<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-29253
BEASLEY BROADCAST GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 65-0960915
(State of Incorporation) (I.R.S. Employer
Identification Number)
</TABLE>
3033 RIVIERA DRIVE, SUITE 200
NAPLES, FLORIDA 34103
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(941) 263-5000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class A Common Stock, $.001 par value, 7,252,068 Shares Outstanding as
of May 4, 2000
Class B Common Stock, $.001 par value, 17,021,373 Shares Outstanding
as of May 4, 2000
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<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements................................ 1
Balance Sheets of Beasley Broadcast Group, Inc. as
of December 31, 1999 and March 31, 2000........... 1
Statements of Operations of Beasley Broadcast
Group, Inc. for the Three Months Ended March 31,
1999 and March 31, 2000........................... 2
Statements of Cash Flows of Beasley Broadcast
Group, Inc. for the Three Months Ended March 31,
1999 and March 31, 2000........................... 3
Notes to Financial Statements..................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 11
Item 3. Quantitative and Qualitative Disclosures About
Market Risk........................................ 16
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.................................. 17
Item 2. Changes in Securities and Use of Proceeds.......... 17
Item 3. Defaults Upon Senior Securities.................... 18
Item 4. Submission of Matters to a Vote of Security
Holders............................................ 18
Item 5. Other Information.................................. 18
Item 6. Exhibits and Reports on Form 8-K................... 18
SIGNATURES.................................................. 20
</TABLE>
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BEASLEY BROADCAST GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
COMBINED CONSOLIDATED
DECEMBER 31, MARCH 31,
1999 2000
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 7,002,669 $ 7,291,686
Accounts receivable, less allowance for doubtful accounts
of $560,282 in 1999 and $436,835 in 2000............... 19,915,098 16,256,035
Trade sales receivable.................................... 735,607 1,006,123
Other receivables......................................... 676,478 617,807
Prepaid expenses and other................................ 1,918,223 1,483,240
Deferred tax assets....................................... -- 210,000
------------ ------------
Total current assets................................... 30,248,075 26,864,891
Property and equipment, net................................. 15,773,175 16,556,473
Notes receivable from related parties....................... 556,796 --
Intangibles, net............................................ 137,287,291 151,339,109
Other investment............................................ -- 3,000,000
Other assets................................................ 1,995,819 2,116,309
------------ ------------
Total assets................................................ $185,861,156 $199,876,782
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current installments of long-term debt.................... $ 166,319 $ 7,868
Notes payable to related parties.......................... 10,447,454 --
Accounts payable.......................................... 5,027,145 5,227,000
Accrued expenses.......................................... 9,213,133 4,371,372
Trade sales payable....................................... 970,108 1,171,827
------------ ------------
Total current liabilities.............................. 25,824,159 10,778,067
Long-term debt, less current installments................... 125,680,696 81,032,699
Long-term debt to related parties........................... 37,275,622 --
Deferred tax liabilities.................................... -- 27,863,000
------------ ------------
Total liabilities...................................... 188,780,477 119,673,766
Preferred stock, $.001 par value, 10,000,000 shares
authorized, none issued................................... -- --
Class A common stock, $.001 par value, 150,000,000 shares
authorized, 7,252,068 issued and outstanding.............. -- 7,252
Class B common stock, $.001 par value, 75,000,000 shares
authorized, 17,021,373 issued and outstanding............. -- 17,021
Common stock................................................ 4,530,352 --
Additional paid-in capital.................................. 34,774,928 107,687,268
Accumulated deficit......................................... (32,818,024) (27,508,525)
Treasury stock.............................................. (548,600) --
------------ ------------
Stockholders' equity........................................ 5,938,656 80,203,016
Notes receivable from stockholders.......................... (8,857,977) --
------------ ------------
Net stockholders' equity (deficit).......................... (2,919,321) 80,203,016
------------ ------------
Total liabilities and stockholders' equity (deficit)... $185,861,156 $199,876,782
============ ============
</TABLE>
See accompanying notes to financial statements
1
<PAGE> 4
BEASLEY BROADCAST GROUP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
COMBINED CONSOLIDATED
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1999 2000
------------ ------------
(UNAUDITED)
<S> <C> <C>
Net revenues................................................ $ 20,143,616 $ 22,786,805
------------ ------------
Costs and expenses:
Program and production.................................... 5,392,277 5,874,822
Sales and advertising..................................... 5,840,810 6,423,095
Station general and administrative........................ 3,218,996 3,547,797
Corporate general and administrative...................... 663,971 1,019,484
Equity appreciation rights................................ -- 1,173,759
Depreciation and amortization............................. 3,601,120 3,985,207
------------ ------------
Total costs and expenses............................... 18,717,174 22,024,164
Operating income....................................... 1,426,442 762,641
Other income (expense):
Interest expense.......................................... (3,389,934) (2,663,053)
Other non-operating expenses.............................. (107,154) (50,012)
Interest income........................................... 152,880 182,983
Other non-operating income................................ -- 14,837
------------ ------------
Loss before income taxes.................................. (1,917,766) (1,752,604)
Income tax expense.......................................... -- 27,653,000
------------ ------------
Net loss.................................................. $ (1,917,766) $(29,405,604)
============ ============
Basic and diluted net loss per share........................ $ (0.11) $ (1.39)
============ ============
Pro forma income tax benefit................................ $ (721,000) $ --
============ ============
Pro forma net loss.......................................... $ (1,196,766) $ --
============ ============
Pro forma basic and diluted net loss per share.............. $ (0.07) $ --
============ ============
Basic and diluted common shares outstanding................. 17,423,441 21,187,177
============ ============
</TABLE>
See accompanying notes to financial statements
2
<PAGE> 5
BEASLEY BROADCAST GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
COMBINED CONSOLIDATED
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1999 2000
------------ ------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (1,917,766) $(29,405,604)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................. 3,601,120 3,985,207
Loss on sale of equipment................................. 107,154 --
Change in assets and liabilities net of effects of
acquisitions and dispositions of radio stations:
Decrease in receivables................................. 1,413,803 3,120,853
(Increase) decrease in prepaid expense and other........ (120,111) 434,983
Increase in other assets................................ (120,042) (120,490)
Increase in payables and accrued expenses............... (1,474,604) (4,440,187)
Increase in deferred tax liabilities.................... -- 27,653,000
------------ ------------
Net cash provided by operating activities............. 1,489,554 1,227,762
------------ ------------
Cash flows from investing activities:
Capital expenditures for property and equipment........... (539,472) (445,980)
Payments for purchase of radio stations................... -- (10,000,000)
Payments from related parties............................. -- 556,796
Loans to stockholders..................................... (106,148) (910,263)
Payments from stockholders................................ -- 9,768,240
------------ ------------
Net cash used in investing activities................. (645,620) (1,031,207)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of indebtedness.................... -- 12,164,262
Principal payments on indebtedness........................ (47,198) (59,648,624)
Principal payments on related party notes................. -- (47,723,076)
Capital contributions..................................... -- 100,000
Stockholders distributions................................ -- (2,250,000)
Issuance of common stock.................................. -- 99,009,900
Payment of initial public offering costs.................. -- (1,560,000)
------------ ------------
Net cash provided by (used in) financing activities... (47,198) 92,462
------------ ------------
Net increase in cash and cash equivalents................... 796,736 289,017
Cash and cash equivalents at beginning of period............ 4,759,598 7,002,669
------------ ------------
Cash and cash equivalents at end of period.................. $ 5,556,334 $ 7,291,686
============ ============
Cash paid for interest...................................... $ 2,353,194 $ 5,373,859
============ ============
Cash paid for state taxes................................... $ 13,000 $ 26,825
============ ============
Supplement disclosure of non-cash investing activities:
Financed purchase of equity investment...................... $ -- $ 3,000,000
============ ============
Minority interests acquired through issuance of Class A
common stock.............................................. $ -- $ 8,370,064
============ ============
</TABLE>
See accompanying notes to financial statements
3
<PAGE> 6
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying financial statements include
all adjustments deemed necessary to summarize fairly and reflect the financial
position and results of operations of Beasley Broadcast Group, Inc. ("the
Company") for the interim periods presented. Results of the first quarter of
2000 are not necessarily indicative of results for the full year. These
financial statements should be read in conjunction with the financial statements
and notes thereto contained on Form 10-K for the year ended December 31, 1999.
