
FCC broadcasting licenses
|
|
|
234,719,505
|
|
|
|
234,719,505
|
|
Goodwill
|
|
|
5,336,583
|
|
|
|
5,336,583
|
|
Other intangibles, net
|
|
|
544,238
|
|
|
|
405,822
|
|
Other assets
|
|
|
5,455,441
|
|
|
|
5,793,120
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
311,401,895
|
|
|
$
|
311,316,167
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Current installments of long-term debt
|
|
$
|
1,484,048
|
|
|
$
|
59,671
|
|
Accounts payable
|
|
|
1,827,003
|
|
|
|
2,120,646
|
|
Other current liabilities
|
|
|
7,588,106
|
|
|
|
9,321,712
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
10,899,157
|
|
|
|
11,502,029
|
|
Due to related parties
|
|
|
952,465
|
|
|
|
904,109
|
|
Long-term debt, net of current installments and unamortized debt issuance costs
|
|
|
86,461,778
|
|
|
|
82,040,520
|
|
Deferred tax liabilities
|
|
|
77,739,201
|
|
|
|
79,147,682
|
|
Other long-term liabilities
|
|
|
1,812,219
|
|
|
|
1,727,491
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
177,864,820
|
|
|
|
175,321,831
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value; 10,000,000 shares authorized; none issued
|
|
|
|
|
|
|
|
|
Class A common stock, $0.001 par value; 150,000,000 shares authorized; 9,449,956 issued and
6,567,777 outstanding in 2015; 9,584,286 issued and 6,654,024 outstanding in 2016
|
|
|
9,450
|
|
|
|
9,584
|
|
Class B common stock, $0.001 par value; 75,000,000 shares authorized; 16,662,743 issued and
outstanding in 2015 and 2016
|
|
|
16,662
|
|
|
|
16,662
|
|
Additional paid-in capital
|
|
|
119,495,619
|
|
|
|
119,936,165
|
|
Treasury stock, Class A common stock; 2,882,179 in 2015; 2,930,262 shares in 2016
|
|
|
(15,361,869
|
)
|
|
|
(15,514,082
|
)
|
Retained earnings
|
|
|
29,302,054
|
|
|
|
31,520,335
|
|
Accumulated other comprehensive income
|
|
|
75,159
|
|
|
|
25,672
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
133,537,075
|
|
|
|
135,994,336
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
311,401,895
|
|
|
$
|
311,316,167
|
|
|
|
|
|
|
|
|
|
|
3
BEASLEY BROADCAST GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2015
|
|
|
2016
|
|
Net revenue
|
|
$
|
27,024,338
|
|
|
$
|
27,777,381
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Station operating expenses (including stock-based compensation of $41,791 in 2015 and $36,412 in
2016 and excluding depreciation and amortization shown separately below)
|
|
|
18,741,666
|
|
|
|
19,729,821
|
|
Corporate general and administrative expenses (including stock-based compensation of $230,207 in
2015 and $168,962 in 2016)
|
|
|
2,302,888
|
|
|
|
2,443,661
|
|
Radio station exchange transaction costs
|
|
|
46,155
|
|
|
|
|
|
Depreciation and amortization
|
|
|
839,874
|
|
|
|
830,581
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
21,930,583
|
|
|
|
23,004,063
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
5,093,755
|
|
|
|
4,773,318
|
|
Non-operating income (expense):
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(941,003
|
)
|
|
|
(898,560
|
)
|
Other income (expense), net
|
|
|
18,694
|
|
|
|
269,052
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
4,171,446
|
|
|
|
4,143,810
|
|
Income tax expense
|
|
|
1,639,404
|
|
|
|
1,674,332
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
2,532,042
|
|
|
|
2,469,478
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on securities (net of income tax expense of $22,772 in 2015 and income tax
benefit of $8,626 in 2016)
|
|
|
36,857
|
|
|
|
(14,080
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
2,568,899
|
|
|
$
|
2,455,398
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
0.11
|
|
|
$
|
0.11
|
|
Dividends declared per common share
|
|
$
|
0.045
|
|
|
$
|
0.045
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
22,918,837
|
|
|
|
23,023,401
|
|
Diluted
|
|
|
22,967,632
|
|
|
|
23,119,431
|
|
4
BEASLEY BROADCAST GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2015
|
|
|
2016
|
|
Net revenue
|
|
$
|
51,275,177
|
|
|
$
|
55,232,328
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Station operating expenses (including stock-based compensation of $83,582 in 2015 and $72,824 in
2016 and excluding depreciation and amortization shown separately below)
|
|
|
36,555,614
|
|
|
|
39,716,112
|
|
Corporate general and administrative expenses (including stock-based compensation of $558,298 in
2015 and $367,856 in 2016)
|
|
|
4,742,035
|
|
|
|
4,944,618
|
|
Radio station exchange transaction costs
|
|
|
349,917
|
|
|
|
|
|
Depreciation and amortization
|
|
|
1,958,727
|
|
|
|
1,669,987
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
43,606,293
|
|
|
|
46,330,717
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
7,668,884
|
|
|
|
8,901,611
|
|
Non-operating income (expense):
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,889,009
|
)
|
|
|
(1,887,084
|
)
|
Other income (expense), net
|
|
|
490,499
|
|
|
|
229,411
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
6,270,374
|
|
|
|
7,243,938
|
|
Income tax expense
|
|
|
2,439,948
|
|
|
|
2,953,707
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
3,830,426
|
|
|
|
4,290,231
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on securities (net of income tax expense of $41,213 in 2015 and income tax
benefit of $30,318 in 2016)
|
|
|
66,704
|
|
|
|
(49,487
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
3,897,130
|
|
|
$
|
4,240,744
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
0.17
|
|
|
$
|
0.19
|
|
Dividends declared per common share
|
|
$
|
0.09
|
|
|
$
|
0.09
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
22,899,865
|
|
|
|
23,003,436
|
|
Diluted
|
|
|
22,953,927
|
|
|
|
23,089,039
|
|
5
BEASLEY BROADCAST GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2015
|
|
|
2016
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
3,830,426
|
|
|
$
|
4,290,231
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
641,880
|
|
|
|
440,680
|
|
Provision for bad debts
|
|
|
247,311
|
|
|
|
452,528
|
|
Depreciation and amortization
|
|
|
1,958,727
|
|
|
|
1,669,987
|
|
Amortization of loan fees
|
|
|
168,732
|
|
|
|
183,498
|
|
Deferred income taxes
|
|
|
2,152,567
|
|
|
|
1,358,994
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(2,395,267
|
)
|
|
|
449,326
|
|
Prepaid expenses
|
|
|
(2,468,250
|
)
|
|
|
(1,865,934
|
)
|
Other assets
|
|
|
1,313,072
|
|
|
|
(30,394
|
)
|
Accounts payable
|
|
|
1,140,399
|
|
|
|
293,643
|
|
Other liabilities
|
|
|
(1,081,048
|
)
|
|
|
1,569,439
|
|
Other operating activities
|
|
|
(23,849
|
)
|
|
|
33,053
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
5,484,700
|
|
|
|
8,845,051
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Change in restricted cash
|
|
|
|
|
|
|
743,195
|
|
Capital expenditures
|
|
|
(845,178
|
)
|
|
|
(1,368,840
|
)
|
Payments for translator licenses
|
|
|
(391,175
|
)
|
|
|
|
|
Payments for investments
|
|
|
(166,667
|
)
|
|
|
(166,667
|
)
|
Repayment of notes receivable from related parties
|
|
|
185,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(1,217,294
|
)
|
|
|
(792,312
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Principal payments on indebtedness
|
|
|
(4,500,000
|
)
|
|
|
(6,029,133
|
)
|
Tax shortfall from vesting of restricted stock
|
|
|
(151,036
|
)
|
|
|
|
|
Dividends paid
|
|
|
