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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 0-29253
BEASLEY BROADCAST GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 65-0960915
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OF ORGANIZATION) IDENTIFICATION NO.)
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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)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
CLASS A COMMON STOCK, $.001 PAR VALUE
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [X]
As of March 20 , 2000, the aggregate market value of the Class A common
stock held by non-affiliates of the registrant was $88,837,833 based on the
closing price on The Nasdaq Stock Market's National Market on such date.
Class A Common Stock, $.001 par value 7,252,068 Shares Outstanding as of March
20, 2000
Class B Common Stock, $.001 par value 17,021,373 Shares Outstanding as of March
20, 2000
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BEASLEY BROADCAST GROUP, INC.
FORM 10-K ANNUAL REPORT
FOR THE PERIOD ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
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PAGE
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PART I -- FINANCIAL INFORMATION
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 19
Item 3. Legal Proceedings........................................... 20
Item 4. Submission of Matters to a Vote of Security Holders......... 20
PART II -- OTHER INFORMATION
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 20
Item 6. Selected Financial Data..................................... 21
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 24
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 31
Item 8. Financial Statements and Supplementary Data................. 32
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 53
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 53
Item 11. Executive Compensation...................................... 54
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 56
Item 13. Certain Relationships and Related Transactions.............. 57
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K......................................................... 58
61
Signatures....................................................................
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PART I
ITEM 1. BUSINESS
OVERVIEW
We were founded in 1961 and are the 16th largest radio broadcasting company
in the United States based on 1998 gross revenues. After giving effect to our
pending acquisitions in Boston, Miami-Ft. Lauderdale, West Palm Beach and
Augusta, we will own and operate 36 stations, 21 FM and 15 AM. Our stations are
located in nine large and midsized markets in the eastern United States. Twelve
of these stations are located in four of the nation's top twelve radio markets:
Atlanta, Philadelphia, Boston and Miami-Ft. Lauderdale. Our station groups rank
among the first or second largest clusters, based on gross revenues, in five of
our nine markets and, collectively, our radio stations reach approximately three
million people on a weekly basis. For the twelve month period ended December 31,
1999, giving effect to acquisitions and dispositions completed during the
period, as well as the pending acquisitions mentioned above and our recent
acquisitions in Atlanta, as if these acquisitions had been completed at the
beginning of the period, we had net revenues of $99.1 million, broadcast cash
flow of $30.3 million and a net loss of $8.0 million.
We seek to maximize revenues and broadcast cash flow by acquiring and
operating clusters of stations in high-growth large and midsized markets located
primarily in the eastern United States. We have assembled groups of five or more
stations in five of our markets. Our radio stations program a variety of
formats, including urban, contemporary hit radio and country, which target the
demographic groups in each market that we consider the most attractive to our
advertisers. The combination of our market clusters and our advertising, sales
and programming expertise has enabled us to achieve strong same station revenue
and broadcast cash flow growth demonstrated as follows:
- same station net revenues increased 14.4% for the twelve months ended
December 31, 1999 compared to the same period in 1998; and
- same station broadcast cash flow increased 32.3% for the twelve months
ended December 31, 1999 compared to the same period in 1998.
For the periods presented above, we calculate same station results by
comparing the performance of radio stations operated by us at December 31, 1999
to the performance of those same stations, whether or not operated by us, in the
corresponding period of the prior year. These results include the effect of
barter revenues and expenses. Same station results also exclude the Atlanta
stations we recently acquired as well as the Boston, Miami-Ft. Lauderdale, West
Palm Beach and Augusta stations we have agreed to acquire.
We are led by our Chairman and Chief Executive Officer, George G. Beasley,
who has over 35 years of experience in the radio broadcasting industry. Under
Mr. Beasley's guidance, excluding the stations that we currently own, we have
acquired and disposed of a total of 52 radio stations, including stations in Los
Angeles, Chicago, New Orleans, Orlando and Cleveland. We acquired these 52
stations for an aggregate acquisition price of approximately $168.0 million and
the total consideration that we received upon disposition was valued at
approximately $346.1 million. Mr. Beasley is supported by a management team with
an average of 16 years of experience in the radio broadcasting industry. Mr.