(b) CORPORATE REORGANIZATION
Prior to February 11, 2000, the Company's radio stations were operated
through a series of subchapter S corporations, partnerships and limited
liability companies related to one another through common ownership and control.
These subchapter S corporations, partnerships and limited liability companies
were collectively known as Beasley FM Acquisition Corp. and related companies
("BFMA") through February 10, 2000. The accompanying financial statements
reflect the financial position of BFMA as of December 31, 1999 and include the
results of operations of BFMA from January 1, 2000 to February 10, 2000.
The Company completed an initial public offering of common stock and the
corporate reorganization on February 11, 2000. Immediately prior to the initial
public offering, pursuant to the reorganization, affiliates of BFMA contributed
their equity interests in those entities to the Company, a newly formed holding
company, in exchange for common stock. Immediately after these transactions, the
Company contributed the capital stock and partnership interests acquired to
Beasley Mezzanine Holdings, LLC ("BMH") and BMH became a wholly-owned subsidiary
of the Company. All S corporation elections were terminated and the resulting
entities became C corporations. The reorganization and contribution of equity
interests was accounted for in a manner similar to a pooling of interests as to
the majority owners, and as an acquisition of minority interest using the
purchase method of accounting.
Changes in stockholders' equity from December 31, 1999 to March 31, 2000
are as follows:
<TABLE>
<CAPTION>
NOTES
CLASS A CLASS B ADDITIONAL RECEIVABLE
COMMON COMMON COMMON PAID-IN ACCUMULATED TREASURY FROM
STOCK STOCK STOCK CAPITAL DEFICIT STOCK STOCKHOLDERS
------- ------- ----------- ------------ ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1999..................... $ -- $ -- $ 4,530,352 $ 34,774,928 $(32,818,024) $(548,600) $(8,857,977)
Net loss................... -- -- -- -- (1,897,079) -- --
Capital contributions...... -- -- -- 100,000 -- -- --
Stockholder
distributions............ -- -- -- -- (2,250,000) -- --
Loans to stockholders...... -- -- -- -- -- -- (910,263)
------ ------- ----------- ------------ ------------ --------- -----------
Balances at February 10,
2000..................... $ -- $ -- $ 4,530,352 $ 34,874,928 $(36,965,103) $(548,600) $(9,768,240)
Distributions to and
contributions from
subchapter S corporation
stockholders in exchange
for Class B common
stock.................... -- 17,021 (4,530,352) (33,000,372) 36,965,103 548,600 --
Issuance of Class A common
stock.................... 7,252 -- -- 99,002,648 -- -- --
Initial public offering
costs.................... -- -- -- (1,560,000) -- -- --
Acquisitions of minority
interest................. -- -- -- 8,370,064 -- -- --
Payments of notes
receivable from
stockholders............. -- -- -- -- -- -- 9,768,240
Net loss................... -- -- -- -- (27,508,525) -- --
------ ------- ----------- ------------ ------------ --------- -----------
Balances at March 31,
2000..................... $7,252 $17,021 $ -- $107,687,268 $(27,508,525) $ -- $ --
====== ======= =========== ============ ============ ========= ===========
<CAPTION>
NET
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balances at December 31,
1999..................... $(2,919,321)
Net loss................... (1,897,079)
Capital contributions...... 100,000
Stockholder
distributions............ (2,250,000)
Loans to stockholders...... (910,263)
-----------
Balances at February 10,
2000..................... $(7,876,663)
Distributions to and
contributions from
subchapter S corporation
stockholders in exchange
for Class B common
stock.................... --
Issuance of Class A common
stock.................... 99,009,900
Initial public offering
costs.................... (1,560,000)
Acquisitions of minority
interest................. 8,370,064
Payments of notes
receivable from
stockholders............. 9,768,240
Net loss................... (27,508,525)
-----------
Balances at March 31,
2000..................... $80,203,016
===========
</TABLE>
Note that balances at December 31, 1999, in the above table, are audited
and all subsequent amounts and balances are unaudited.
4
<PAGE> 7
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Proceeds from the initial public offering, net of underwriters discount of
$7,165,100, were used as follows:
<TABLE>
<S> <C>
Repayment of the revolving credit loan...................... $58,508,421
Repayment of long-term debt, including accrued interest, to
related parties........................................... 38,228,843
Net repayment of payables and receivables, including accrued
interest, to related parties.............................. 2,272,636
-----------
Net proceeds................................................ $99,009,900
===========
</TABLE>
(c) DERIVATIVE FINANCIAL INSTRUMENTS
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company uses
interest rate collar and swap agreements to specifically hedge against the
potential impact of increases in interest rates on the revolving credit loan.
Interest differentials are recorded as adjustments to interest expense in the
period they occur.
(d) REVENUE RECOGNITION
Revenue is recognized as advertising air time is broadcast and is net of
advertising agency commissions.
(e) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
BFMA had elected to be treated as a subchapter S Corporation under
provisions of the Internal Revenue Code. Under this corporate status, the
stockholders of BFMA were individually responsible for reporting their share of
taxable income or loss. Accordingly, no deferred tax assets or liabilities have
been reflected in the accompanying balance sheet as of December 31, 1999. Pro
forma income tax benefit in the accompanying statements of operations from
January 1, 1999 to March 31, 1999 includes pro forma income tax benefit computed
in accordance with SFAS 109, Accounting for Income Taxes, as if the Company had
been subject to Federal and state income taxes for that period.
(f) EARNINGS PER SHARE
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution that could
occur if options or other contracts to issue common stock were exercised or
converted into common stock.
Earnings per share from January 1, 1999 to March 31, 1999 and from January
1, 2000 to February 10, 2000 is based on the number of common shares issued
immediately prior to the initial public offering.