(2,058,785
|
)
|
|
|
(2,068,435
|
)
|
Payments for treasury stock
|
|
|
(246,022
|
)
|
|
|
(152,213
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(6,955,843
|
)
|
|
|
(8,249,781
|
)
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(2,688,437
|
)
|
|
|
(197,042
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
14,259,441
|
|
|
|
14,318,494
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
11,571,004
|
|
|
$
|
14,121,452
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
1,720,277
|
|
|
$
|
1,721,457
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
4,287,595
|
|
|
$
|
2,555,650
|
|
|
|
|
|
|
|
|
|
|
Supplement disclosure of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Property and equipment acquired through placement of advertising airtime
|
|
$
|
26,829
|
|
|
$
|
39,702
|
|
|
|
|
|
|
|
|
|
|
Dividends declared but unpaid
|
|
$
|
1,031,383
|
|
|
$
|
1,036,088
|
|
|
|
|
|
|
|
|
|
|
6
BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1)
|
Interim Financial Statements
|
The accompanying unaudited condensed consolidated
financial statements should be read in conjunction with the consolidated financial statements of Beasley Broadcast Group, Inc. and its subsidiaries (the Company) included in the Companys Annual Report on Form 10-K for the year
ended December 31, 2015. These financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the financial statements reflect all adjustments necessary for a fair
statement of the financial position and results of operations for the interim periods presented and all such adjustments are of a normal and recurring nature. The Companys results are subject to seasonal fluctuations therefore the results
shown on an interim basis are not necessarily indicative of results for the full year.
(2)
|
Recent Accounting Pronouncements
|
In March 2016, the Financial Accounting Standards
Board (FASB) issued guidance to improve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the
statement of cash flows. The new guidance is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. The Company has not determined the impact of adoption on its financial statements.
In February 2016, the FASB issued guidance to increase transparency and comparability among organizations by recognizing lease assets and
lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset
representing its right to use the underlying asset for the lease term. There continues to be a differentiation between finance leases and operating leases, however lease assets and lease liabilities arising from operating leases should now be
recognized in the statement of financial position. New disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The new guidance is
effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company has not determined the impact of adoption on its financial statements.
In January 2016, the FASB issued guidance that changes how entities measure equity investments and present changes in the fair value of
financial liabilities. The new guidance requires entities to measure equity investments that do not result in consolidation and are not accounted under the equity method at fair value and recognize any changes in fair value in net income unless the
investments qualify for the new practicality exception. A practicality exception will apply to those equity investments that do not have a readily determinable fair value and do not qualify for the practical expedient to estimate fair value, and as
such, these investments may be measured at cost. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company has not determined the impact of adoption on its
financial statements.
In May 2014, the FASB issued guidance to clarify the principles for recognizing revenue. The core principle of the
guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The guidance provides a comprehensive framework for revenue recognition that supersedes current general revenue guidance and most industry-specific guidance. In addition, the guidance requires improved disclosures to help users of financial
statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. In 2016, the FASB issued several updates to address implementation issues and to clarify guidance for principal versus agent considerations and
identifying performance obligations and licensing. An entity should apply the guidance either retrospectively to each prior reporting period presented or retrospectively with the cumulative adjustment at the date of the initial application. In
August 2015, the FASB delayed the effective date of the new guidance to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is now permitted after the original
effective date of December 15, 2016. The Company has not determined the impact of adoption on its financial statements.
(3)
|
FCC Broadcasting Licenses
|
On July 25, 2016, the Company entered into an agreement
to acquire one FM translator license from Radio One of Boston, Inc. for $0.4 million. This translator license will allow the Company to rebroadcast the programming of its radio station in Boston, MA on the FM band over an expanded area of coverage.
7
BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The acquisitions are subject to certain closing conditions, including FCC approval.
Translator licenses are generally granted for renewable terms of eight years and are tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that they might be impaired.
Long-term debt is comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2015
|
|
|
2016
|
|
Term loan
|
|
$
|
89,000,000
|
|
|
$
|
83,000,000
|
|
Revolving credit facility
|
|
|
|
|
|
|
|
|
Capital lease obligations
|
|
|
750,216
|
|
|
|
721,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89,750,216
|
|
|
|
83,721,083
|
|
Less unamortized debt issuance costs
|
|
|
(1,804,390
|
)
|
|
|
(1,620,892
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
87,945,826
|
|
|
|
82,100,191
|
|
Less current installments
|
|
|
(1,484,048
|
)
|
|
|
(59,671
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
86,461,778
|
|
|
$
|
82,040,520
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2016, the credit facility consisted of a term loan with a remaining balance of $83.0
million and a revolving credit facility with a maximum commitment of $20.0 million. As of June 30, 2016, the Company had $20.0 million in available commitments under its revolving credit facility. At the Companys option, the credit
facility may bear interest at either (i) the LIBOR rate, as defined in the credit agreement, plus a margin ranging from 2.5% to 4.5% that is determined by the Companys consolidated total debt ratio, as defined in the credit agreement or
(ii) the base rate, as defined in the credit agreement, plus a margin ranging from 1.5% to 3.5% that is determined by the Companys consolidated total debt ratio. Interest on adjusted LIBOR loans is payable at the end of each applicable
interest period and, for those interest periods with a duration in excess of three months, the three month anniversary of the beginning of such interest period. Interest on base rate loans is payable quarterly in arrears. The credit facility carried
interest, based on LIBOR, at 3.5% as of June 30, 2016 and matures on November 30, 2020.
