<PAGE> 1
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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 JUNE 30, 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 [X] No [ ]
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 August 2, 2000
Class B Common Stock, $.001 par value, 17,021,373 Shares Outstanding
as of August 2, 2000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<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 June 30, 2000............ 1
Statements of Operations of Beasley Broadcast
Group, Inc. for the Three and Six Months Ended
June 30, 1999 and June 30, 2000................... 2
Statements of Cash Flows of Beasley Broadcast
Group, Inc. for the Six Months Ended June 30, 1999
and June 30, 2000................................. 3
Notes to Financial Statements..................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results
of Operations................................... 13
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................... 19
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.................................. 21
Item 2. Changes in Securities and Use of Proceeds.......... 21
Item 3. Defaults Upon Senior Securities.................... 21
Item 4. Submission of Matters to a Vote of Security
Holders................................................... 21
Item 5. Other Information.................................. 21
Item 6. Exhibits and Reports on Form 8-K................... 21
SIGNATURES.................................................. 23
</TABLE>
<PAGE> 3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BEASLEY BROADCAST GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
COMBINED CONSOLIDATED
DECEMBER 31, JUNE 30,
1999 2000
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 7,002,669 $ 6,507,534
Accounts receivable, less allowance for doubtful accounts
of $560,282 in 1999 and $609,609 in 2000............... 19,915,098 19,448,604
Trade sales receivable.................................... 735,607 916,648
Other receivables......................................... 676,478 908,153
Prepaid expenses and other................................ 1,918,223 2,152,469
Deferred tax assets....................................... -- 133,000
------------ ------------
Total current assets................................... 30,248,075 30,066,408
Property and equipment, net................................. 15,773,175 19,455,271
Notes receivable from related parties....................... 556,796 --
Intangibles, net............................................ 137,287,291 169,944,347
Other investments........................................... -- 3,158,661
Other assets................................................ 1,995,819 2,257,268
------------ ------------
Total assets........................................... $185,861,156 $224,881,955
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current installments of long-term debt.................... $ 166,319 $ 8,026
Notes payable to related parties.......................... 10,447,454 --
Accounts payable.......................................... 5,027,145 6,793,016
Accrued expenses.......................................... 9,213,133 4,620,769
Trade sales payable....................................... 970,108 978,087
------------ ------------
Total current liabilities.............................. 25,824,159 12,399,898
Long-term debt, less current installments................... 125,680,696 104,541,346
Long-term debt to related parties........................... 37,275,622 --
Deferred tax liabilities.................................... -- 27,681,000
------------ ------------
Total liabilities...................................... 188,780,477 144,622,244
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.................................. 34,774,928 106,757,206
Accumulated deficit......................................... (32,818,024) (26,521,768)
Treasury stock.............................................. (548,600) --
------------ ------------
Stockholders' equity........................................ 5,938,656 80,259,711
Notes receivable from stockholders.......................... (8,857,977) --
------------ ------------
Net stockholders' equity (deficit).......................... (2,919,321) 80,259,711
------------ ------------
Total liabilities and stockholders' equity (deficit)... $185,861,156 $224,881,955
============ ============
</TABLE>
See accompanying notes to financial statements
1
<PAGE> 4
BEASLEY BROADCAST GROUP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
COMBINED CONSOLIDATED COMBINED CONSOLIDATED
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 2000 1999 2000
------------ ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues............................. $23,006,050 $27,080,918 $43,149,666 $ 49,867,723
----------- ----------- ----------- ------------
Costs and expenses:
Program and production................. 6,168,172 6,962,561 11,560,449 12,837,383
Sales and advertising.................. 6,293,072 7,447,262 12,133,882 13,870,357
Station general and administrative..... 3,167,945 3,758,415 6,386,941 7,306,212
Corporate general and administrative... 635,506 1,047,690 1,299,477 2,067,174
Equity appreciation rights............. -- -- -- 1,173,759
Depreciation and amortization.......... 3,588,769 4,273,785 7,189,889 8,258,992
----------- ----------- ----------- ------------
Total costs and expenses............ 19,853,464 23,489,713 38,570,638 45,513,877
Operating income.................... 3,152,586 3,591,205 4,579,028 4,353,846
Other income (expense):
Interest expense....................... (3,214,718) (1,860,348) (6,604,652) (4,523,401)
Other non-operating expenses........... -- (14,540) (107,154) (64,552)
Interest income........................ 137,181 90,110 290,061 273,093
Other non-operating income............. -- 8,330 -- 23,167
----------- ----------- ----------- ------------
Income (loss) before income taxes...... 75,049 1,814,757 (1,842,717) 62,153
Income tax expense....................... -- 828,000 -- 28,481,000
----------- ----------- ----------- ------------
Net income (loss)................... $ 75,049 $ 986,757 $(1,842,717) $(28,418,847)
=========== =========== =========== ============
Basic and diluted net income (loss) per