(g) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS 133 establishes accounting and
reporting standards for derivative instruments, including derivative instruments
embedded in other contracts, and for hedging activities. SFAS 133 was amended by
5
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BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
SFAS 137 in June 1999 and is effective, as amended, for all fiscal quarters of
fiscal years beginning after June 15, 2000. The Company has not completed its
evaluation of SFAS 133; however, management does not anticipate that the
adoption of SFAS 133 will have a material impact on the Company's earnings or
financial position upon adoption.
(2) ACQUISITIONS
(a) CURRENT ACQUISITIONS
On January 6, 2000, BFMA acquired the assets of WAEC-AM and WWWE-AM in the
Atlanta market for approximately $10,000,000. This acquisition was financed
through the Company's revolving credit loan and accounted for by the
purchase method of accounting.
The purchase price was allocated as follows:
<TABLE>
<S> <C>
Property and equipment...................................... $ 1,023,861
FCC broadcasting licenses................................... 8,961,139
Goodwill.................................................... 15,000
-----------
$10,000,000
===========
</TABLE>
(b) SUBSEQUENT ACQUISITIONS
- On May 2, 2000, the Company acquired the assets of WRCA-AM in the Boston
market for approximately $6,000,000. This acquisition was financed
through the Company's revolving credit loan and accounted for by the
purchase method of accounting.
- On May 3, 2000 the Company acquired the assets of WRFN-FM and WRDW-AM in
the Augusta, Georgia market for approximately $800,000. This acquisition
was funded by surplus working capital and accounted for by the purchase
method of accounting.
(3) INTANGIBLES
Intangibles, at cost, is comprised of the following:
<TABLE>
<CAPTION>
ESTIMATED
DECEMBER 31, MARCH 31, USEFUL LIVES
1999 2000 (YEARS)
------------ ------------ ------------
<S> <C> <C> <C>
FCC broadcasting licenses...................... $157,700,379 $166,661,518 10-15
Goodwill....................................... 16,763,990 25,149,054 15
Advertising base............................... 4,139,251 4,139,251 5
Loan fees...................................... 2,975,681 2,975,681 7
Noncompete agreements.......................... 1,120,000 1,120,000 2-8
Other intangibles.............................. 5,666,932 5,671,211 5-15
------------ ------------
188,366,233 205,716,715
Less accumulated amortization.................. (51,078,942) (54,377,606)
------------ ------------
$137,287,291 $151,339,109
============ ============
</TABLE>
On February 11, 2000, the Company computed the fair value of minority
stockholder interests based on the number of shares issued to the stockholders
and the estimated net book values of the radio stations at the close of business
on February 10, 2000. The computed amount of $8,370,064 was recorded using the
purchase method of accounting and is included in goodwill and additional paid-in
capital in the accompanying balance sheet at March 31, 2000.
6
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BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(4) OTHER INVESTMENTS
On January 14, 2000, the Company purchased 600,000 shares of common stock
of FindWhat.com, representing approximately 4.8% of the outstanding common
stock, in exchange for a $3 million promissory note. The shares contain
restrictions that generally limit the Company's ability to sell or otherwise
dispose of them. The investment was recorded using the cost method of
accounting. Also, in December 1999, the Company entered into an agreement to
purchase 750,000 shares of preferred stock of eTour, Inc., representing
approximately 2.8% of the outstanding capital stock, in exchange for $3.0
million of advertising time from the Company's radio stations. The Company will
earn these shares as advertisements are placed over the term of the agreement.
(5) LONG-TERM DEBT
At March 31, 2000, the maximum commitment under the revolving credit loan
is $150 million and the outstanding balance is $78.3 million. The loan bears
interest at either the base rate or LIBOR plus a margin that is determined by
the Company's debt to cash flow ratio. The base rate is equal to the higher of
the prime rate or the overnight federal funds effective rate plus 0.5%. As of
December 31, 1999 and March 31, 2000, the revolving credit loan carried interest
at an average rate of 7.95% and 8.23% respectively. Interest is generally
payable monthly. The scheduled reductions in the amount available under the
revolving credit loan may require principal repayments if the outstanding
balance at that time exceeds the new maximum available amount under the
revolving credit loan. The Company has entered into interest rate hedge
agreements as discussed in note 8. The loan agreement includes restrictive
covenants and requires the Company to maintain certain financial ratios. The
restrictive covenants include only limiting distributions to stockholders to
amounts required to pay individual income taxes on earnings from BFMA. The loan
is secured by substantially all assets of the Company.
On January 14, 2000, Beasley Internet Ventures, LLC, a wholly-owned
subsidiary of the radio station entities, executed a $3 million promissory note
in favor of FindWhat.com as consideration for the purchase of 600,000 shares of
common stock. The note bears interest at 5.73% per annum and matures on January
14, 2002. All outstanding principal and accrued interest is due at maturity,
however the Company may repay the note in full with an equivalent amount of
advertising air time as specified in the loan agreement and a related
advertising agreement with FindWhat.com. At March 31, 2000, the outstanding
principal amount has been reduced by approximately $322,000 through the
placement of advertising air time. The note is guaranteed by the radio station
entities.
On February 16, 2000, the Company repaid approximately $58.5 million of the
outstanding revolving credit loan balance. In addition, the Company is currently
negotiating an increase in the maximum commitment and a revision to the
scheduled reductions of the maximum commitment. The first scheduled reduction of
the maximum amount is not expected to be before 2001 therefore no current
installments of long-term debt related to the revolving credit loan have been
reported in the accompanying balance sheets. Other terms of the revolving credit
loan are expected to remain substantially the same including a restriction on
payment of dividends.
On February 16, 2000, all long-term debt, except the revolving credit loan,
the promissory note to FindWhat.com and capital lease obligations, was repaid in
full.
(6) RELATED PARTY TRANSACTIONS
BFMA had a management agreement with Beasley Broadcasting Management Corp.,
an affiliate of BFMA's principal stockholder, George G. Beasley. For the three
months ended March 31, 1999 and from January 1, 2000 to February 10, 2000,
management fee expense under the agreement was approximately
7
<PAGE> 10
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
$664,000, and $447,000, respectively. Management fee expense is included in
corporate general and administrative in the accompanying statements of
operations.
The Company leases certain office space from its principal stockholder,
George G. Beasley. For the three months ended March 31, 2000 and 2000, rental
expense paid to Mr. Beasley was approximately $23,000 and $24,000, respectively.
Distributions to stockholders of BFMA during the three months ended March
31, 2000 were $2,250,000.
Notes receivable from related parties were repaid in full on February 16,
2000.
Notes payable to related parties bore interest at 7.67% to 9.25% and were
repaid in full on February 16, 2000. For the three months ended March 31, 1999
and 2000, interest expense on notes payable to related parties was approximately
$161,000 and $80,000, respectively.
Notes receivable from stockholders bore interest at 9.25% and were repaid
in full on February 16, 2000. For the three months ended March 31, 1999 and
2000, interest income on notes receivable from related parties was approximately
$177,000 and $135,000, respectively.
The Company has reached a set of agreements to sell its radio towers and
related real estate assets to Beasley Family Towers, Inc. (BFT) for
approximately $5,100,000. No material gain or loss is expected to be recognized.