Beasley and our management team have established a track record of acquiring and
operating a substantial portfolio of well run radio stations and, in several
instances, have demonstrated the ability to reposition and turn around
under-performing stations. We believe that we are well positioned to continue to
realize cash flow growth from our existing stations and to acquire and operate
new radio stations in both existing and new markets with positive demographic
trends and growth characteristics.
INITIAL PUBLIC OFFERING AND CORPORATE REORGANIZATION
On February 11, 2000, we offered and sold 6,850,000 shares of Class A
common stock. In connection with our initial public offering, we effected a
corporate reorganization. Before our reorganization, we were comprised of a
series of subchapter S corporations, a general partnership and a series of
limited partnerships and limited liability companies. The subchapter S
corporations and the general partnership held the
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operating assets of our radio stations and the limited partnerships held the FCC
licenses for our radio stations. Subchapter S corporations and partnerships are
flow-through entities for federal and some state and local income tax purposes.
As a result, our combined net income for federal and some state and local income
tax purposes has been reported by and taxed directly to the equity holders of
these entities, rather than to us. In connection with our initial public
offering, our subchapter S corporation status of these entities terminated, and
we became subject to federal and applicable state and local corporate income tax
as a subchapter C corporation.
After our reorganization, the various entities comprising our business
became indirect, wholly-owned subsidiaries of Beasley Broadcast Group. To effect
this corporate reorganization:
- George G. Beasley and members of his immediate family contributed their
equity interests in those entities to Beasley Broadcast Group in exchange
for a total of 17,021,373 shares of Class B common stock of Beasley
Broadcast Group; and
- two of our general managers contributed their equity interests in two of
the entities to Beasley Broadcast Group in exchange for a total of
402,068 shares of Class A common stock of Beasley Broadcast Group.
Immediately after these contribution transactions, Beasley Broadcast Group
contributed the capital stock and partnership interests it acquired to Beasley
Mezzanine Holdings, LLC, in exchange for all the membership interests in Beasley
Mezzanine Holdings. As a result, Beasley Mezzanine Holdings became a
wholly-owned subsidiary of Beasley Broadcast Group and our radio station assets
are owned by a series of wholly-owned subsidiaries of Beasley Mezzanine
Holdings.
OPERATING STRATEGY
The principal components of our operating strategy are to:
- Develop Market-Leading Clusters. We seek to secure and maintain a
leadership position in the markets we serve by creating clusters of
multiple stations in each of our markets. Our station groups rank among
the first or second largest clusters, based on gross revenues, in five of
our nine markets. We operate our stations in clusters to capture a
variety of demographic listener groups, which enhances our stations'
appeal to a wide range of advertisers. In addition, we have been able to
achieve operating efficiencies by strategically aligning our sales and
promotional efforts and consolidating broadcast facilities where possible
to minimize duplicative management positions and reduce overhead
expenses. Finally, we believe that strategic acquisitions of additional
stations in existing clusters positions us to capitalize on our market
expertise and existing relationships with local advertisers to increase
revenues of the acquired stations.
- Conduct Extensive Market Research. We conduct extensive market research
to enhance our ratings and in certain circumstances to identify
opportunities to reformat a station to reach an underserved demographic
group. Our research, programming and marketing strategy combines thorough
research with an assessment of our competitors' vulnerabilities and
overall market dynamics in order to identify specific audience and
formatting opportunities within each market. Using this research, we
tailor our programming, marketing and promotions on each station to
maximize its appeal to its target audience and to respond to the changing
preferences of our listeners.
- Establish Strong Local Brand Identity. Our stations pursue a variety of
programming and marketing initiatives designed to develop a distinctive
identity and to strengthen the stations' local brand or franchise. In
addition, through our research, programming and promotional initiatives,
we create a marketable identity for our stations to enhance audience
share and listener loyalty. As part of this objective, we promote
nationally recognized on-air personalities and local sports programming
at a number of our stations. For example, we broadcast
nationally-syndicated shows such as "Rush Limbaugh," "Dr. Laura" and
"Howard Stern" and we are the flagship station for the Miami Dolphins,
Florida Marlins, Florida Panthers and Miami Hurricanes on our sports
station in the Miami-Ft. Lauderdale market.