share.................................. $ -- $ 0.04 $ -- $ (1.25)
=========== =========== =========== ============
Pro forma income tax expense (benefit)... $ 48,000 $ -- $ (673,000) $ --
=========== =========== =========== ============
Pro forma net income (loss).............. $ 27,049 $ -- $(1,169,717) $ --
=========== =========== =========== ============
Pro forma basic and diluted net income
(loss) per share....................... $ 0.00 $ -- $ (0.07) $ --
=========== =========== =========== ============
Basic common shares outstanding.......... 17,423,441 24,273,441 17,423,441 22,730,309
=========== =========== =========== ============
Diluted common shares outstanding........ 17,423,441 24,274,689 17,423,441 22,731,293
=========== =========== =========== ============
</TABLE>
See accompanying notes to financial statements
2
<PAGE> 5
BEASLEY BROADCAST GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
COMBINED CONSOLIDATED
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
1999 2000
----------- ------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(1,842,717) $(28,418,847)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................. 7,189,889 8,258,992
Loss on sale of equipment................................. 107,154 --
Change in assets and liabilities net of effects of
acquisitions and dispositions of radio stations:
Increase in receivables................................ (1,152,169) (766,258)
Increase in prepaid expense and other.................. (396,694) (234,246)
Increase in other assets............................... (197,738) (574,339)
Decrease in accounts payables and accrued expenses..... (557,066) (2,818,514)
Increase in deferred tax liabilities................... -- 27,548,000
----------- ------------
Net cash provided by operating activities............ 3,150,659 2,994,788
----------- ------------
Cash flows from investing activities:
Expenditures for property and equipment................... (1,018,546) (1,013,655)
Payments for purchase of radio stations................... -- (34,780,000)
Payment for purchase of equity investment................. -- (50,002)
Payments from related parties............................. -- 556,796
Loans to stockholders..................................... (184,048) (910,263)
Payments from stockholders................................ -- 9,768,240
----------- ------------
Net cash used in investing activities................ (1,202,594) (26,428,884)
----------- ------------
Cash flows from financing activities:
Proceeds from issuance of indebtedness.................... -- 36,064,262
Principal payments on indebtedness........................ (89,079) (59,650,528)
Principal payments on related party notes................. -- (47,723,076)
Payments of loan fees..................................... -- (121,535)
Capital contributions..................................... -- 100,000
Stockholders distributions................................ (2,967,200) (2,250,000)
Issuance of common stock.................................. -- 99,009,900
Payment of initial public offering costs.................. -- (2,490,062)
----------- ------------
Net cash provided by (used in) financing
activities.......................................... (3,056,279) 22,938,961
----------- ------------
Net decrease in cash and cash equivalents................... (1,108,214) (495,135)
Cash and cash equivalents at beginning of period............ 4,759,598 7,002,669
----------- ------------
Cash and cash equivalents at end of period.................. $ 3,651,384 $ 6,507,534
=========== ============
Cash paid for interest...................................... $ 6,338,716 $ 7,505,899
=========== ============
Cash paid for state taxes................................... $ 13,000 $ 26,825
=========== ============
Supplement disclosure of non-cash investing and financing
activities:
Financed purchase of equity investment...................... $ -- $ 3,000,000
=========== ============
Equity investment acquired through the placement of
advertising air time...................................... $ -- $ 108,659
=========== ============
Minority interests acquired through issuance of Class A
common stock.............................................. $ -- $ 8,370,064
=========== ============
Principal payments on indebtedness through the placement of
advertising air time...................................... $ -- $ 711,377
=========== ============
</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 second 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 at 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 June 30, 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.................... -- -- -- (2,490,062) -- -- --
Acquisitions of minority
interests................ -- -- -- 8,370,064 -- -- --
Payments of notes
receivable from
stockholders............. -- -- -- -- -- -- 9,768,240
Net loss................... -- -- -- -- (26,521,768) -- --
------ ------- ----------- ------------ ------------ --------- -----------
Balances at June 30,
2000..................... $7,252 $17,021 $ -- $106,757,206 $(26,521,768) $ -- $ --
====== ======= =========== ============ ============ ========= ===========
<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.................... (2,490,062)
Acquisitions of minority
interests................ 8,370,064
Payments of notes
receivable from
stockholders............. 9,768,240
Net loss................... (26,521,768)
------------
Balances at June 30,
2000..................... $ 80,259,711
============
</TABLE>
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 airtime 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 at December 31, 1999. Pro forma
income tax benefit in the accompanying statements of operations from January 1,
1999 to June 30, 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 are computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflect 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 June 30, 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) STOCK-BASED COMPENSATION
Stock-based compensation is measured and recognized in accordance with APB
Opinion 25, Accounting for Stock Issued to Employees and disclosed in accordance
with SFAS 123, Accounting for Stock-Based Compensation.