In conjunction with this sale, the agreements provide for the Company to enter
into long-term agreements to leaseback the towers from BFT.
(7) COMMITMENTS AND CONTINGENCIES
In 1997, the Company entered into contracts for the radio broadcast rights
relating to the Miami Dolphins, Florida Marlins and Florida Panthers sports
franchises. These contracts grant WQAM-AM the exclusive, English language rights
for live radio broadcasts of the sporting events of these franchises for a five-
year term that began in 1997. The contracts require the Company to pay certain
fees and to provide commercial advertising and other considerations. For the
three months ended March 31, 1999 and 2000, the contract expense calculated on a
straight-line basis and other direct expenses exceeded related revenues by
$352,000 and $370,000, respectively. Unless the Company is able to generate
significantly more revenues under these contracts in future periods, the
contracts are likely to have a material adverse effect on the Company's results
of operations on a going-forward basis. However, in light of the uncertainty
regarding future revenues, the amount of any future loss cannot be determined at
this time.
In the normal course of business, the Company is party to various legal
matters. The ultimate disposition of these matters will not, in management's
judgment, have a material adverse effect on the Company's financial position.
(8) DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses interest rate collar and swap agreements to hedge against
the potential impact of increases in interest rates on the revolving credit
loan. For the three months ended March 31, 1999, the Company paid additional
interest of approximately $24,000. For the three months ended March 31, 2000,
the Company received additional interest of approximately $38,000. The amount
paid is based on the differential between the specified rate of the swap
agreements and the variable interest rate of the revolving credit loan.
8
<PAGE> 11
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(9) INCOME TAXES
Income tax expense (benefit) from continuing operations for the three
months ended March 31, 1999 (pro forma) and 2000 is as follows:
<TABLE>
<CAPTION>
PRO FORMA
1999 2000
------------ ------------
<S> <C> <C>
Federal:
Current................................................ $ (5,000) $ --
Deferred............................................... (585,000) 22,641,000
------------ ------------
(590,000) 22,641,000
State:
Current................................................ (1,000) --
Deferred............................................... (130,000) 5,012,000
------------ ------------
(131,000) 5,012,000
------------ ------------
$ (721,000) $ 27,653,000
============ ============
</TABLE>
Income tax expense (benefit) differs from the amounts that would result
from applying the federal statutory rate of 34% to the Company's net loss for
the three months ended March 31, 1999 and 2000, as follows:
<TABLE>
<CAPTION>
PRO FORMA
1999 2000
------------ ------------
<S> <C> <C>
Expected pro forma tax benefit........................... $ (652,000) $ (596,000)
State income taxes, net of federal benefit............... (86,000) (77,000)
Establishment of deferred tax assets and liabilities upon
conversion from a subchapter S to a subchapter C
corporation on February 11, 2000....................... -- 28,297,000
Other.................................................... 17,000 29,000
------------ ------------
$ (721,000) $ 27,653,000
============ ============
</TABLE>
Temporary differences that give rise to the components of deferred tax
assets and liabilities, at December 31, 1999 and March 31, 2000 are as follows:
<TABLE>
<CAPTION>
PRO FORMA
1999 2000
------------ ------------
<S> <C> <C>
Allowance for doubtful accounts.......................... $ 2,623,000 $ 210,000
Accrued interest on notes receivable from related
parties................................................ 1,457,000 --
Notes receivable from related parties.................... 478,000 --
Net operating loss carryforwards......................... -- 484,000
------------ ------------
Gross deferred tax assets.............................. 4,558,000 694,000
Intangibles.............................................. (27,929,000) (27,295,000)
Property and equipment................................... (1,113,000) (1,052,000)
------------ ------------
Gross deferred tax liabilities......................... (29,042,000) (28,347,000)
------------ ------------
Net deferred tax liabilities........................... (24,484,000) (27,653,000)
============ ============
</TABLE>
9
<PAGE> 12
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(10) SEGMENT INFORMATION
Segment information, in thousands of dollars, for the three months ended
March 31, 1999 and 2000 are as follows:
<TABLE>
<CAPTION>
1999 2000
------- -------
<S> <C> <C>
Net revenues:
Radio Group One........................................... $12,893 $14,386
Radio Group Two........................................... 7,251 8,401
------- -------
Total..................................................... 20,144 22,787
------- -------
Broadcast cash flow:
Radio Group One........................................... $ 4,005 $ 4,250
Radio Group Two........................................... 1,687 2,691
------- -------
Total..................................................... 5,692 6,941
------- -------
Reconciliation to net loss:
Corporate general and administrative expenses............... $ (664) $(1,019)
Depreciation and amortization............................... (3,601) (3,985)
Equity appreciation rights.................................. -- (1,174)
Interest expense............................................ (3,390) (2,663)
Other non-operating income.................................. 45 147
------- -------
Net loss before income taxes................................ $(1,918) $(1,753)
======= =======
</TABLE>
Radio Group One includes radio stations located in Miami-Ft. Lauderdale,
Ft. Myers-Naples, Fl, and Greenville-New Bern-Jacksonville, NC. Radio Group Two
includes radio stations located in Philadelphia, PA, Fayetteville, NC, Atlanta,
GA and Augusta, GA.
Broadcast cash flow consists of operating income before corporate general
and administrative expenses, equity appreciation rights expenses and
depreciation and amortization.
(11) EQUITY PLAN
On February 11, 2000, the Company adopted The 2000 Equity Plan of Beasley
Broadcast Group, Inc. (the "Equity Plan"). A total of 3,000,000 shares of Class
A common stock were reserved for issuance under the Equity Plan, of which
2,500,000 stock options were granted on February 11, 2000 with an exercise price
per share equal to the initial public offering price. The issued stock options
generally vest ratably over four years, however some contain performance-related
provisions that may delay vesting beyond four years. Under the Equity Plan, a
variety of compensation awards, including non-qualified stock options, incentive
stock options, stock appreciation rights, restricted stock, deferred stock,
dividend equivalents, performance awards, stock payments and other stock-related
benefits may be granted to selected officers, employees, consultants and
directors. The Equity Plan is administered by a committee of independent
directors.
10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
You should read the following discussion together with the financial
statements and related notes included elsewhere in this report. The results
discussed below are not necessarily indicative of the results to be expected in
any future periods. Certain matters discussed herein are forward-looking
statements. Certain, but not necessarily all, of such forward-looking statements
can be identified by the use of forward-looking terminology, such as "believes,"
"expects," "may," "will," "should," "estimates," or "anticipates," or the
negative thereof or other variations thereof or comparable terminology. All
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause our actual transactions, results, performance or
achievements to be materially different from any future transactions, results,
performance or achievements expressed or implied by such forward-looking
statements. Although we believe the expectations reflected in such
forward-looking statements are based upon reasonable assumptions, we can give no
assurance that our expectations will be attained or that any deviations will not
be material. Unless required by law, we undertake no obligation to publicly
release the result of any revisions to these forward-looking statements that may
be made to reflect any future events or circumstances.