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- Build Relationship-Oriented Sales Staff and Emphasize Focused Marketing
and Promotional Initiatives. We seek to gain advertising revenue share
in each of our markets by utilizing our relationship-oriented sales staff
to lead local and national marketing and promotional initiatives. We
design our sales efforts based on advertiser demand and market
conditions. Our stations have an experienced and stable sales force with
an average of three years experience with Beasley Broadcast Group. In
addition, we provide our sales force with extensive training, competitive
compensation and performance based incentives. Our stations also engage
in special local promotional activities such as concerts featuring
nationally recognized performers, contests, charitable events and special
community events. Our experienced sales staff and these promotional
initiatives help strengthen our relationship with our advertisers and
listening community.
- Hire, Develop and Motivate Strong Local Management Teams. Our station
general managers have been with Beasley Broadcast Group for an average of
approximately nine years, and a substantial majority operate under
employment contracts. We believe that broadcasting is primarily a
locally-based business and much of its success is based on the efforts of
local management teams. We believe that our station managers have been
able to recruit, develop, motivate and train superior management teams.
We offer competitive compensation packages with performance-based
incentives for our key employees. In addition, we provided employees with
opportunities for personal growth and advancement through extensive
training, seminars and other educational initiatives.
- Enhance Broadcast Cash Flow of Underutilized AM Stations. We seek to
selectively acquire and enhance the performance of major-market AM
stations serving niche markets. To enhance broadcast cash flows at these
radio stations, we sell blocks of time to providers of health, ethnic,
religious and other specialty formats.
ACQUISITION STRATEGY
Since June 1996, we have acquired or agreed to acquire 25 radio stations.
Our future acquisition strategy, which will focus on stations located in the 100
largest radio markets, is to:
- acquire additional radio stations in our current markets to further
enhance our market position;
- acquire existing clusters in new markets or establish a presence in new
markets where we believe we can build successful clusters over time;
- pursue swap opportunities with other radio station owners to build or
enhance our market clusters; and
- selectively acquire large-market AM stations serving attractive
demographic groups with specialty programming.
INTERNET STRATEGY
We recently formed a division, Beasley Interactive, that is creating an
Internet presence for Beasley Broadcast Group that will complement our existing
radio business. In November 1999, we hired a creative director to develop web
page content for our radio stations' web sites that reflects each station's
programming and brand. Our strategy is to create additional revenue streams from
advertising, e-commerce and web page development and support for advertisers by
capitalizing on the loyalty of our radio station listeners by persuading them to
use our stations' web sites.
From time to time, we expect to make strategic investments in Internet
companies that we believe are complementary to our radio broadcasting business
and that are available on commercially attractive terms. On January 14, 2000, we
purchased 600,000 shares of common stock of FindWhat.com, representing
approximately 4.8% of the outstanding capital stock, in exchange for $3.0
million, reflected by a promissory note. The outstanding amount due under the
promissory note may be offset by the purchase price of advertisements placed by
FindWhat.com with our radio stations. Also, in December 1999, we 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 our radio stations.
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STATION PORTFOLIO
Our stations are clustered in demographically attractive and growing
markets located in the eastern United States, including major markets such as
Atlanta, Philadelphia, Boston and Miami-Ft. Lauderdale. The following table sets
forth information about our portfolio and the markets where we operate. The
column entitled Beasley Stations in the table includes radio stations in Boston,
Miami-Ft. Lauderdale, West Palm Beach and Augusta that we have agreed to
acquire.