5
<PAGE> 8
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(h) 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
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 $10.0 million. This acquisition was
financed through the Company's revolving credit loan and accounted for by
the purchase method of accounting.
On May 2, 2000, the Company acquired the assets of WRCA-AM in the Boston
market for approximately $6.0 million. 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 $0.8 million. This
acquisition was funded by surplus working capital and accounted for by the
purchase method of accounting.
On June 2, 2000 the Company acquired the assets of WHSR-AM and WWNN-AM in
the Miami-Ft. Lauderdale market and WSBR-AM in the West Palm Beach market
for approximately $18.0 million. This acquisition was financed through the
Company's revolving credit loan and accounted for by the purchase method of
accounting.
The aggregate purchase price for the current acquisitions was allocated as
follows:
<TABLE>
<S> <C>
Property and equipment...................................... $ 4,088,173
FCC broadcasting licenses................................... 30,606,827
Goodwill.................................................... 85,000
-----------
$34,780,000
===========
</TABLE>
(b) UNAUDITED PRO FORMA RESULTS OF OPERATIONS
The following unaudited pro forma information presents the results of
operations for the three and six months ended June 30, 1999 and 2000, with
pro forma adjustments as if the acquisitions of the stations in 1999 and
2000 had occurred prior to January 1 in the prior year.
6
<PAGE> 9
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
This unaudited pro forma information is not necessarily indicative of what
would have occurred had the acquisitions occurred prior to January 1 in the
prior year or of the results that may occur in the future.
<TABLE>
<CAPTION>
COMBINED CONSOLIDATED COMBINED CONSOLIDATED
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 2000 1999 2000
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net revenues............................. $24,385,668 $27,702,735 $45,867,757 $ 51,553,237
----------- ----------- ----------- ------------
Costs and expenses:
Program and production................. 6,293,665 7,011,864 11,789,923 12,970,910
Sales and advertising.................. 6,364,559 7,479,443 12,296,270 13,984,797
Station general and administrative..... 3,443,317 3,858,161 6,862,824 7,594,815
Corporate general and administrative... 635,506 1,047,690 1,299,477 2,067,174
Equity appreciation rights............. -- -- -- 1,173,759
Depreciation and amortization.......... 4,197,936 4,524,618 8,408,222 8,951,574
----------- ----------- ----------- ------------
Total costs and expenses....... 20,934,983 23,921,776 40,656,716 46,743,029
Operating income.................... 3,450,685 3,780,959 5,211,041 4,810,208
Other income (expense):
Interest expense....................... (3,890,468) (2,133,698) (7,956,152) (5,278,154)
Other non-operating expenses........... -- (14,540) (107,154) (64,552)
Interest income........................ 137,181 90,110 290,061 273,093
Other non-operating income............. -- 8,330 -- 23,167
----------- ----------- ----------- ------------
Income (loss) before income taxes...... (302,602) 1,731,161 (2,562,204) (236,238)
Income tax expense....................... -- 796,000 -- 28,366,000
----------- ----------- ----------- ------------
Net income (loss)...................... $ (302,602) $ 935,161 $(2,562,204) $(28,602,238)
=========== =========== =========== ============
Basic and diluted net income (loss) per
share.................................. $ -- $ 0.04 $ -- $ (1.26)
=========== =========== =========== ============
Pro forma income tax benefit............. $ (117,000) $ -- $ (990,000) $ --
=========== =========== =========== ============
Pro forma net loss....................... $ (185,602) $ -- $(1,572,204) $ --
=========== =========== =========== ============
Pro forma basic and diluted net loss per
share.................................. $ (0.01) $ -- $ (0.09) $ --
=========== =========== =========== ============
Basic common shares outstanding.......... 17,423,441 24,273,441 17,423,441 22,730,309
=========== =========== =========== ============
Diluted common shares outstanding........ 17,423,441 24,274,689 17,423,441 22,731,293
=========== =========== =========== ============
</TABLE>
(c) PENDING ACQUISITIONS
On June 2, 2000 the Company entered into an agreement to acquire all of the
outstanding common stock of Centennial Broadcasting Nevada, Inc. and all of
the membership interests in Centennial Broadcasting, LLC for an aggregate
purchase price, subject to certain adjustments, of approximately $137.5
million. Centennial Broadcasting Nevada, Inc. owns approximately 18.5% of
the membership interests in Centennial Broadcasting, LLC. Centennial
Broadcasting, LLC owns the radio stations KJUL-FM, KSTJ-FM and KKLZ-FM in
Las Vegas, Nevada and WBYU-AM, WRNO-FM and KMEZ-FM in New Orleans,
Louisiana.