GENERAL
A radio broadcasting company derives its revenues primarily from the sale
of broadcasting time to local and national advertisers. The advertising rates
that a radio station is able to charge and the number of advertisements that can
be broadcast without jeopardizing listener levels largely determine those
revenues. Advertising rates are primarily based on three factors:
- a radio station's audience share in the demographic groups targeted by
advertisers, as measured principally by quarterly reports issued by The
Arbitron Ratings Company;
- the number of radio stations in the market competing for the same
demographic groups; and
- the supply of and demand for radio advertising time.
Several factors may adversely affect a radio broadcasting company's
performance in any given period. In the radio broadcasting industry, seasonal
revenue fluctuations are common and are due primarily to variations in
advertising expenditures by local and national advertisers. Typically, revenues
are lowest in the first calendar quarter of the year. We generally incur
advertising and promotional expenses to increase listenership and Arbitron
ratings. However, because Arbitron reports ratings quarterly in most of our
markets, any increased ratings, and therefore increased advertising revenues,
tend to lag behind the incurrence of advertising and promotional spending.
In the broadcasting industry, radio stations often utilize trade or barter
agreements to reduce expenses by exchanging advertising time for goods or
services. In order to maximize cash revenue from our spot inventory, we minimize
our use of trade agreements and during the past five years have held barter
revenues under 5% of our gross revenues and barter related broadcast cash flow
under 3% of our broadcast cash flow.
We calculate same station results by comparing the performance of radio
stations operated by us at the end of a relevant period to the performance of
those same stations, whether or not operated by us, in the prior year's
corresponding period, including the effect of barter revenues and expenses.
Broadcast cash flow consists of operating income before corporate general and
administrative expenses, equity appreciation rights expense, and depreciation
and amortization and may not be comparable to similarly titled measures employed
by other companies. Same station broadcast cash flow is the broadcast cash flow
of the radio stations included in our same station calculations.
For purposes of the following discussion, pro forma net income represents
historical income before income taxes adjusted as if we were treated as a
subchapter C corporation during all relevant periods at an effective tax rate of
38%, applied to income before income taxes and extraordinary items.
11
<PAGE> 14
RESULTS OF OPERATIONS
Several factors are expected to affect our results of operations on a
going-forward basis that have not fully affected our historical results of
operations. First, we redeemed, for cash, equity appreciation rights previously
granted to two of our station managers, as we do not believe this form of
compensation is well-suited to public companies. In connection with this
redemption, we recorded an expense of approximately $606,000 and $1,174,000 in
the fourth quarter of 1999 and first quarter of 2000, respectively. Second, in
connection with our recent reorganization, our net stockholders' equity was
reduced by approximately $27.6 million to establish the net deferred tax
liability resulting from the termination of our subchapter S status.
Finally, corporate general and administrative expenses are likely to
increase as we incur the additional reporting and compliance costs of operating
as a public company.
In 1997, we entered into contracts for the radio broadcast rights relating
to the Miami Dolphins, Florida Marlins and Florida Panthers sports franchises.
These contracts grant WQAM-AM the exclusive, English language rights for live
radio broadcasts of the sporting events of these franchises for a five year term
which began in 1997. The contracts require us to pay fees and to provide
commercial advertising and other considerations. As of December 31, 1999,
remaining payments of fees are as follows: $8.5 million in 2000, $8.8 million in
2001 and $359,000 in 2002. For the years ended December 31, 1997, 1998 and 1999,
the contract expense calculated on a straight-line basis and other direct
expenses exceeded related revenues by $2,882,000, $3,617,000 and $2,770,000,
respectively. Unless we are able to generate significantly more revenues under
these contracts in the future, they are likely to have a material adverse effect
on our results of operations on a going-forward basis. However, in light of the
uncertainty regarding future revenues, the amount of any future loss cannot be
determined at this time.
THREE MONTH PERIOD ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS ENDED MARCH
31, 1999
Net Revenue. Net revenue increased 13.1% to $22.8 million for the three
months ended March 31, 2000 from $20.1 million for three months ended March 31,
1999. The increase was primarily due to the additional revenue generated through
the acquisition of two radio stations in Atlanta as well as revenue growth at
most of our existing radio stations, particularly in the Miami-Ft. Lauderdale
and Greenville-New Bern-Jacksonville markets. On a same station basis, net
revenues increased 11.2% to $22.8 million for the three months ended March 31,
2000 from $20.5 million for three months ended March 31, 1999.
Station Operating Expenses. Station operating expenses increased 9.6% to
$15.8 million for the three months ended March 31, 2000 from $14.4 million for
three months ended March 31, 1999. The increase was primarily due to program and
production and sales and advertising expenses in the Miami-Ft. Lauderdale
market, as well as expenses related to WQAM-AM's radio broadcast rights for the
University of Miami Hurricanes football team. The increase was also due to
increased program and production, sales and advertising, and general and
administrative expenses associated with operating two additional radio stations
in Atlanta and generating revenue growth from our existing radio stations. On a
same station basis, station operating expenses increased 8.9% to $15.8 million
for the three months ended March 31, 2000 from $14.5 million for three months
ended March 31, 1999.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased 53.0% to $1.0 million for the three months
ended March 31, 2000 from $0.7 million for three months ended March 31, 1999.
The increase was primarily due to additional reporting and compliance costs of
operating as a public company. Higher general and administrative expenses were
also experienced due to the acquisition of two radio stations in Atlanta.
Depreciation and Amortization. Depreciation and amortization increased
10.7% to $4.0 million for the three months ended March 31, 2000 from $3.6
million for three months ended March 31, 1999. The increase was primarily due to
additional amortization and depreciation expense associated with the acquisition
of two radio stations in Atlanta.
Interest Expense. Interest expense decreased 21.4% to $2.7 million for the
three months ended March 31, 2000 from $3.4 million for three months ended March
31, 1999. The decrease was primarily due to
12
<PAGE> 15
the repayment of $58.5 million of the credit facility as well as the repayment
of all outstanding notes payable to related parties with proceeds from the
initial public offering. This decrease was partially offset by an increase in
interest expense during the three months ended March 31, 2000 due to financing
the radio station acquisitions in Atlanta with a draw from the revolving credit
loan.
Broadcast Cash Flow. Broadcast cash flow increased 21.9% to $6.9 million
for the three months ended March 31, 2000 from $5.7 million for three months
ended March 31, 1999. The increase was primarily due to the additional broadcast
cash flow generated through the acquisition of two radio stations in Atlanta as
well as revenue growth and increased operating efficiencies at some of our
existing radio stations, particularly in the Philadelphia and Greenville-New
Bern-Jacksonville markets. On a same station basis, broadcast cash flow
increased 16.9% to $6.9 million for the three months ended March 31, 2000 from
$6.0 million for three months ended March 31, 1999.
Loss Before Income Taxes. We experienced a loss before income taxes of
$1.8 million for the three months ended March 31, 2000 versus a loss before pro
forma income taxes of $1.9 million for three months ended March 31, 1999. The
change was primarily due to the additional income before income taxes generated
through the acquisition of two radio stations in Atlanta as well as revenue
growth and increased operating efficiencies at some of our existing radio
stations, particularly in the Philadelphia and Greenville-New Bern-Jacksonville
markets. The revenue growth and increased operating efficiencies were partially
offset by the redemption of equity appreciation rights for $1.2 million during
the three months ended March 31, 2000.