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1999 BEASLEY
1999 1995-1998 BEASLEY MARKET
RADIO MARKET RADIO MARKET 1999 STATIONS REVENUE
REVENUE AVERAGE ANNUAL RADIO MARKET --------- ------------
MARKET RANK REVENUE GROWTH REVENUE GROWTH FM AM SHARE RANK
------ ------------ -------------- -------------- --- --- ----- ----
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Atlanta, GA................... 7 14.6% 22.3% -- 2 -- --
Philadelphia, PA.............. 9 9.5 13.1 2 2 7.2% 5
Boston, MA.................... 10 13.2 20.5 -- 1 -- --
Miami-Ft. Lauderdale, FL...... 12 15.2 12.3 2 3 18.8 2
West Palm Beach, FL........... 44 8.9 15.2 -- 1 -- --
Ft. Myers-Naples, FL.......... 74 11.2* 13.1 4 1 36.6 1
Greenville-New Bern-
Jacksonville, NC............ 86 12.1 5.7 5 1 57.3 1
Fayetteville, NC.............. 91 13.0 6.2 4 2 62.2 1
Augusta, GA................... 112 3.5 7.1 4 2 19.4 2
Total............... 21 15
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* Radio market average annual revenue growth data is presented from 1996-1998.
Data for 1995 is unavailable.
For this report, we derived:
- the 1999 radio market revenue rank from BIA Research, Inc.
- the 1995-1998 radio market average annual revenue growth for the
Philadelphia, Miami-Ft. Lauderdale, Ft. Myers-Naples and Fayetteville
markets from Miller, Kaplan, Arase & Co., (Equivalent Weeks Market
Revenue Report, December 1995 and December 1996 and Year-To-Date Market
Performance Summary, December 1997 and December 1998 eds.). Because
information was not available from Miller, Kaplan, Arase & Co. for the
Atlanta, Boston, West Palm Beach, Greenville-New Bern-Jacksonville and
Augusta markets, for these markets we used Duncan's Radio Market Guide
(1999 ed.).
- the 1999 radio market revenue growth from Miller, Kaplan, Arase & Co.
(December 1999 ed.).
- our audience share and audience rank in target demographic data from
surveys of persons, listening Monday through Sunday, 6 a.m. to 12
midnight, in the indicated demographic, as set forth in the Fall 1999
radio market reports published by The Arbitron Ratings Company.
- our 1999 cluster market revenue rank and 1999 cluster market revenue
share data from Miller, Kaplan, Arase & Co. (December 1999 ed.).
- the viable station data for each market from Duncan's Radio Market Guide
(1999 ed.). Duncan's defines viable stations as stations that are active
and viable competitors for advertising dollars in a market.
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We present radio station and market data assuming the completion of our
pending acquisitions. Further information about our radio stations on a
market-by-market basis follows.
ATLANTA, GA
1999 RADIO MARKET REVENUE RANK: 7
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TARGET AUDIENCE SHARE IN AUDIENCE RANK IN
STATION CALL LETTERS YEAR ACQUIRED FORMAT DEMOGRAPHIC TARGET DEMOGRAPHIC TARGET DEMOGRAPHIC
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WAEC-AM 2000 religious 35-64 -- --
WWWE-AM 2000 Hispanic 35-64 -- --
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MARKET OVERVIEW
Atlanta is the seventh largest radio market in the United States based on
1999 radio market revenue. Radio market revenues in the Atlanta market have
grown from approximately $170.0 million in 1995 to approximately $256.1 million
in 1998 at an average annual rate of 14.6%. Radio market revenue grew 22.3% in
1999, as compared to 1998. In 1998, there were 16 viable stations in the Atlanta
market.
ATLANTA STATIONS
On January 6, 2000, we purchased two AM radio stations in Atlanta for $10.0
million.
WAEC-AM is a religious/talk radio station. WAEC-AM traditionally has
broadcast ministers, including Martin Luther King, Sr., targeting the
African-American community.
WWWE-AM is a Spanish language radio station targeting the Hispanic
community.