7
<PAGE> 10
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(3) INTANGIBLES
Intangibles, at cost, is comprised of the following:
<TABLE>
<CAPTION>
ESTIMATED
DECEMBER 31, JUNE 30, USEFUL LIVES
1999 2000 (YEARS)
------------ ------------ ------------
<S> <C> <C> <C>
FCC broadcasting licenses...................... $157,700,379 $188,307,206 10-15
Goodwill....................................... 16,763,990 25,219,054 15
Advertising base............................... 4,139,251 4,139,251 5
Loan fees...................................... 2,975,681 3,097,216 7
Noncompete agreements.......................... 1,120,000 1,120,000 2-8
Other intangibles.............................. 5,666,932 5,979,822 5-15
------------ ------------
188,366,233 227,862,549
Less accumulated amortization.................. (51,078,942) (57,918,202)
------------ ------------
$137,287,291 $169,944,347
============ ============
</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 June 30, 2000.
(4) OTHER INVESTMENTS
In December 1999, the Company entered into an agreement to purchase 750,000
shares of preferred stock of eTour, Inc. in exchange for $3.0 million of
advertising airtime. The Company will earn these shares as advertisements are
placed over the term of the agreement. For the three and six months ended June
30, 2000, eTour, Inc. had placed advertising airtime totaling approximately
$109,000 and the Company had earned approximately 27,000 shares. 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.
On January 14, 2000, the Company purchased 600,000 shares of common stock
of FindWhat.com in exchange for a $3.0 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.
On April 4, 2000, the Company purchased 5,394 shares of preferred stock of
iBiquity Digital for $50,002. 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.
(5) LONG-TERM DEBT
At June 30, 2000, the maximum commitment under the revolving credit loan is
$150.0 million and the outstanding balance is $102.2 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%. At
December 31, 1999 and June 30, 2000, the revolving credit loan carried interest
at an average rate of 7.95% and 7.81%, 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
8
<PAGE> 11
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
certain financial ratios. The restrictive covenants include 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, an indirect
wholly-owned subsidiary of the Company, executed a $3.0 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 airtime as specified in the loan agreement and a related advertising
agreement with FindWhat.com. At June 30, 2000, the outstanding principal amount
has been reduced by approximately $711,000 through the placement of advertising
airtime. The note is guaranteed by BFMA.
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
and six months ended June 30, 1999, management fee expense under the agreement
was approximately $636,000 and $1,299,000, respectively. From January 1, 2000 to
February 10, 2000, management fee expense under the agreement was approximately
$447,000.
The Company leases certain office space from its principal stockholder,
George G. Beasley. For the three and six months ended June 30, 1999, rental
expense paid to Mr. Beasley was approximately $23,000 and $46,000, respectively.
For the three and six months ended June 30, 2000, rental expense paid to Mr.
Beasley was approximately $24,000 and $48,000, respectively.
Distributions to stockholders of BFMA during the three and six months ended
June 30, 1999 were approximately $2,967,000. From January 1, 2000 to February
10, 2000, distributions to stockholders of BFMA were approximately $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 and six months ended June 30,
1999, interest expense on notes payable to related parties was approximately
$210,000 and $371,000, respectively. From January 1, 2000 to February 16, 2000,
interest expense on notes payable to related parties was approximately $80,000.
Notes receivable from stockholders bore interest at 9.25% and were repaid
in full on February 16, 2000. For the three and six months ended June 30, 1999,
interest income on notes receivable from related parties was approximately
$69,000 and $169,000, respectively. From January 1, 2000 to February 16, 2000,
interest income on notes receivable from related parties was approximately
$135,000.
9
<PAGE> 12
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 and six months ended June 30, 1999, the contract expense calculated on a
straight-line basis and other direct expenses exceeded related revenues by
$598,000 and $950,000, respectively. For the three and six months ended June 30,
2000, the contract expense calculated on a straight-line basis and other direct
expenses exceeded related revenues by $1,548,000 and $1,918,000, 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 and six months ended June 30, 1999, the Company paid
additional interest of approximately $39,000 and $63,000, respectively. For the
three and six months ended June 30, 2000, the Company received additional
interest of approximately $44,000 and $88,000, respectively. 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.