Net Loss. Net loss for the three months ended March 31, 2000 was $29.4
million compared to a pro forma net loss of $1.2 million for three months ended
March 31, 1999. The change was primarily due to the establishment of deferred
tax assets and liabilities upon conversion from a series of subchapter S
corporations to a series of subchapter C corporations as a result of the initial
public offering and corporate reorganization. The net loss for the three months
ended March 31, 2000 was offset by the additional net income generated through
the acquisition of two radio stations in Atlanta as well as revenue growth and
increased operating efficiencies at some of our existing radio stations,
particularly in the Philadelphia and Greenville-New Bern-Jacksonville markets
and increased by the redemption of equity appreciation rights for $1.2 million.
LIQUIDITY AND CAPITAL RESOURCES
Overview. Historically, we have used a significant portion of our
liquidity to consummate acquisitions. These acquisitions have been funded from
one or a combination of the following sources:
- our credit facility;
- disposing of radio stations in transactions which are intended to qualify
as like-kind exchanges under Section 1031 of the Internal Revenue Code;
- internally-generated cash flow; and
- advances to us from George G. Beasley, members of his family and
affiliated entities.
Other liquidity needs have been for debt service, working capital,
distributions to equity holders and general corporate purposes, including
capital expenditures. In the future, we expect that our principal liquidity
requirements will be for working capital and general corporate purposes,
including acquisitions of additional radio stations. We expect to finance future
acquisitions through a combination of bank borrowings, internally generated
funds and our stock.
We used approximately $58.5 million of the net proceeds from our initial
public offering to pay down debt on our credit facility, which increased the
availability of cash to fund future acquisitions, including the recently
completed and pending acquisitions, and other general corporate purposes. We
also used approximately $40.5 million of the proceeds of our initial public
offering to repay the indebtedness owed to our Chairman and Chief Executive
Officer, George G. Beasley, and affiliated companies. That approximately $40.5
million payment is net of the repayment at the closing of the initial public
offering of approximately $10.3 million owed to us by members of the Beasley
family.
13
<PAGE> 16
As of March 31, 2000, we held $7.3 million in cash and cash equivalents and
had $71.7 million in availability under our credit facility. After March 31,
2000, we used our credit facility to finance one of our recently completed
acquisitions with an aggregate price of $6.0 million and we will borrow an
additional $18.0 million to fund our pending acquisitions. We believe that the
cash available from operations as well as the availability from our credit
facility should be sufficient to permit us to meet our financial obligations for
at least the next twelve months. Under our credit facility, we can currently
borrow up to $150.0 million, subject to compliance with financial ratios and
other restrictive covenants. We are currently negotiating an increase in the
maximum commitment and a revision to the scheduled reductions of the maximum
commitment. Other terms of the credit facility are expected to remain
substantially the same.
Net Cash Provided by (Used in) Operating Activities. Net cash provided by
operating activities was $1.2 million and $1.5 million for the three months
ended March 31, 2000 and 1999, respectively. The decrease was primarily due to a
$1.2 million redemption of equity appreciation rights. These expenses were
offset by the additional net income generated through the acquisition of two
radio stations in Atlanta as well as revenue growth and operating efficiencies
at some of our existing radio stations, particularly in the Philadelphia and
Greenville-New Bern-Jacksonville markets.
Net Cash Provided by (Used in) Investing Activities. Net cash used in
investing activities was $1.0 million and $0.6 million for the three months
ended March 31, 2000 and 1999, respectively. The increase is primarily due to
the acquisition of two radio stations in Atlanta and loans to the former S
corporation stockholders. The increase is offset by repayment of notes
receivable from related parties and stockholders.
Net Cash Provided by (Used in) by Financing Activities. Net cash provided
by financing activities was $92,000 for the three months ended March 31, 2000
compared to net cash used in investing activities of $47,000 for the three
months ended March 31, 1999. The change was primarily due to the repayment of
$58.5 million of the credit facility as well as the repayment of all outstanding
notes payable to related parties. Distributions were also made to the former S
corporation stockholders. The net use of cash was offset by proceeds from the
initial public offering less the costs associated with the initial public
offering.
Credit Facility. On August 11, 1999, we entered into an amendment to our
credit agreement with the Bank of Montreal, Chicago Branch, as agent, and with
our syndicate of commercial lenders. The amendment to our credit agreement
provides for a maximum revolving loan and letter of credit commitment of $150.0
million.
At March 31, 2000, the scheduled reductions of the amended maximum
commitment of the credit facility for the next five fiscal years and thereafter
are as follows:
<TABLE>
<S> <C>
2000........................................................ 7,500,000
2001........................................................ 15,000,000
2002........................................................ 15,000,000
2003........................................................ 18,750,000
2004........................................................ 22,500,000
Thereafter.................................................. 71,250,000
------------
Total....................................................... $150,000,000
============
</TABLE>
On February 16, 2000, we repaid approximately $58.5 million of the
outstanding balance under our credit facility. In addition, we are currently
negotiating an increase in the maximum commitment and a revision to the
scheduled reductions of the maximum commitment. Other terms of the credit
facility are expected to remain substantially the same.
As of March 31, 2000, we had an outstanding balance under our credit
facility of approximately $78.3 million and availability under our credit
facility of $71.7 million for future acquisitions and other corporate purposes.
These amounts do not give effect to the recently completed acquisitions in the
Boston and
14
<PAGE> 17
Augusta, Georgia markets and the pending acquisitions in the Miami-Ft.
Lauderdale and West Palm Beach markets.
At March 31, 2000, the weighted average annual interest rate applicable to
our credit facility was approximately 8.23%. The credit facility expires on
December 31, 2006.
We must pay to Bank of Montreal, Chicago Branch, as agent, on a quarterly
basis, an unused commitment fee. The commitment fee is a maximum of 0.5%
multiplied by the average of the daily excess of the maximum revolving loan and
letter of credit commitment, currently $150.0 million, over the outstanding
principal balance and letter of credit usage for the preceding quarter. For the
three-month period ended March 31, 2000, our unused commitment fee was $52,000.
The current credit facility prohibits us from paying cash dividends and
restricts our ability to make other distributions with respect to our capital
stock. The credit facility also contains other customary restrictive covenants.
These covenants limit our ability to:
- incur additional indebtedness and liens;
- enter into certain investments or joint ventures;
- consolidate, merge or effect asset sales;
- make overhead expenditures;
- enter sale and lease-back transactions;
- sell or discount accounts receivable;
- enter into transactions with affiliates or stockholders;
- sell, assign, pledge, encumber or dispose of capital stock; or
- change the nature of our business.
We are also required to satisfy financial covenants, which require us to
maintain specified financial ratios and to comply with financial tests, such as
ratios for minimum interest coverage, minimum fixed charges and maximum total
debt. These financial covenants include:
- Minimum Interest Coverage Test. Our operating cash flow for any four
consecutive quarters must be at least twice the amount of our cash
interest expense.