As of December 31, 2015, the
credit facility consisted of a term loan with a remaining balance of $89.0 million and a revolving credit facility with a maximum commitment of $20.0 million. The credit facility carried interest, based on adjusted LIBOR, at 3.9% as of
December 31, 2015.
The credit agreement requires mandatory prepayments equal to 50% of consolidated excess cash flow, as defined in
the credit agreement, when the Companys consolidated total debt is equal to or greater than three times its consolidated operating cash flow, as defined in the credit agreement. Prepayments of excess cash flow are not required when the
Companys consolidated total debt is less than three times its consolidated operating cash flow. Mandatory prepayments of consolidated excess cash flow are due 120 days after year end. The credit agreement also requires mandatory prepayments
for defined amounts from net proceeds of asset sales, net insurance proceeds, and net proceeds of debt issuances.
The credit agreement
requires the Company to comply with certain financial covenants which are defined in the credit agreement. These financial covenants include:
|
|
|
Consolidated Total Debt Ratio.
The Companys consolidated total debt on the last day of each fiscal quarter through September 30, 2016 must not exceed 4.5 times its consolidated operating cash flow for
the four quarters then ended. For the period from October 1, 2016 through March 31, 2017, the maximum ratio is 4.25 times. For the period from April 1, 2017 through December 31, 2017, the maximum ratio is 4.0 times. The maximum
ratio is 3.75 for 2018, 3.5 times for 2019, and 3.0 times for 2020.
|
|
|
|
Interest Coverage Ratio.
The Companys consolidated operating cash flow for the four quarters ending on the last day of each fiscal quarter through maturity must not be less than 2.0 times its consolidated
cash interest expense for the four quarters then ended.
|
8
BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The credit facility is secured by a first-priority lien on substantially all of the
Companys assets and the assets of substantially all of its subsidiaries and is guaranteed jointly and severally by the Company and substantially all of its subsidiaries. If the Company defaults under the terms of the credit agreement, the
Company and its applicable subsidiaries may be required to perform under their guarantees. As of June 30, 2016, the maximum amount of undiscounted payments the Company and its applicable subsidiaries would have been required to make in the
event of default was $83.0 million. The guarantees for the credit facility expire on November 30, 2020.
Failure to comply with
financial covenants, scheduled interest payments, scheduled principal repayments, or any other terms of the Companys credit agreement could result in the acceleration of the maturity of its outstanding debt, which could have a material adverse
effect on its business or results of operations. As of June 30, 2016, the Company was in compliance with all applicable financial covenants under its credit agreement.
The Company has two capital leases related to radio towers. The obligations recorded as of December 31, 2015 and June 30, 2016
represent the fair value of one tower and the present value of future lease payments under the lease agreement for the other tower.
The
aggregate scheduled principal repayments of the credit facility and capital lease obligations for the remainder of 2016 and the next four years and thereafter are as follows:
|
|
|
|
|
2016
|
|
$
|
29,132
|
|
2017
|
|
|
592,327
|
|
2018
|
|
|
6,889,020
|
|
2019
|
|
|
7,460,851
|
|
2020
|
|
|
68,320,326
|
|
Thereafter
|
|
|
429,427
|
|
|
|
|
|
|
Total
|
|
$
|
83,721,083
|
|
|
|
|
|
|
(5)
|
Stock-Based Compensation
|
The Beasley Broadcast Group, Inc. 2007 Equity Incentive Award
Plan (the 2007 Plan) permits the Company to issue up to 4.0 million shares of Class A common stock. The 2007 Plan allows for eligible employees, directors and certain consultants of the Company to receive shares of restricted
stock, stock options or other stock-based awards. The restricted stock awards that have been granted under the 2007 Plan generally vest over one to five years of service.
A summary of restricted stock activity under the 2007 Plan for the three months ended June 30, 2016 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Weighted-
Average
Grant-Date
Fair Value
|
|
Unvested as of April 1, 2016
|
|
|
299,293
|
|
|
$
|
4.76
|
|
Granted
|
|
|
|
|
|
|
|
|
Vested
|
|
|
(6,700
|
)
|
|
|
7.27
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested as of June 30, 2016
|
|
|
292,593
|
|
|
$
|
4.70
|
|
|
|
|
|
|
|
|
|
|
As of June 30, 2016, there was $0.8 million of total unrecognized compensation cost related to restricted
stock granted under the 2007 Plan. That cost is expected to be recognized over a weighted-average period of 1.5 years.
The Companys effective tax rate was approximately 40% and 41% for
the three and six months ended June 30, 2016, respectively and approximately 39% for the three and six months ended June 30, 2015. These rates differ from the federal statutory rate of 35% due to the effect of state income taxes and
certain expenses that are not deductible for tax purposes.
9
BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(7)
|
Related Party Transactions
|
On May 3, 2016, the Company contributed an additional
$166,667 to Digital PowerRadio, LLC which maintained its ownership interest at approximately 20% of the outstanding units. The Company may be called upon to make additional pro rata cash contributions to Digital PowerRadio, LLC in the future.
Digital PowerRadio, LLC is managed by Fowler Radio Group, LLC which is partially-owned by Mark S. Fowler, an independent director of the Company.
(8)
|
Financial Instruments
|
The carrying amount of the Companys financial instruments
including cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short term nature of these financial instruments.
The carrying amount of long term debt, including capital lease obligations and current installments, as of June 30, 2016 was $83.7
million and approximated fair value based on current market interest rates. The carrying amount of long-term debt, including capital lease obligations and current installments, as of December 31, 2015 was $89.8 million and approximated fair
value based on market rates at that time.
On July 19, 2016, the Company entered into an Agreement and Plan
of Merger with Greater Media, Inc. (Greater Media), Beasley Media Group 2, Inc., an indirect wholly-owned subsidiary of the Company (Merger Sub), and Peter A. Bordes, Jr., as the Stockholders Representative (the
Merger Agreement) pursuant to which, subject to the satisfaction or waiver of the conditions set forth therein, Merger Sub will be merged with and into Greater Media, with Greater Media surviving the merger as an indirect wholly-owned
subsidiary of the Company (the Merger).