PHILADELPHIA, PA
1999 RADIO MARKET REVENUE RANK: 9
1999 CLUSTER MARKET REVENUE SHARE: 7.2%
1999 CLUSTER MARKET REVENUE RANK: 5
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TARGET AUDIENCE SHARE IN AUDIENCE RANK IN
STATION CALL LETTERS YEAR ACQUIRED FORMAT DEMOGRAPHIC TARGET DEMOGRAPHIC TARGET DEMOGRAPHIC
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WWDB-FM 1997 news/talk 35-64 4.2% 8
WXTU-FM 1983 country 25-54 3.3 13t
WTEL-AM 1986 brokered 35-64 * --
WTMR-AM 1998 religious 35-64 * --
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* Less than 1%.
MARKET OVERVIEW
Philadelphia is the ninth largest radio market in the United States based
on 1999 radio market revenue. Radio market revenues in the Philadelphia market
have grown from approximately $189.9 million in 1995 to approximately $249.1
million in 1998 at an average annual rate of 9.5%. Radio market revenue grew
13.1% in 1999, as compared to 1998. In 1998, there were 19 viable stations in
the Philadelphia market.
PHILADELPHIA STATIONS
WWDB-FM is a news/talk radio station broadcasting news from 5 AM to 9 AM
and talk for the remainder of the day. In 1975, WWDB-FM became the first
commercial FM station in the country to operate as a talk station. WWDB-FM's
programming includes renowned announcer Sid Marks, who has been hosting "Friday
with Frank" and "Sunday with Sinatra" for over 40 years. Three local talk show
hosts have been with the radio station since the format inception in 1975.
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WXTU-FM has been the only country music radio station in Philadelphia for
the past 15 years. Of the eight counties that make up the Philadelphia metro
area, WXTU-FM targets the seven county suburban area that accounts for 70% of
the Philadelphia metro population. We believe that WXTU-FM has a loyal audience
that produces excellent results for its advertisers. The WXTU-FM morning show
featuring Harman & Evans is nationally recognized by country music listeners. In
1997, the station opened a country nightclub called "Club 92.5 -- A Music
Saloon" to create more awareness of country music in Philadelphia and provide a
distinctive source of additional revenue and advertising. In addition, WXTU-FM
continues to hold its annual Anniversary Show in June, bringing in performers
such as Reba McEntire, Alabama, Brooks & Dunn and LeAnn Rimes.
WTEL-AM is a brokered radio station that focuses on health, financial,
inspirational and other niche programming.
WTMR-AM has been operating as a Christian station since 1976. For the last
three fiscal years, WTMR-AM has sold over 90% of its available broadcast time.
BOSTON, MA
1999 RADIO MARKET REVENUE RANK: 10
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TARGET AUDIENCE SHARE IN AUDIENCE RANK IN
STATION CALL LETTERS YEAR ACQUIRED FORMAT DEMOGRAPHIC TARGET DEMOGRAPHIC TARGET DEMOGRAPHIC
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WRCA-AM pending Hispanic 25-54 -- --
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MARKET OVERVIEW
Boston is the tenth largest radio market in the United States based on 1999
radio market revenue. Radio market revenues in the Boston market have grown from
approximately $171.0 million in 1995 to approximately $247.9 million in 1998 at
an average annual rate of 13.2%.Radio market revenue grew 20.5% in 1999, as
compared to 1998. In 1998, there were 19.5 viable stations in the Boston market.
BOSTON STATION
We have entered into an agreement to purchase one AM radio station in
Boston for approximately $6 million, subject to an upward adjustment of up to $2
million if the FCC approves specified increases in the power of the station's
transmitter. We expect this transaction to close in the second quarter of 2000.
WRCA-AM is a brokered radio station that focuses on Hispanic programming,
reaching many ethnic and religious groups in the Boston area.
MIAMI-FT. LAUDERDALE, FL
1999 RADIO MARKET REVENUE RANK: 12
1999 CLUSTER MARKET SHARE: 18.8%
1999 CLUSTER MARKET REVENUE RANK: 2
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TARGET AUDIENCE SHARE IN AUDIENCE RANK IN
STATION CALL LETTERS YEAR ACQUIRED FORMAT DEMOGRAPHIC TARGET DEMOGRAPHIC TARGET DEMOGRAPHIC
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WPOW-FM 1986 dance CHR 18-34 9.4% 2
WQAM-AM 1996 sports/talk 25-54 men 5.5 4t
WKIS-FM 1996 country 25-54 3.9 9t
WWNN-AM pending health 35+ -- --
WHSR-AM pending foreign 25-54 -- --
language
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MARKET OVERVIEW
Miami-Ft. Lauderdale is the twelfth largest radio market in the United
States based on 1999 radio market revenue. Radio market revenues in the
Miami-Ft. Lauderdale market have grown from approximately $136.3 million in 1995
to approximately $206.6 million in 1998 at an average annual rate of 15.2%.