(9) INCOME TAXES
Income tax expense (benefit) from continuing operations is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- --------------------------
1999 2000 1999 2000
------------- ---------- ----------- -----------
(PRO FORMA) (PRO FORMA)
<S> <C> <C> <C> <C>
Federal:
Current................................. $ 372,000 $765,000 $ 366,000 $ 765,000
Deferred................................ (332,000) (87,000) (917,000) 22,554,000
--------- -------- --------- -----------
40,000 678,000 (551,000) 23,319,000
State:
Current................................. 82,000 169,000 81,000 169,000
Deferred................................ (74,000) (19,000) (203,000) 4,993,000
--------- -------- --------- -----------
8,000 150,000 (122,000) 5,162,000
--------- -------- --------- -----------
$ 48,000 $828,000 $(673,000) $28,481,000
========= ======== ========= ===========
</TABLE>
10
<PAGE> 13
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense (benefit) differs from the amounts that would result
from applying the federal statutory rate of 34% to the Company's net income
(loss) as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- --------------------------
1999 2000 1999 2000
------------- ---------- ----------- -----------
(PRO FORMA) (PRO FORMA)
<S> <C> <C> <C> <C>
Expected pro forma tax expense
(benefit)............................... $26,000 $617,000 $(627,000) $ 21,000
State income taxes, net of federal
benefit................................. 5,000 84,000 (80,000) 3,000
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
Non-deductible amortization of minority
interest acquisitions................... -- 86,000 -- 86,000
Other..................................... 17,000 41,000 34,000 74,000
------- -------- --------- -----------
$48,000 $828,000 $(673,000) $28,481,000
======= ======== ========= ===========
</TABLE>
Temporary differences that give rise to the components of deferred tax
assets and liabilities, at December 31, 1999 and June 30, 2000 are as follows:
<TABLE>
<CAPTION>
1999 2000
------------ ------------
(PRO FORMA)
<S> <C> <C>
Allowance for doubtful accounts.......................... $ 2,623,000 $ 133,000
Accrued interest on notes receivable from related
parties................................................ 1,457,000 --
Notes receivable from related parties.................... 478,000 --
------------ ------------
Gross deferred tax assets.............................. 4,558,000 133,000
Intangibles.............................................. (27,929,000) (26,678,000)
Property and equipment................................... (1,113,000) (1,003,000)
------------ ------------
Gross deferred tax liabilities......................... (29,042,000) (27,681,000)
------------ ------------
Net deferred tax liabilities........................... (24,484,000) (27,548,000)
============ ============
</TABLE>
(10) SEGMENT INFORMATION
Segment information is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1999 2000 1999 2000
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net revenues:
Radio Group One......................... $14,017,402 $16,835,399 $26,910,426 $31,220,925
Radio Group Two......................... 8,988,648 10,245,519 16,239,240 18,646,798
----------- ----------- ----------- -----------
Total................................... 23,006,050 27,080,918 43,149,666 49,867,723
----------- ----------- ----------- -----------
Broadcast cash flow:
Radio Group One......................... $ 4,613,185 $ 5,098,263 $ 8,617,937 $ 9,348,497
Radio Group Two......................... 2,763,676 3,814,417 4,450,457 6,505,274
----------- ----------- ----------- -----------
Total................................... 7,376,861 8,912,680 13,068,394 15,853,771
----------- ----------- ----------- -----------
</TABLE>
11
<PAGE> 14
BEASLEY BROADCAST GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1999 2000 1999 2000
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Reconciliation to income (loss) before
income taxes:
Corporate general and administrative
expenses................................ $ (635,506) $(1,047,690) $(1,299,477) $(2,067,174)
Equity appreciation rights................ -- -- -- (1,173,759)
Depreciation and amortization............. (3,588,769) (4,273,785) (7,189,889) (8,258,992)
Interest expense.......................... (3,214,718) (1,860,348) (6,604,652) (4,523,401)
Other non-operating income................ 137,181 83,900 182,907 231,708
----------- ----------- ----------- -----------
Income (loss) before income taxes......... $ 75,049 $ 1,814,757 $(1,842,717) $ 62,153
=========== =========== =========== ===========
</TABLE>
Radio Group One includes radio stations located in Miami-Ft. Lauderdale,
Ft. Myers-Naples, Fl, Greenville-New Bern-Jacksonville, NC and West Palm Beach,
FL. Radio Group Two includes radio stations located in Philadelphia, PA,
Fayetteville, NC, Augusta, GA, Atlanta, GA and Boston, MA.
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. On May 9, 2000, the
Company granted 25,000 stock options with an exercise price per share equal to
the closing stock price on that date. 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.
12
<PAGE> 15
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. However, we expect barter revenues to
increase as a percentage of our gross revenues and barter related broadcast cash
flow to increase as a percentage of our broadcast cash flow due to our
investments in eTour, Inc. and FindWhat.com.
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
38.62%, applied to income before income taxes.
13
<PAGE> 16
RECENTLY COMPLETED AND PENDING ACQUISITIONS
On June 2, 2000, we purchased two radio stations in the Miami-Ft.
Lauderdale market and one radio station in the West Palm Beach market for
approximately $18.0 million. The acquisition was financed through our credit
facility.
Additionally, we have agreed to acquire three FM radio stations in the Las
Vegas market and two FM and one AM radio stations in the New Orleans market for
an aggregate purchase price of approximately $137.5 million. We intend to
finance these acquisitions through the increased capacity of our credit facility
that we are currently renegotiating. If we are unable to renegotiate our credit
facility on acceptable terms, we will need to finance these acquisitions through
alternative means. The consummation of these acquisitions 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.
RESULTS OF OPERATIONS
Several factors have affected our results of operations in the three and
six months ended June 30, 2000 that did not affect the comparable periods of the
previous year. 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.