Pursuant to the terms of the Merger Agreement, the Company agreed to acquire all of
the issued and outstanding equity stock of Greater Media for an aggregate purchase price of $239,875,000, inclusive of the refinancing of approximately $80.0 million of Greater Medias outstanding debt and the payment of certain transaction
expenses. The proceeds to be paid to the stockholders of Greater Media are expected to consist of (i) approximately $100.0 million in cash and (ii) approximately $25.0 million in shares of the Companys Class A common stock,
which is equal to 5,422,993 shares at a fixed value of $4.61 per share (the Merger Shares). The Merger consideration is subject to adjustment for changes in working capital of Greater Media, outstanding debt of Greater Media and its
subsidiaries as of the date of the closing and certain other payments and expenses. Additional Merger Shares may be issued in connection with such adjustment. In addition, the stockholders of Greater Media will receive the net cash proceeds from the
sale of Greater Medias tower assets, estimated to be approximately $20.0 million.
Consummation of the Merger is subject to
customary closing conditions, including (i) approval from the Federal Communications Commission, (ii) absence of any order or injunction prohibiting the consummation of the Merger, (iii) subject to customary materiality qualifiers,
the accuracy of the representations and warranties of the Company and Merger Sub contained in the Merger Agreement and compliance by the Company with its covenants contained in the Merger Agreement, (iv) the Merger Shares having been approved
for listing on the Nasdaq Global Select Market and (v) the Company having delivered executed counterparts to certain ancillary agreements. The Company has obtained a debt financing commitment to fund the transactions contemplated by the Merger
Agreement, the aggregate proceeds of which, together with cash and cash equivalents available to the Company and issuance of the Merger Shares, will be sufficient for the Company to pay the aggregate Merger Consideration and all related fees and
expenses.
The Merger Agreement contains certain customary termination rights for both the Company and Greater Media. The Merger Agreement
also provides that the Company shall pay Greater Media a termination fee of $6,390,000 if Greater Media terminates the Merger Agreement because all conditions to closing have been satisfied and the Company has not consummated the Merger due to the
failure of the financing to be available; provided that Greater Media is not also able to terminate the Merger Agreement due to the Companys breach. It further provides that the Company shall pay Greater Media a termination fee of $12,780,000
if (i) Greater Media terminates the Merger Agreement due to a breach of a representation or covenant by the Company such that the applicable condition to closing is not satisfied or (ii) Greater Media terminates the Merger Agreement
because the Company has failed to consummate the Merger when required by the Merger Agreement, in circumstances where the financing was available.
The Merger Agreement contemplates that the parties or their affiliates will enter into the following additional agreements at Closing:
(i) an Investor Rights Agreement and (ii) a Registration Rights Agreement. The Investor Rights Agreement would provide the former stockholders of Greater Media receiving Merger Shares (the Greater Media Stockholders) with
tag-along rights to
10
BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
participate in certain sales of equity securities by the Company and its affiliates and also would provide the Greater Media Stockholders with the right to nominate one director for election to
the Companys Board, so long as the Greater Media Stockholders collectively hold at least 75 % of the Merger Shares issued to them at the closing of the Merger. The Registration Rights Agreement would require the Company to prepare and
file with the Securities and Exchange Commission, not later than 20 days after the consummation of the Merger, a registration statement with respect to the resale of the Merger Shares by the Greater Media Stockholders, among other things.
In connection with the transactions contemplated by the Merger Agreement, Royal Bank of Canada (RBC), U.S. Bank National
Association (US Bank) and Beasley Mezzanine Holdings, LLC (the Borrower), a direct subsidiary of the Company, entered into a commitment letter, dated July 19, 2016 (the Commitment Letter), pursuant to which
RBC and US Bank have agreed to provide a credit facility consisting of (a) a term loan B facility in the amount of $265.0 million (the Term Loan B Facility) and (b) a revolving credit facility of $20.0 million. The Term Loan B
Facility will be borrowed by the Borrower at the closing of the Merger and, along with the Merger Shares, will be used to pay the purchase price, fees, costs and expenses incurred in connection with the Merger, and to refinance existing third party
indebtedness of the Borrower and Greater Media. The obligations of RBC and US Bank to provide the debt financing under the Commitment Letter are subject to certain customary closing conditions, including the consummation of the Merger. The
termination date for the commitments of RBC and US Bank is six months after the date of the Commitment Letter; provided that such termination date will automatically extend by an additional three months in certain circumstances. In connection with
the Commitment Letter, RBC, US Bank, and the Borrower entered into a fee letter pursuant to which the Borrower agreed to pay certain fees to RBC, US Bank and any additional lenders.
11
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
We
are a radio broadcasting company whose primary business is operating radio stations throughout the United States. We own and operate 52 radio stations in the following radio markets: Atlanta, GA, Augusta, GA, Boston, MA, Charlotte, NC, Fayetteville,
NC, Fort Myers-Naples, FL, Greenville-New Bern-Jacksonville, NC, Las Vegas, NV, Philadelphia, PA, Tampa-Saint Petersburg, FL, West Palm Beach-Boca Raton, FL, and Wilmington, DE. We refer to each group of radio stations in each radio market as a
market cluster.
Recent Developments
On July 19, 2016, the Company, entered into an Agreement and Plan of Merger with Greater Media, Inc. (Greater Media), Beasley
Media Group 2, Inc., an indirect wholly-owned subsidiary of the Company (Merger Sub), and Peter A. Bordes, Jr., as the Stockholders Representative (the Merger Agreement) pursuant to which, subject to the satisfaction or
waiver of the conditions set forth therein, Merger Sub will be merged with and into Greater Media, with Greater Media surviving the merger as an indirect wholly-owned subsidiary of the Company (the Merger).
Pursuant to the terms of the Merger Agreement, the Company agreed to acquire all of the issued and outstanding equity stock of Greater Media
for an aggregate purchase price of $239,875,000, inclusive of the refinancing of approximately $80.0 million of Greater Medias outstanding debt and the payment of certain transaction expenses. The proceeds to be paid to the stockholders of
Greater Media are expected to consist of (i) approximately $100.0 million in cash and (ii) approximately $25.0 million in shares of the Companys Class A common stock, which is equal to 5,422,993 shares at a fixed value of $4.61
per share (the Merger Shares). The Merger consideration is subject to adjustment for changes in working capital of Greater Media, outstanding debt of Greater Media and its subsidiaries as of the date of the closing and certain other
payments and expenses. Additional Merger Shares may be issued in connection with such adjustment. In addition, the stockholders of Greater Media will receive the net cash proceeds from the sale of Greater Medias tower assets, estimated to be
approximately $20.0 million.