Radio market revenue grew 12.3% in 1999, as compared to 1998. In 1998, there
were 24.5 viable stations in the Miami-Ft. Lauderdale market.
MIAMI-FT. LAUDERDALE STATIONS
We have agreed to acquire two AM stations in the Miami-Ft. Lauderdale
market and one AM station in the West Palm Beach market for a total purchase
price of approximately $18 million. We expect this transaction to close in the
second quarter of 2000.
WPOW-FM targets young Hispanic women in the 18 to 34 age group. It has a
listening audience that is 65% Hispanic.
WQAM-AM is the only AM station in South Florida that covers the Miami metro
area with a full, non-directional signal day and night. The station is currently
ranked second in its target demographic. WQAM-AM broadcasts play-by-play sports
and is the flagship station for Miami Dolphins football, Florida Marlins
baseball, Florida Panthers hockey and the University of Miami sports. 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. WQAM-AM has high profile
sports/talk personalities such as Neil Rogers, a top ranked air personality in
Miami, and Hank Goldberg, who is also featured on ESPN.
WKIS-FM is the only country music station in the Miami-Ft. Lauderdale
market. The listening audience of WKIS-FM is 87% non-ethnic. WKIS-FM is the top
rated non-ethnic station in its target demographic with a 10.0% audience share.
This station is licensed in Boca Raton, Florida and its primary coverage area
reaches Dade and Broward counties, which are located in the Miami-Ft. Lauderdale
market.
WWNN-AM is a brokered station that focuses on health talk, featuring
programs that discuss medical information, vitamins and traditional and
non-traditional medicines.
WHSR-AM is a brokered station that focuses on international programming.
WEST PALM BEACH, FL
1999 RADIO MARKET REVENUE RANK: 44
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TARGET AUDIENCE SHARE IN AUDIENCE RANK IN
STATION CALL LETTERS YEAR ACQUIRED FORMAT DEMOGRAPHIC TARGET DEMOGRAPHIC TARGET DEMOGRAPHIC
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WSBR-AM pending financial 35-64 men * 31t
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* Less than 1%.
MARKET OVERVIEW
West Palm Beach is the forty-fourth largest radio market in the United
States based on 1999 radio market revenue. Radio market revenues in the West
Palm Beach market have grown from approximately $33.7 million in 1995 to
approximately $43.5 million in 1998 at an average annual rate of 8.9%. Radio
market revenue grew 15.2% in 1999, as compared to 1998. In 1998, there were 14.5
viable stations in the West Palm Beach market.
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WEST PALM BEACH STATIONS
We have entered into an agreement to purchase one AM radio station in West
Palm Beach, along with two AM radio stations in the Miami-Ft. Lauderdale market,
for a total purchase price of approximately $18 million. We expect this
transaction to close in the second quarter of 2000.
WSBR-AM is a brokered station that focuses on financial topics, including
investment strategies and financial services. It also delivers news, traffic and
weather information.
FT. MYERS-NAPLES, FL
1999 RADIO MARKET REVENUE RANK: 74
1999 CLUSTER MARKET REVENUE SHARE: 36.6%
1999 CLUSTER MARKET REVENUE RANK: 1
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TARGET AUDIENCE SHARE IN AUDIENCE RANK IN
STATION CALL LETTERS YEAR ACQUIRED FORMAT DEMOGRAPHIC TARGET DEMOGRAPHIC TARGET DEMOGRAPHIC
- -------------------- ------------- ---------------- ----------- ------------------ ------------------
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WXKB-FM 1995 adult CHR 18-49 women 16.4% 1
WJBX-FM 1998 alternative rock 18-34 men 15.7 1
WRXK-FM 1986 classic rock 25-54 men 12.5 1
WJST-FM 1998 nostalgia 55+ 6.8 2
WWCN-AM 1987 sports/talk 25-54 men 3.1 9t
</TABLE>
MARKET OVERVIEW
Ft. Myers-Naples is the seventy-fourth largest radio market in the United
States based on 1999 radio market revenue. Radio market revenues in the Ft.