- Minimum Fixed Charges Test. Our operating cash flow for any four
consecutive quarters must be at least 1.10 times our fixed charges.
- Maximum Total Debt Test. For the period through June 30, 2000, our total
debt as of the last day of a fiscal quarter must not exceed 5.75 times
our operating cash flow for the four quarter period ending on that day.
For the period of July 1, 2000 through December 31, 2001, the required
maximum ratio is 5.5 times. For each twelve-month period after December
31, 2001, the maximum ratio will decrease by 0.5 times. For all periods
after January 1, 2005, the maximum ratio is 3.5 times.
RECENTLY COMPLETED AND PENDING ACQUISITIONS. On May 2, 2000, we purchased
a radio station in the Boston market for approximately $6.0 million. On May 3,
2000, we purchased two radio stations in the Augusta, Georgia market for
approximately $800,000. The Boston acquisition was financed through our credit
facility and the Augusta acquisition was funded by surplus working capital. We
have agreed to acquire two radio stations in the Miami-Ft. Lauderdale market and
one radio station in the West Palm Beach market for an aggregate purchase price
of approximately $18.0 million. We intend to finance these acquisitions through
our credit facility. The consummation of the pending transaction is subject to
certain conditions, including the approval of the FCC. Although we believe these
closing conditions are customary for transactions of this type, these conditions
may not be satisfied.
15
<PAGE> 18
RECENT PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133 entitled "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and the resulting designation. In
June 1999, the FASB issued SFAS No. 137, which extends the effective date of
SFAS No. 133 to fiscal quarters of fiscal years beginning after June 15, 2000
and should not be applied retroactively to financial statements of prior
periods. We do not anticipate that the adoption of SFAS No. 133 will have a
material impact on our earnings or financial position upon adoption.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is the risk of loss arising from adverse changes in market
rates and prices such as interest rates, foreign currency exchange rate and
commodity prices. Our primary exposure to market risk is interest rate risk
associated with our credit facility. Amounts borrowed under the credit facility
incur interest at the London Interbank Offered Rate, or LIBOR, plus additional
basis points depending on the outstanding principal balance under the credit
facility. As of March 31, 2000, $78.3 million was outstanding under our credit
facility. On February 16, 2000, we repaid approximately $58.5 million of the
outstanding balance under our credit facility. In addition, we are currently
negotiating an increase in the maximum commitment and a revision to the
scheduled reductions of the maximum commitment. Other terms of the credit
facility are expected to remain substantially the same. We evaluate our exposure
to interest rate risk by monitoring changes in interest rates in the market
place.
To manage interest rate risk associated with our credit agreement, we have
entered into several interest rate collar and swap agreements.
An interest rate collar is the combined purchase and sale of an interest
rate cap and an interest rate floor so as to keep interest rate exposure within
a defined range. We have purchased one interest rate collar. Under this
agreement, our base LIBOR cannot exceed 7.0% and our base LIBOR cannot fall
below 5.17%.
An interest rate swap is a combined series of forward rate agreements
calling for exchange of interest payments on a number of specified future dates.
We have purchased three interest rate swaps. Under these agreements, we pay a
fixed rate of 5.52%, 5.82% and 5.685%, respectively, on the notional amount, and
the other party pays to us a variable amount rate equal to the three-month LIBOR
on a quarterly basis.
Notional amounts are used to calculate the contractual payments to be
exchanged under the contract. The notional amount upon maturity of these collars
and swaps is approximately $50.0 million.
Our collar and swap agreements are summarized in the following chart:
<TABLE>
<CAPTION>
ESTIMATED
NOTIONAL EXPIRATION FAIR
AGREEMENT AMOUNT FLOOR CAP SWAP DATE VALUE
--------- ----------- ----- --- ----- -------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Interest rate collar................ $10,000,000 5.17% 7% -- May 2000 $ 0
Interest rate swap.................. 10,000,000 -- -- 5.52% May 2001 40,000
Interest rate swap.................. 10,000,000 -- -- 5.82% September 2001 1,000
Interest rate swap.................. 20,000,000 -- -- 5.685% May 2002 60,000
</TABLE>
16
<PAGE> 19
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We currently and from time to time are involved in litigation incidental to
the conduct of our business, but we are not a party to any lawsuit or proceeding
which, in the opinion of management, is likely to have a material adverse effect
on us.
On December 29, 1998, we filed a lawsuit in the Circuit Court of the
Eleventh Judicial Circuit, Miami-Dade County, against the Florida Marlins Inc.,
Florida Marlins Baseball Team, Ltd., and Front Row Communications for breach of
contract and other related claims. The lawsuit is based on actions taken by the
Florida Marlins major league baseball team to trade or release key players of
the Marlins after the 1997 season, thereby transforming the Marlins into a
non-competitive team. On January 14, 2000, the court dismissed the Marlins'
motion for summary judgment. On May 22, 1999, the Marlins countersued for breach
of contract. We intend to pursue our legal action against the Marlins and seek
dismissal of their countersuit. We cannot yet determine the outcome of these
lawsuits.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Before our reorganization and initial public offering on February 11, 2000,
we operated as a series of subchapter S corporations, a general partnership and
a series of limited partnerships and limited liability companies. To effect our
reorganization and pursuant to the Beasley Broadcast Group, Inc. Contribution
Agreement dated as of November 23, 1999, we agreed to issue shares of our Class
A common stock to Reed Miami Holdings, Inc. and J. Daniel Highsmith in exchange
for all of their interests held in Beasley-Reed Acquisition Partnership and
Beasley Broadcasting of Eastern North Carolina, Incorporated. Under this
agreement, Reed Miami Holdings, Inc. and Mr. Highsmith received, on February 11,
2000, a total of 402,068 shares of Class A common stock, which is the number of
shares having the value of their pre-offering interest in the entities that
became Beasley Broadcast Group, Inc. Therefore, based on the initial public
offering price of $15.50, Beasley Broadcast Group received approximately $8.4
million of value for the interests in Beasley-Reed Acquisition Partnership and
Beasley Broadcasting of Eastern North Carolina, Incorporated in exchange for
approximately $8.4 million of shares of its Class A common stock. These
transactions were effected without registration under the Securities Act in
reliance upon the exemptions from registration contained in Section 4(2) of the
Securities Act. Section 4(2) exempts transactions by an issuer not involving a
public offering from the provisions of Securities Act Section 5. We offered
Class A common stock to these stockholders, each of whom is an accredited
investor under Rule 501 under the Securities Act and each of whom is actively
involved in the management of radio stations owned by the registrant, on a
private basis not involving a public offering.
Additionally, pursuant to the Beasley Broadcast Group, Inc. Contribution
Agreement dated as of November 23, 1999, we also agreed to issue shares of our
Class B common stock to George G. Beasley, members of his immediate family and
affiliated trusts in exchange for all the interests held by these persons in the
companies we now hold. Under this agreement, the Beasley family members and
affiliated trusts received on February 11, 2000 a total of 17,021,373 shares of
Class B common stock, which is the number of shares having the value of their
pre-offering interest in the entities that became Beasley Broadcast Group, Inc.