Consummation of the Merger is subject to customary closing conditions, including (i) approval from the
Federal Communications Commission, (ii) absence of any order or injunction prohibiting the consummation of the Merger, (iii) subject to customary materiality qualifiers, the accuracy of the representations and warranties of the Company and
Merger Sub contained in the Merger Agreement and compliance by the Company with its covenants contained in the Merger Agreement, (iv) the Merger Shares having been approved for listing on the Nasdaq Global Select Market and (v) the Company
having delivered executed counterparts to certain ancillary agreements. The Company has obtained a debt financing commitment to fund the transactions contemplated by the Merger Agreement, the aggregate proceeds of which, together with cash and cash
equivalents available to the Company and issuance of the Merger Shares, will be sufficient for the Company to pay the aggregate Merger Consideration and all related fees and expenses.
The Merger Agreement contains certain customary termination rights for both the Company and Greater Media. The Merger Agreement also provides
that the Company shall pay Greater Media a termination fee of $6,390,000 if Greater Media terminates the Merger Agreement because all conditions to closing have been satisfied and the Company has not consummated the Merger due to the failure of the
financing to be available; provided that Greater Media is not also able to terminate the Merger Agreement due to the Companys breach. It further provides that the Company shall pay Greater Media a termination fee of $12,780,000 if
(i) Greater Media terminates the Merger Agreement due to a breach of a representation or covenant by the Company such that the applicable condition to closing is not satisfied or (ii) Greater Media terminates the Merger Agreement because
the Company has failed to consummate the Merger when required by the Merger Agreement, in circumstances where the financing was available.
The Merger Agreement contemplates that the parties or their affiliates will enter into the following additional agreements at Closing:
(i) an Investor Rights Agreement and (ii) a Registration Rights Agreement. The Investor Rights Agreement would provide the former stockholders of Greater Media receiving Merger Shares (the Greater Media Stockholders) with
tag-along rights to participate in certain sales of equity securities by the Company and its affiliates and also would provide the Greater Media Stockholders with the right to nominate one director for election to the Companys Board, so long
as the Greater Media Stockholders collectively hold at least 75 % of the Merger Shares issued to them at the closing of the Merger. The Registration Rights Agreement would require the Company to prepare and file with the Securities and Exchange
Commission, not later than 20 days after the consummation of the Merger, a registration statement with respect to the resale of the Merger Shares by the Greater Media Stockholders, among other things.
12
In connection with the transactions contemplated by the Merger Agreement, Royal Bank of Canada
(RBC), U.S. Bank National Association (US Bank) and Beasley Mezzanine Holdings, LLC (the Borrower), a direct subsidiary of the Company, entered into a commitment letter, dated July 19, 2016 (the
Commitment Letter), pursuant to which RBC and US Bank have agreed to provide a credit facility consisting of (a) a term loan B facility in the amount of $265.0 million (the Term Loan B Facility) and (b) a revolving
credit facility of $20.0 million. The Term Loan B Facility will be borrowed by the Borrower at the closing of the Merger and, along with the Merger Shares, will be used to pay the purchase price, fees, costs and expenses incurred in connection with
the Merger, and to refinance existing third party indebtedness of the Borrower and Greater Media. The obligations of RBC and US Bank to provide the debt financing under the Commitment Letter are subject to certain customary closing conditions,
including the consummation of the Merger. The termination date for the commitments of RBC and US Bank is six months after the date of the Commitment Letter; provided that such termination date will automatically extend by an additional three months
in certain circumstances. In connection with the Commitment Letter, RBC, US Bank, and the Borrower entered into a fee letter pursuant to which the Borrower agreed to pay certain fees to RBC, US Bank and any additional lenders.
On May 26, 2016, our board of directors declared a cash dividend of $0.045 per share on our Class A and Class B common stock. The
dividend of $1.0 million in the aggregate was paid on July 8, 2016, to stockholders of record on June 30, 2016. While we intend to pay quarterly cash dividends for the foreseeable future, all subsequent dividends will be reviewed quarterly
and declared by the board of directors at its discretion.
Cautionary Note Regarding Forward-Looking Statements
This report contains forward-looking statements about the Company and Greater Media within the meaning of the Private Securities
Litigation Reform Act of 1995, which relate to future, not past, events. All statements other than statements of historical fact included in this document are forward-looking statements. These forward-looking statements are based on the current
beliefs and expectations of the Companys management and are subject to known and unknown risks and uncertainties. Words or expressions such as expects, anticipates, intends, plans,
believes, estimates, may, will, plans, projects, could, should, would, seek, forecast, or other similar expressions
help identify forward-looking statements.
Forward-looking statements by their nature address matters that are, to different degrees,
uncertain. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The Company and Greater Media undertake no obligation to update or revise any forward-looking statements.
Forward-looking statements involve a number of risks and uncertainties, and actual results or events may differ materially from those
projected or implied in those statements. Factors that could cause actual results or events to differ materially from these forward-looking statements include, but are not limited to:
|
|
|
the risk that the Merger may not be completed;
|
|
|
|
the ability of the Company to obtain debt financing for the Merger;
|
|
|
|
the risk that, under certain circumstances, the Company may be required to pay a termination fee to Greater Media;
|
|
|
|
the ability to successfully combine the businesses of the Company and Greater Media;
|
|
|
|
the ability of the Company to achieve the expected cost savings, synergies and other benefits from the proposed Merger within the expected time frames or at all;
|
|
|
|
the incurrence of significant transaction and other Merger-related fees and costs;
|
|
|
|
the incurrence of unexpected costs, liabilities or delays relating to the Merger;
|
|
|
|
the risk that the public assigns a lower value to Greater Medias business than the value used in negotiating the terms of the Merger;
|
13
|
|
|
the effects of the Merger on the interests of the Companys current stockholders in the earnings, voting power and market value of the Company;
|
|
|
|
the risk that the Merger may not be accretive to the Companys current stockholders;
|
|
|
|
the risk that the Merger may prevent the Company from acting on future opportunities to enhance stockholder value;
|
|
|
|
the impact of the issuance of the Merger Shares in connection with the Merger;
|
|
|
|
the risk that any goodwill or identifiable intangible assets recorded due to the Merger could become impaired;
|
|
|
|
the risk due to business uncertainties and contractual restrictions while the Merger is pending that could disrupt the Companys business;
|
|
|
|
the risk that a closing condition to the proposed Merger may not be satisfied;
|
|
|
|
the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement; and
|
|
|
|
other economic, business, competitive, and regulatory factors affecting the businesses of the Company and Greater Media generally, including those set forth in the Companys filings with the SEC.
|
Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ
materially from those projected or assumed in any of our forward-looking statements. We do not intend, and undertake no obligation, to update any forward-looking statement.