Myers-Naples market have grown from approximately $18.4 million in 1996 to
approximately $22.8 million in 1998 at an average annual rate of 11.2%. Radio
market revenue grew 13.1% in 1999, as compared to 1998. In 1998, there were 16.5
viable stations in the Ft. Myers-Naples market.
FT. MYERS-NAPLES STATIONS
We acquired WJBX-FM in February 1998 and since then have upgraded the local
sales staff and have increased advertising rates.
WRXK-FM broadcasts the Howard Stern Morning Show, the number one rated
morning show in the market.
We purchased WJST-FM in February 1998. Since then, the station has created
a local morning show, increased the number of sales people, raised advertising
rates and increased its promotional efforts. After the local morning show, the
station joins the Music of Your Life syndicated network for the remainder of the
day. Under our management, we have secured a Class C3 license for this station,
which will enable WJST-FM to broadcast with 50 kW of power. The new license will
allow full market coverage. Currently, the station operates at 6 kW.
WWCN-AM simulcasts with WQAM-AM daily beginning with the Neil Rogers show.
WWCN-AM also simulcasts sports events with WQAM-AM.
WJBX-FM and WJST-FM are co-located in Ft. Myers. We plan to co-locate all
of our radio stations in the Ft. Myers-Naples market by the fourth quarter of
2000, which we expect will lower our operating expenses for this market.
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GREENVILLE-NEW BERN-JACKSONVILLE, NC
1999 RADIO MARKET REVENUE RANK: 86
1999 CLUSTER MARKET REVENUE SHARE: 57.3%
1999 CLUSTER MARKET REVENUE RANK: 1
<TABLE>
<CAPTION>
TARGET AUDIENCE SHARE IN AUDIENCE RANK IN
STATION CALL LETTERS YEAR ACQUIRED FORMAT DEMOGRAPHIC TARGET DEMOGRAPHIC TARGET DEMOGRAPHIC
- -------------------- ------------- ------------ ----------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
WSFL-FM 1991 classic rock 25-54 men 15.4% 1
WXNR-FM 1996 alternative 18-34 men 15.2 1
rock
WIKS-FM 1996 urban 25-54 11.0 2
WMGV-FM 1996 adult 25-54 women 10.8 3
contemporary
WNCT-FM 1996 oldies 35-64 6.8 4
WNCT-AM 1996 Hispanic 25-54 * --
brokered
</TABLE>
- ---------------
* Less than 1%.
MARKET OVERVIEW
Greenville-New Bern-Jacksonville is the eighty-sixth largest radio market
in the United States based on 1999 radio market revenue. Radio market revenues
in the Greenville-New Bern-Jacksonville market have grown from approximately
$14.6 million in 1995 to approximately $20.5 million in 1998 at an average
annual rate of 12.1%. Radio market revenue grew 5.7% in 1999, as compared to
1998. In 1998, there were 11.5 viable stations in the Greenville-New
Bern-Jacksonville market.
GREENVILLE-NEW BERN-JACKSONVILLE STATIONS
WSFL-FM is anchored by the popular John Boy and Billy Big Show, which
originates in Charlotte, North Carolina.
WIKS-FM is the only urban contemporary station in the Greenville-New
Bern-Jacksonville market. It broadcasts the nationally syndicated Tom Joyner
Morning Show, which consistently ranks as one of the top three morning shows in
the market.
WNCT-AM has recently changed its format. In 1999, WNCT-AM began brokering
50% of its airtime to a group that provided the market's first Hispanic
programming. In the year 2000, 100% of WNCT-AM's programming will be Hispanic.