Additionally, corporate general and administrative expenses have increased
as we incur the 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. At 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 MONTHS ENDED JUNE 30, 2000 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1999
Net Revenue. Net revenue increased 17.7% to $27.1 million for the three
months ended June 30, 2000 from $23.0 million for three months ended June 30,
1999. The increase was primarily due to the revenue growth at most of our
existing radio stations, particularly in the Miami-Ft. Lauderdale market. In
addition, net revenues increased due to our radio station acquisitions in the
Atlanta, Boston, Miami-Ft. Lauderdale and West Palm Beach markets. On a same
station basis, net revenues increased 13.6% to $27.7 million for the three
months ended June 30, 2000 from $24.4 million for three months ended June 30,
1999.
Station Operating Expenses. Station operating expenses increased 16.2% to
$18.2 million for the three months ended June 30, 2000 from $15.6 million for
three months ended June 30, 1999. The increase was primarily due to increased
station operating expenses related to the radio broadcast rights for the Florida
Marlins sports franchise and the University of Miami Hurricanes football team at
WQAM-AM in Miami-Ft. Lauderdale. The increase was also due to increased station
operating expenses at most of our existing radio stations associated with
generating the growth in net revenues; however, station operating expenses
decreased at WTEL-AM in Philadelphia due to programming changes. In addition,
station operating expenses increased
14
<PAGE> 17
due to our radio station acquisitions in the Atlanta, Boston, Miami-Ft.
Lauderdale and West Palm Beach markets. On a same station basis, station
operating expenses increased 14.4% to $18.4 million for the three months ended
June 30, 2000 from $16.1 million for three months ended June 30, 1999.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased 64.9% to $1.0 million for the three months
ended June 30, 2000 from $0.6 million for three months ended June 30, 1999. The
increase was primarily due to additional reporting and compliance costs of
operating as a public company.
Depreciation and Amortization. Depreciation and amortization increased
19.1% to $4.3 million for the three months ended June 30, 2000 from $3.6 million
for three months ended June 30, 1999. The increase was primarily due to
additional amortization and depreciation expense associated with the acquisition
of radio stations in Atlanta, Boston, Miami-Ft. Lauderdale and West Palm Beach
markets.
Interest Expense. Interest expense decreased 42.1% to $1.9 million for the
three months ended June 30, 2000 from $3.2 million for three months ended June
30, 1999. The decrease 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 with proceeds from the initial public offering. This decrease
was partially offset by an increase in interest expense during the three months
ended June 30, 2000 due to financing the radio station acquisitions in Atlanta,
Boston, Miami-Ft. Lauderdale and West Palm Beach with borrowings from our credit
facility.
Broadcast Cash Flow. Broadcast cash flow increased 20.8% to $8.9 million
for the three months ended June 30, 2000 from $7.4 million for three months
ended June 30, 1999. The increase was primarily due to the additional broadcast
cash flow generated through revenue growth and increased operating efficiencies
at most of our existing radio stations. On a same station basis, broadcast cash
flow increased 12.1% to $9.3 million for the three months ended June 30, 2000
from $8.3 million for three months ended June 30, 1999.
Income Before Income Taxes. We experienced income before income taxes of
$1.8 million for the three months ended June 30, 2000 versus income before pro
forma income taxes of $0.1 million for three months ended June 30, 1999. The
increase was primarily due to the additional income before income taxes
generated through the revenue growth, increased operating efficiencies at most
of our existing radio stations and a decrease in interest expense due to reduced
borrowings from our credit facility. This increase was partially offset by the
increase in amortization and depreciation expense associated with the
acquisition of radio stations in Atlanta, Boston, Miami-Ft. Lauderdale and West
Palm Beach markets.
Net Income. Net income for the three months ended June 30, 2000 was $1.0
million compared to a pro forma net income of $27,000 for three months ended
June 30, 1999. The increase was primarily due to the additional net income
generated through the revenue growth and increased operating efficiencies at
most of our existing radio stations as well as the decrease in interest expense
due to reduced borrowings from our credit facility. This increase was partially
offset by the increase in amortization and depreciation expense associated with
the acquisition of radio stations in Atlanta, Boston, Miami-Ft. Lauderdale and
West Palm Beach markets.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1999
Net Revenue. Net revenue increased 15.6% to $49.9 million for the six
months ended June 30, 2000 from $43.1 million for six months ended March 31,
1999. The increase was primarily due to the revenue growth at most of our
existing radio stations, particularly in the Miami-Ft. Lauderdale market. In
addition, net revenues increased due to our radio station acquisitions in the
Atlanta, Boston, Miami-Ft. Lauderdale and West Palm Beach markets. On a same
station basis, net revenues increased 12.4% to $51.6 million for the six months
ended June 30, 2000 from $45.9 million for six months ended June 30, 1999.