Financial Statement Presentation
The
following discussion provides a brief description of certain key items that appear in our financial statements and general factors that impact these items.
Net Revenue.
Our net revenue is primarily derived from the sale of advertising airtime to local and national advertisers. Net revenue
is gross revenue less agency commissions, generally 15% of gross revenue. Local revenue generally consists of airtime sales, digital sales and event marketing for advertisers in a radio stations local market either directly to the advertiser
or through the advertisers agency. National revenue generally consists of advertising airtime and digital sales to agencies purchasing advertising for multiple markets. National sales are generally facilitated by our national representation
firm, which serves as our agent in these transactions.
Our net revenue is generally determined by the advertising rates that we are able
to charge and the number of advertisements that we can broadcast without jeopardizing listener levels. Advertising rates are primarily based on the following factors:
|
|
|
a radio stations audience share in the demographic groups targeted by advertisers as measured principally by periodic reports issued by Nielson Audio;
|
|
|
|
the number of radio stations, as well as other forms of media, in the market competing for the attention of the same demographic groups;
|
|
|
|
the supply of, and demand for, radio advertising time; and
|
|
|
|
the size of the market.
|
Our net revenue is affected by general economic conditions,
competition and our ability to improve operations at our market clusters. Seasonal revenue fluctuations are also common in the radio broadcasting industry and are primarily due to variations in advertising expenditures by local and national
advertisers. Our revenues are typically lowest in the first calendar quarter of the year.
14
We use trade sales agreements to reduce cash paid for operating costs and expenses by exchanging
advertising airtime for goods or services; however, we endeavor to minimize trade revenue in order to maximize cash revenue from our available airtime.
We also continue to invest in digital support services to develop and promote our radio station websites. We derive revenue from our websites
through the sale of advertiser promotions and advertising on our websites and the sale of advertising airtime during audio streaming of our radio stations over the internet. We also generate revenue from selling other digital products.
Operating Expenses.
Our operating expenses consist primarily of (1) programming, engineering, sales, advertising and promotion,
and general and administrative expenses incurred at our radio stations, (2) general and administrative expenses, including compensation and other expenses, incurred at our corporate offices, and (3) depreciation and amortization. We strive
to control our operating expenses by centralizing certain functions at our corporate offices and consolidating certain functions in each of our market clusters.
Critical Accounting Estimates
The
preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect reported amounts and related disclosures. We consider an accounting estimate to be
critical if:
|
|
|
it requires assumptions to be made that were uncertain at the time the estimate was made; and
|
|
|
|
changes in the estimate or different estimates that could have been selected could have a material impact on our results of operations or financial condition.
|
Our critical accounting estimates are described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2015.
There have been no material changes to our critical accounting estimates during the second quarter of 2016.
Recent Accounting Pronouncements
Recent accounting pronouncements are described in Note 2 to the accompanying financial statements.
Three Months Ended June 30, 2016 Compared to the Three Months Ended June 30, 2015
The following summary table presents a comparison of our results of operations for the three months ended June 30, 2015 and 2016 with
respect to certain of our key financial measures. These changes illustrated in the table are discussed in greater detail below. This section should be read in conjunction with the financial statements and notes to financial statements included in
Item 1 of this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended June 30,
|
|
|
Change
|
|
|
|
2015
|
|
|
2016
|
|
|
$
|
|
|
%
|
|
Net revenue
|
|
$
|
27,024,338
|
|
|
$
|
27,777,381
|
|
|
$
|
753,043
|
|
|
|
2.8
|
%
|
Station operating expenses
|
|
|
18,741,666
|
|
|
|
19,729,821
|
|
|
|
988,155
|
|
|
|
5.3
|
|
Corporate general and administrative expenses
|
|
|
2,302,888
|
|
|
|
2,443,661
|
|
|
|
140,773
|
|
|
|
6.1
|
|
Other income (expense), net
|
|
|
18,694
|
|
|
|
269,052
|
|
|
|
250,358
|
|
|
|
1339.2
|
|
Income tax expense
|
|
|
1,639,404
|
|
|
|
1,674,332
|
|
|
|
34,928
|
|
|
|
2.1
|
|
Net income
|
|
|
2,532,042
|
|
|
|
2,469,478
|
|
|
|
(62,564
|
)
|
|
|
(2.5
|
)
|
Net Revenue.
Net revenue increased $0.8 million during the three months ended June 30, 2016 as
compared to the three months ended June 30, 2015. Significant factors affecting net revenue included a $0.8 million increase in advertising revenue from our Tampa-Saint Petersburg market cluster and a $0.3 million increase in advertising
revenue from our Charlotte market cluster. Net revenue for the three months ended June 30, 2016 was comparable to net revenue for the same period in 2015 at our remaining market clusters.
Station Operating Expenses.
Station operating expenses increased $1.0 million during the three months ended June 30, 2016 as
compared to the three months ended June 30, 2015. Significant factors affecting station operating expenses included a $0.7 million increase in station operating expenses at our Tampa-Saint Petersburg market cluster and a $0.3 million increase
in station operating expenses at our Charlotte market cluster. Station operating expenses for the three months ended June 30, 2016 were comparable to station operating expenses for the same period in 2015 at our remaining market clusters.
15
Corporate General and Administrative Expenses.
The increase in corporate general and
administrative expenses during the three months ended June 30, 2016 was primarily due to an increase in contract services.
Other Income (Expense), Net.
Other income (expense), net increased $0.3 million during the three months ended
June 30, 2016. The increase was primarily due to the receipt of insurance proceeds of $0.3 million related to fire damage at our Greenville offices in 2016.
Income Tax Expense.
Our effective tax rate was approximately 39% and 40% for the three months ended June 30, 2015 and 2016,
respectively. These rates differ from the federal statutory rate of 35% due to the effect of state income taxes and certain expenses that are not deductible for tax purposes.
Net Income.
Net income during the three months ended June 30, 2016 decreased $0.1 million as a result of the factors described
above.