Therefore, based on the initial public offering price of $15.50 for Class A
common stock, Beasley Broadcast Group received approximately $263.8 million of
value for the interests in the entities that became Beasley Broadcast Group in
exchange for approximately $263.8 million of shares of Class B common stock.
These transactions were effected without registration under the Securities Act
in reliance upon the exemptions from registration contained in Section 4(2) of
the Securities Act. Section 4(2) exempts transactions by an issuer not involving
a public offering from the provisions of Securities Act Section 5. We offered
shares of its Class B common stock to George G. Beasley, members of his
immediate family and affiliated entities, on a private basis not involving a
public offering.
17
<PAGE> 20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the 2000 annual meeting of the stockholders held by written consent
effective as of February 11, 2000, holders of all of the outstanding shares of
Class A and Class B common stock approved the 2000 Equity Plan of Beasley
Broadcast Group, Inc. and elected the following directors to serve on our board
of directors: George G. Beasley, Bruce G. Beasley, Caroline Beasley, Brian E.
Beasley, Joe B. Cox and Mark S. Fowler.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------------------------------------------------------
<S> <C>
2.1* Asset Purchase Agreement of Radio Stations WAEC-AM and
WWWE-AM in Atlanta and Hapeville, Georgia, respectively,
dated August 26, 1999.
2.2* Asset Purchase Agreement of Radio Station WRCA-AM in
Waltham, Massachusetts, dated December 31, 1999.
2.3* Asset Purchase Agreement of Radio Stations WWNN-AM and
WHSR-AM in Pompano Beach, Florida and WSBR-AM in Boca Raton,
Florida, dated December 30, 1999.
3.1* Amended Certificate of Incorporation of the Registrant.
3.2* Amended and Restated Bylaws of the Registrant.
4.1* Form of Certificate of Class A Common Stock of the
Registrant.
10.1* George G. Beasley Executive Employment Agreement with
Beasley Mezzanine Holdings, LLC, dated January 31, 2000.
10.2* Bruce G. Beasley Executive Employment Agreement with Beasley
Mezzanine Holdings, LLC, dated January 31, 2000.
10.3* B. Caroline Beasley Executive Employment Agreement with
Beasley Mezzanine Holdings, LLC, dated January 31, 2000.
10.4* Brian E. Beasley Executive Employment Agreement with Beasley
Mezzanine Holdings, LLC, dated January 31, 2000.
10.5* Credit Agreement between Beasley FM Acquisition Corp. and
affiliated entities and the Bank of Montreal, Chicago
Branch, as agent dated March 30, 1998.
10.6* First Amendment to the Credit Facility between Beasley FM
Acquisition Corp. and affiliated entities and the Bank of
Montreal, Chicago Branch, as agent dated August 11, 1999.
10.7* Second Amendment to the Credit Facility between Beasley FM
Acquisition Corp. and affiliated entities and the Bank of
Montreal, Chicago Branch, as agent dated December 30, 1999.
10.8* Beasley Broadcast Group Contribution Agreement, dated as of
November 23, 1999 between Beasley Broadcast Group, Inc.,
George G. Beasley, Bruce G. Beasley, Brian E. Beasley, B.
Caroline Beasley, Bradley C. Beasley, Robert E. Beasley,
Shirley W. Beasley, J. Daniel Highsmith, Reed Miami
Holdings, Inc., Beasley FM Acquisition Corp. and affiliated
entities.
10.9* Note of Indebtedness Issued to Beasley Broadcasting of
Philadelphia, Inc., in the Principal Amount of
$24,545,566.53, dated August 11, 1994.
10.10* Note of Indebtedness Issued to Beasley-Reed Broadcasting of
Miami, Inc., in the Principal Amount of $11,498,147.97,
dated August 11, 1994.
10.11* Third Amendment to Credit Facility between Beasley FM
Acquisition Corp. and affiliated entities and Bank of
Montreal, Chicago Branch, as agent, dated February 8, 2000.
</TABLE>
18
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------------------------------------------------------
<S> <C>
10.12* Form of Notes of Indebtedness by and between Beasley
Broadcast Group, Inc. and affiliates, dated January 31,
2000.
10.13* The 2000 Equity Plan of Beasley Broadcast Group, Inc.
10.14* Form of Agreement of Sale of Four Communications Towers
between Beasley FM Acquisition Corp. and Beasley Family
Towers, Inc.
10.15* Form of Agreement of Sale of a Communications Tower between
Beasley Broadcasting of Eastern North Carolina, Inc. and
Beasley Family Towers, Inc.
10.16* Form of Agreement of Sale of a Communications Tower between
Beasley Broadcasting of New Jersey, Inc. and Beasley Family
Towers, Inc.
10.17* Form of Agreement of Sale of a Communications Tower between
Beasley Broadcasting of Eastern Pennsylvania, Inc. and
Beasley Family Towers, Inc.
10.18* Form of Agreement of Sale of a Communications Tower between
Beasley Broadcasting of Coastal Carolina, Inc. and Beasley
Family Towers, Inc.
10.19* Form of Agreement of Sale of a Communications Tower between
Beasley Reed Acquisition Partnership and Beasley Family
Towers, Inc.
10.20* Form of Agreement of Sale of Three Communications Towers
between Beasley FM Acquisition Corp. and Beasley Family
Towers, Inc.
21.1* Subsidiaries of the Company.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* Incorporated by reference to Beasley Broadcast Groups Registration Statement
on Form S-1 (333-91683).
(b) No reports on Form 8-K were filed during the three month period ended March
31, 2000.
19
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 5, 2000 BEASLEY BROADCAST GROUP, INC.
/s/ GEORGE G. BEASLEY
--------------------------------------
Name: George G. Beasley
Title: Chairman of the Board and
Chief Executive Officer
Date: May 5, 2000
/s/ CAROLINE BEASLEY
--------------------------------------
Name: Caroline Beasley
Title: Vice President, Chief
Financial Officer, Secretary,
Treasurer and Director
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BEASLEY
BROADCAST GROUP, INC.'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT
OF OPERATIONS AS OF AND FOR THE PERIOD ENDED MARCH 31, 2000 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 7,292
<SECURITIES> 0
<RECEIVABLES> 16,693
<ALLOWANCES> 437
<INVENTORY> 0
<CURRENT-ASSETS> 26,865
<PP&E> 32,285
<DEPRECIATION> 15,728
<TOTAL-ASSETS> 199,877
<CURRENT-LIABILITIES> 10,778
<BONDS> 0
0
0
<COMMON> 24
<OTHER-SE> 80,179
<TOTAL-LIABILITY-AND-EQUITY> 199,877
<SALES> 0
<TOTAL-REVENUES> 22,787
<CGS> 0
<TOTAL-COSTS> 22,024
<OTHER-EXPENSES> 50
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,663
<INCOME-PRETAX> (1,753)
<INCOME-TAX> 27,653
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (29,406)
<EPS-BASIC> (1.39)
<EPS-DILUTED> (1.39)
</TABLE>