Station Operating Expenses. Station operating expenses increased 13.1% to
$34.0 million for the six months ended June 30, 2000 from $30.1 million for six
months ended June 30, 1999. The increase was primarily due to increased station
operating expenses related to the radio broadcast rights for the Miami Dolphins,
Florida Marlins and Florida Panthers sports franchises and the University of
Miami Hurricanes football team at WQAM-AM in Miami-Ft. Lauderdale. The increase
was also due to increased station
15
<PAGE> 18
operating expenses at most of our existing radio stations associated with
generating the growth in net revenues; however, station operating expenses
decreased at WTEL-AM in Philadelphia due to programming changes. In addition,
station operating expenses increased due to our radio station acquisitions in
the Atlanta, Boston, Miami-Ft. Lauderdale and West Palm Beach markets. On a same
station basis, station operating expenses increased 11.7% to $34.6 million for
the six months ended June 30, 2000 from $30.9 million for six months ended June
30, 1999.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased 59.1% to $2.1 million for the six months ended
June 30, 2000 from $1.3 million for six months ended June 30, 1999. The increase
was primarily due to additional reporting and compliance costs of operating as a
public company.
Depreciation and Amortization. Depreciation and amortization increased
14.9% to $8.3 million for the six months ended June 30, 2000 from $7.2 million
for six months ended June 30, 1999. The increase was primarily due to additional
amortization and depreciation expense associated with the acquisition of radio
stations in Atlanta, Boston, Miami-Ft. Lauderdale and West Palm Beach markets.
Interest Expense. Interest expense decreased 31.5% to $4.5 million for the
six months ended June 30, 2000 from $6.6 million for six months ended June 30,
1999. The decrease 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 with proceeds from the initial public offering. This decrease
was partially offset by an increase in interest expense during the six months
ended June 30, 2000 due to financing the radio station acquisitions in Atlanta,
Boston, Miami-Ft. Lauderdale and West Palm Beach with borrowings from our credit
facility.
Broadcast Cash Flow. Broadcast cash flow increased 21.3% to $15.9 million
for the six months ended June 30, 2000 from $13.1 million for six months ended
June 30, 1999. The increase was primarily due to the additional broadcast cash
flow generated through revenue growth and increased operating efficiencies at
most of our existing radio stations. On a same station basis, broadcast cash
flow increased 13.8% to $17.0 million for the six months ended June 30, 2000
from $15.0 million for six months ended June 30, 1999.
Income (Loss) Before Income Taxes. We experienced income before income
taxes of $0.1 million for the six months ended June 30, 2000 versus a loss
before pro forma income taxes of $1.8 million for six months ended June 30,
1999. The increase was primarily due to the additional income before income
taxes generated through the revenue growth, increased operating efficiencies at
most of our existing radio stations, and a decrease in interest expense due to
reduced borrowings from our credit facility. The revenue growth and increased
operating efficiencies were partially offset by the redemption of equity
appreciation rights for $1.2 million and the increase in amortization and
depreciation expense associated with the acquisition of radio stations in
Atlanta, Boston, Miami-Ft. Lauderdale and West Palm Beach markets.
Net Loss. Net loss for the six months ended June 30, 2000 was $28.4
million compared to a pro forma net loss of $1.2 million for six months ended
June 30, 1999. The decrease was primarily due to the establishment of a $27.6
million net deferred tax liability upon conversion from a series of subchapter S
corporations to a series of subchapter C corporations and the $1.2 million
redemption of equity appreciation rights as a result of the initial public
offering and corporate reorganization. The net loss for the six months ended
June 30, 2000 was partially offset by the additional net income generated
through the revenue growth, increased operating efficiencies at most of our
existing radio stations, the decrease in interest expense due to reduced
borrowings from our credit facility and the increase in amortization and
depreciation expense associated with the acquisition of radio stations in
Atlanta, Boston, Miami-Ft. Lauderdale and West Palm Beach markets.
16
<PAGE> 19
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. The repayment of
approximately $40.5 million 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.
At June 30, 2000, we held $6.5 million in cash and cash equivalents and had
$47.8 million in availability under our credit facility. 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 $3.2 million and $3.0 million for the six months ended
June 30, 1999 and 2000, respectively. The change was primarily due to the
redemption of equity appreciation rights totaling $1.2 million, which was offset
by the additional net income generated through the revenue growth, increased
operating efficiencies at most of our existing radio stations, and the decrease
in interest expense due to reduced borrowings from our credit facility.
Net Cash Provided by (Used in) Investing Activities. Net cash used in
investing activities was $1.2 million and $26.4 million for the six months ended
June 30, 1999 and 2000, respectively. The change was partially due to loans to
the former S corporation stockholders and the subsequent repayment of these
loans and all other outstanding notes receivable from related parties and
stockholders as a result of our initial public offering. The change was also
partially due to the radio station acquisitions in the Atlanta, Boston,
Miami-Ft. Lauderdale and West Palm Beach markets and expenditures for property
and equipment.