Six Months Ended June 30, 2016 Compared to the Six Months Ended June 30, 2015
The following summary table presents a comparison of our results of operations for the six months ended June 30, 2015 and 2016 with
respect to certain of our key financial measures. These changes illustrated in the table are discussed in greater detail below. This section should be read in conjunction with the financial statements and notes to financial statements included in
Item 1 of this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months ended June 30,
|
|
|
Change
|
|
|
|
2015
|
|
|
2016
|
|
|
$
|
|
|
%
|
|
Net revenue
|
|
$
|
51,275,177
|
|
|
$
|
55,232,328
|
|
|
$
|
3,957,151
|
|
|
|
7.7
|
%
|
Station operating expenses
|
|
|
36,555,614
|
|
|
|
39,716,112
|
|
|
|
3,160,498
|
|
|
|
8.6
|
|
Corporate general and administrative expenses
|
|
|
4,742,035
|
|
|
|
4,944,618
|
|
|
|
202,583
|
|
|
|
4.3
|
|
Radio station exchange transaction costs
|
|
|
349,917
|
|
|
|
|
|
|
|
(349,917
|
)
|
|
|
(100.0
|
)
|
Depreciation and amortization
|
|
|
1,958,727
|
|
|
|
1,669,987
|
|
|
|
(288,740
|
)
|
|
|
(14.7
|
)
|
Other income (expense), net
|
|
|
490,499
|
|
|
|
229,411
|
|
|
|
(261,088
|
)
|
|
|
(53.2
|
)
|
Income tax expense
|
|
|
2,439,948
|
|
|
|
2,953,707
|
|
|
|
513,759
|
|
|
|
21.1
|
|
Net income
|
|
|
3,830,426
|
|
|
|
4,290,231
|
|
|
|
459,805
|
|
|
|
12.0
|
|
Net Revenue.
Net revenue increased $4.0 million during the six months ended June 30, 2016 as
compared to the six months ended June 30, 2015. Significant factors affecting net revenue included a $2.9 million increase in advertising revenue from our Tampa-Saint Petersburg market cluster and a $0.9 million increase in advertising revenue
from our Charlotte market cluster. Net revenue for the six months ended June 30, 2016 was comparable to net revenue for the same period in 2015 at our remaining market clusters.
Station Operating Expenses.
Station operating expenses increased $3.2 million during the six months ended June 30, 2016 as
compared to the six months ended June 30, 2015. Significant factors affecting station operating expenses included a $1.8 million increase in station operating expenses at our Tampa-Saint Petersburg market cluster, a $0.6 million increase in
station operating expenses at our Charlotte market cluster, and a $0.4 million increase in station operating expenses at our Fort Myers-Naples market cluster. Station operating expenses for the six months ended June 30, 2016 were comparable to
station operating expenses for the same period in 2015 at our remaining market clusters.
Corporate General and Administrative
Expenses.
The increase in corporate general and administrative expenses during the six months ended June 30, 2016 was primarily due to an increase in contract services.
Radio Station Exchange Transaction Costs.
In connection with the asset exchange with CBS Radio Stations, Inc. in 2014, we incurred
transaction costs of $0.3 million in 2015.
Depreciation and Amortization.
The $0.3 million decrease in depreciation and
amortization during the six months ended June 30, 2016 was primarily due to a $0.3 million decrease in amortization of other intangibles at our Charlotte and Tampa-Saint Petersburg market clusters as compared to the same period in 2015.
Other Income (Expense), Net.
Other income (expense), net decreased $0.3 million during the six months ended June 30, 2016.
16
The decrease was primarily due to the receipt of insurance proceeds of $0.4 million related to a radio tower damaged by severe weather in our Augusta market in 2015 partially offset by the
receipt of insurance proceeds of $0.3 million related to fire damage at our Greenville offices in 2016.
Income Tax Expense.
Our
effective tax rate was approximately 39% and 41% for the six months ended June 30, 2015 and 2016, respectively. These rates differ from the federal statutory rate of 35% due to the effect of state income taxes and certain expenses that are not
deductible for tax purposes.
Net Income.
Net income during the six months ended June 30, 2016 increased $0.5 million as a
result of the factors described above.
Liquidity and Capital Resources
Overview.
Our primary sources of liquidity are internally generated cash flow and our revolving credit facility. Our primary
liquidity needs have been, and for the next twelve months and thereafter, not accounting for the Merger, are expected to continue to be, for working capital, debt service, and other general corporate purposes, including capital expenditures and
radio station acquisitions. Historically, our capital expenditures have not been significant. In addition to property and equipment associated with radio station acquisitions, our capital expenditures have generally been, and are expected to
continue to be, related to the maintenance of our studio and office space and the technological improvement, including upgrades necessary to broadcast HD Radio, and maintenance of our broadcasting towers and equipment. We have also purchased or
constructed office and studio space in some of our markets to facilitate the consolidation of our operations.
In connection with the
Merger, we entered into the Commitment Letter, pursuant to which RBC and US Bank have agreed to provide a credit facility consisting of (a) a Term Loan B Facility in the amount of $265.0 million and (b) a revolving credit facility of $20.0
million. We expect the Term Loan B Facility will be borrowed by the Borrower at the closing of the Merger and, along with the Merger Shares, will be used to pay the purchase price, fees, costs and expenses incurred in connection with the Merger, and
to refinance existing third party indebtedness of the Borrower and Greater Media. We expect that such borrowings under the Term Loan B Facility will be sufficient to meet the capital requirements of the Merger.
Our credit agreement permits us to repurchase sufficient shares of our common stock to fund withholding taxes in connection with the vesting
of restricted stock, subject to compliance with financial covenants, up to an aggregate amount of $2.5 million per year. We paid $0.2 million to repurchase 48,083 shares during the six months ended June 30, 2016.
Our credit agreement permits us to pay cash dividends and to repurchase additional shares of our common stock, subject to compliance with
financial covenants, up to an aggregate amount of $6.0 million each year. We paid cash dividends of $2.1 million during the six months ended June 30, 2016. Also, on May 26, 2016, our board of directors declared a cash dividend of $0.045
per share on our Class A and Class B common stock. The dividend of $1.0 million in the aggregate was paid on July 8, 2016, to stockholders of record on June 30, 2016.
On May 28, 2015, our board of directors authorized us to repurchase up to $1.0 million of our Class A common stock over a period of
one year from the date of authorization. We did not make any repurchases pursuant to this authority which expired on May 28, 2016.