Net Cash Provided by (Used in) Financing Activities. Net cash used in
financing activities was $3.1 million for the six months ended June 30, 1999
compared to net cash provided by financing activities of $22.9 million for the
six months ended June 30, 2000. The change was partially due to distributions
made to the former S corporation stockholders prior to our initial public
offering. The change was also partially due to the proceeds from our initial
public offering, less related costs, which were used for repayment of
approximately $58.5 million of the credit facility and all outstanding notes
payable to related parties. The change was also partially due to additional
borrowings from our credit facility to complete the radio station acquisitions
in the Atlanta, Boston, Miami-Ft. Lauderdale and West Palm Beach markets.
17
<PAGE> 20
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 June 30, 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.
At June 30, 2000, we had an outstanding balance under our credit facility
of approximately $102.2 million and availability under our credit facility of
$47.8 million for future acquisitions and other corporate purposes.
At June 30, 2000, the weighted average annual interest rate applicable to
our credit facility was approximately 7.81%. 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 and six months ended June 30, 2000, our unused commitment fee was
approximately $54,000 and $106,000, respectively.
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 leaseback 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.
18
<PAGE> 21
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 have exceeded 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.
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. At December 31, 1999, $124.7 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. At June 30, 2000, $102.2 million
was outstanding under our credit facility. 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 interest rate swap and collar agreements.
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 one interest rate swap. Under this agreement, we pay a fixed
rate of 5.82%, 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.
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 8% and our base LIBOR cannot fall below
6.69%
Notional amounts are used to calculate the contractual payments to be
exchanged under the contract. At December 31, 1999, the notional amount upon
maturity of our swap and collar agreements then outstanding
19
<PAGE> 22
was approximately $50.0 million. At June 30, 2000, the notional amount upon
maturity of our swap and collar agreements is approximately $30.0 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 swap................. $10,000,000 -- -- 5.82% September 2001 $102,000
Interest rate collar............... 20,000,000 6.69% 8% -- May 2002 --
</TABLE>
20
<PAGE> 23
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 counter sued for
breach of contract. We intend to pursue our legal action against the Marlins and
seek dismissal of their counter suit. We cannot yet determine the outcome of
these lawsuits.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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 Station WRCA-AM in
Waltham, Massachusetts, dated December 31, 1999.
2.2* 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.
2.3** Equity Interest Purchase Agreement of Radio Stations
KJUL-FM, KSTJ-FM and KKLZ-FM in Las Vegas, Nevada and
WBYU-AM, WRNO-FM and KMEZ-FM in New Orleans, Louisiana,
dated June 2, 2000.
3.1 Second Amended and Restated Bylaws of the Registrant.
10.1* Credit Agreement between Beasley FM Acquisition Corp. and
affiliated entities and the Bank of Montreal, Chicago
Branch, as agent dated March 30, 1998.
10.2* 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.
10.3* 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.
10.4* 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>
21
<PAGE> 24
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------
<S> <C>
10.5* Form of Agreement of Sale of Four Communications Towers
between Beasley FM Acquisition Corp. and Beasley Family
Towers, Inc.
10.6* Form of Agreement of Sale of a Communications Tower between
Beasley Broadcasting of Eastern North Carolina, Inc. and
Beasley Family Towers, Inc.
10.7* Form of Agreement of Sale of a Communications Tower between
Beasley Broadcasting of New Jersey, Inc. and Beasley Family
Towers, Inc.
10.8* Form of Agreement of Sale of a Communications Tower between
Beasley Broadcasting of Eastern Pennsylvania, Inc. and
Beasley Family Towers, Inc.
10.9* Form of Agreement of Sale of a Communications Tower between
Beasley Broadcasting of Coastal Carolina, Inc. and Beasley
Family Towers, Inc.
10.10* Form of Agreement of Sale of a Communications Tower between
Beasley Reed Acquisition Partnership and Beasley Family
Towers, Inc.
10.11* 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).
** Incorporated by reference to Exhibit 2.1 to Beasley Broadcast Group's Current
Report on Form 8-K dated June 2, 2000 (0-29253).
(b) Reports on Form 8-K. The following report on Form 8-K was filed during the
three month period ended June 30, 2000.
On June 14, 2000 a report on Form 8-K was filed reporting an Equity Interest
Purchase Agreement entered into by Beasley Broadcast Group, Inc. and
Centennial Broadcasting and the appointment of a new director to the Beasley
Broadcast Group, Inc.'s Board of Directors.
22
<PAGE> 25
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: August 2, 2000 BEASLEY BROADCAST GROUP, INC.
/s/ GEORGE G. BEASLEY
--------------------------------------
Name: George G. Beasley
Title: Chairman of the Board and
Chief Executive Officer
Date: August 2, 2000
/s/ CAROLINE BEASLEY
--------------------------------------
Name: Caroline Beasley
Title: Vice President, Chief
Financial Officer,
Secretary, Treasurer and
Director
23