We expect to provide for future liquidity needs through one or a combination of the following sources of liquidity:
|
|
|
internally generated cash flow;
|
|
|
|
our existing revolving credit facility;
|
|
|
|
the Term Loan B Facility and revolving credit facility that we expect to enter into in connection with the closing of the Merger;
|
|
|
|
additional borrowings, other than under our existing revolving credit facility, to the extent permitted under our credit agreement or the new Term Loan B Facility; and
|
|
|
|
additional equity offerings.
|
17
We believe that we will have sufficient liquidity and capital resources to permit us to provide
for our liquidity requirements and meet our financial obligations for the next twelve months. However, poor financial results or unanticipated expenses could give rise to defaults under our credit facility, or our new Term Loan B Facility after the
closing of the Merger, additional debt servicing requirements or other additional financing or liquidity requirements sooner than we expect and we may not secure financing when needed or on acceptable terms.
Our ability to reduce our consolidated total debt ratio, as defined by our credit agreement, by increasing operating cash flow and/or
decreasing long-term debt will determine how much, if any, of the remaining commitments under our revolving credit facility will be available to us in the future. Poor financial results or unanticipated expenses could result in our failure to
maintain or lower our consolidated total debt ratio and we may not be permitted to make any additional borrowings under our revolving credit facility.
The following summary table presents a comparison of our capital resources for the six months ended June 30, 2015 and 2016 with respect
to certain of our key measures affecting our liquidity. The changes set forth in the table are discussed in greater detail below. This section should be read in conjunction with the financial statements and notes to financial statements included in
Item 1 of this report.
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
|
2015
|
|
|
2016
|
|
Net cash provided by operating activities
|
|
$
|
5,484,700
|
|
|
$
|
8,845,051
|
|
Net cash used in investing activities
|
|
|
(1,217,294
|
)
|
|
|
(792,312
|
)
|
Net cash used in financing activities
|
|
|
(6,955,843
|
)
|
|
|
(8,249,781
|
)
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
$
|
(2,688,437
|
)
|
|
$
|
(197,042
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Provided By Operating Activities.
Net cash provided by operating activities increased
$3.4 million during the six months ended June 30, 2016. Significant factors affecting this increase in net cash provided by operating activities included a $6.4 million increase in cash receipts from the sale of advertising airtime and a $1.7
million decrease in income tax payments, partially offset by a $4.5 million increase in cash paid for station operating expenses.
Net
Cash Used In Investing Activities.
Net cash used in investing activities during the six months ended June 30, 2016 included payments of $1.4 million for capital expenditures and a $0.7 million decrease in restricted cash from the
release of unused radio tower sales proceeds from a qualified intermediary. Net cash used in investing activities for the same period in 2015 included payments of $0.8 million for capital expenditures and payments of $0.4 million for translator
licenses.
Net Cash Used In Financing Activities.
Net cash used in financing activities during the six months ended
June 30, 2016 included repayments of $6.0 million on our long-term debt and payments of $2.1 million for cash dividends. Net cash used in financing activities for the same period in 2015 included repayments of $4.5 million on our long-term debt
and payments of $2.1 million for cash dividends.
Credit Facility.
As of June 30, 2016, the credit facility consisted of
a term loan with a remaining balance of $83.0 million and a revolving credit facility with a maximum commitment of $20.0 million. As of June 30, 2016, we had $20.0 million in available commitments under our revolving credit facility. At our
option, the credit facility may bear interest at either (i) the LIBOR rate, as defined in the credit agreement, plus a margin ranging from 2.5% to 4.5% that is determined by our consolidated total debt ratio, as defined in the credit agreement
or (ii) the base rate, as defined in the credit agreement, plus a margin ranging from 1.5% to 3.5% that is determined by our consolidated total debt ratio. Interest on adjusted LIBOR loans is payable at the end of each applicable interest
period and, for those interest periods with a duration in excess of three months, the three month anniversary of the beginning of such interest period. Interest on base rate loans is payable quarterly in arrears. The credit facility carried
interest, based on LIBOR, at 3.5% as of June 30, 2016 and matures on November 30, 2020.
The credit agreement requires mandatory
prepayments equal to 50% of consolidated excess cash flow, as defined in the credit agreement, when the Companys consolidated total debt is equal to or greater than three times its consolidated operating cash flow, as defined in the credit
agreement. Prepayments of excess cash flow are not required when the Companys consolidated total debt is less than three times its consolidated operating cash flow. Mandatory prepayments of consolidated excess cash flow are due 120 days after
year end. The credit agreement also requires mandatory prepayments for defined amounts from net proceeds of asset sales, net insurance proceeds, and net proceeds of debt issuances.
18
The credit agreement requires us to comply with certain financial covenants which are defined in
the credit agreement. These financial covenants include:
|
|
|
Consolidated Total Debt Ratio.
Our consolidated total debt on the last day of each fiscal quarter through September 30, 2016 must not exceed 4.5 times our consolidated operating cash flow for the four
quarters then ended. For the period from October 1, 2016 through March 31, 2017, the maximum ratio is 4.25 times. For the period from April 1, 2017 through December 31, 2017, the maximum ratio is 4.0 times. The maximum ratio is
3.75 for 2018, 3.5 times for 2019, and 3.0 times for 2020.
|
|
|
|
Interest Coverage Ratio.
Our consolidated operating cash flow for the four quarters ending on the last day of each fiscal quarter through maturity must not be less than 2.0 times our consolidated cash interest
expense for the four quarters then ended.
|
The credit facility is secured by a first-priority lien on substantially all of
the Companys assets and the assets of substantially all of its subsidiaries and is guaranteed jointly and severally by the Company and substantially all of its subsidiaries. If we default under the terms of the credit agreement, the Company
and its applicable subsidiaries may be required to perform under their guarantees. As of June 30, 2016, the maximum amount of undiscounted payments the Company and its applicable subsidiaries would have been required to make in the event of
default was $83.0 million. The guarantees for the credit facility expire on November 30, 2020.
The aggregate scheduled principal
repayments of the credit facility and capital lease obligations for the remainder of 2016 and the next four years and thereafter are as follows:
|
|
|
|
|
2016
|
|
$
|
29,132
|
|
2017
|
|
|
592,327
|
|
2018
|
|
|
6,889,020
|
|
2019
|
|
|
7,460,851
|
|
2020
|
|
|
68,320,326
|
|
Thereafter
|
|
|
429,427
|
|
|
|
|
|
|
Total
|
|
$
|
83,721,083
|
|
|
|
|
|
|
Failure to comply with financial covenants, scheduled interest payments, scheduled principal repayments, or
any other terms of our credit agreement could result in the acceleration of the maturity of our outstanding debt, which could have a material adverse effect on its business or results of operations. As of June 30, 2016, we were in compliance
with all applicable financial covenants under our credit agreement; our consolidated total debt ratio was 2.90 times, and our interest coverage ratio was 6.75 times.