There are an estimated 30,000 Hispanics in the metro and an additional 30,000
Hispanics in the total survey area.
WSFL-FM, WIKS-FM, WXNR-FM and WMGV-FM are co-located in New Bern, North
Carolina. WNCT-FM and WNCT-AM are co-located in Greenville, North Carolina.
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<PAGE> 12
FAYETTEVILLE, NC
1999 RADIO MARKET REVENUE RANK: 91
1999 CLUSTER MARKET REVENUE SHARE: 62.2%
1999 CLUSTER MARKET REVENUE RANK: 1
<TABLE>
<CAPTION>
TARGET AUDIENCE SHARE IN AUDIENCE RANK IN
STATION CALL LETTERS YEAR ACQUIRED FORMAT DEMOGRAPHIC TARGET DEMOGRAPHIC TARGET DEMOGRAPHIC
- -------------------- ------------- ------------ ----------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
WZFX-FM 1997 urban 18-49 16.0% 1
WKML-FM 1983 country 25-54 12.2 1t
WFLB-FM 1996 oldies 35-64 7.8 3
WUKS-FM 1997 urban/adult 25-54 6.7 4
contemporary
WAZZ-AM 1997 nostalgia 55+ 2.2 9t
WYRU-AM 1997 religious 35-64 1.0 19t
</TABLE>
MARKET OVERVIEW
Fayetteville is the ninety-first largest radio market in the United States
based on 1999 radio market revenue. Radio market revenues in the Fayetteville
market have grown from approximately $11.5 million in 1995 to approximately
$16.4 million in 1998 at an average annual rate of 13.0%. Radio market revenue
grew 6.2% in 1999, as compared to 1998. In 1998, there were 9.5 viable stations
in the Fayetteville market.
FAYETTEVILLE STATIONS
We have been successful in positioning WZFX-FM as the dominant urban radio
station in the market. The radio station emphasizes its continuing community
involvement, including its annual birthday party with a salute to the military
of Fort Bragg. Approximately 10,000 listeners attended this event last year.
WKML is the only significant country radio station in the Fayetteville
market. WKML-FM broadcasts selected NASCAR races, including races from the Motor
Racing Network and the Professional Racing Network. WKML-FM has consistently
been the highest billing radio station in the market.
WFLB-FM is the market's exclusive broadcaster of the University of North
Carolina football and basketball games. In 1997, we relocated this station's
antenna, giving WFLB-FM a highly desirable signal in the Fayetteville market.
In 1997, WUKS-FM changed its format from young urban, with a target
demographic audience of 12-24, to a format of urban/adult contemporary with a
target demographic audience of 25-54. WUKS-FM broadcasts the nationally
syndicated Tom Joyner Morning Show. While there is shared listening between
WUKS-FM and WZFX-FM, WUKS-FM attracts an older audience.
WAZZ-AM is the second oldest station in the market and has a nostalgia
format. WAZZ-AM's morning show is anchored by forty-year local radio veteran,
Curt Nunnery. WAZZ-AM is Fayetteville's exclusive broadcaster of the Charlotte
Hornets and the Atlanta Braves. WAZZ-AM also carries a select group of Busch
Garden National and Winston Cup Series races from the Motor Racing Network.
WYRU-AM is a religious format station targeted to the African-American
community. In 1999, WYRU-AM sold 90% of its available broadcast time.
10
<PAGE> 13
AUGUSTA, GA
1999 RADIO MARKET REVENUE RANK: 112
1999 CLUSTER MARKET REVENUE SHARE: 19.4%
1999 CLUSTER MARKET REVENUE RANK: 2
<TABLE>
<CAPTION>
TARGET AUDIENCE SHARE IN AUDIENCE RANK IN
STATION CALL LETTERS YEAR ACQUIRED FORMAT DEMOGRAPHIC TARGET DEMOGRAPHIC TARGET DEMOGRAPHIC
- -------------------- ------------- ------------ ----------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
WCHZ-FM 1997 alternative 18-34 men 14.0% 1
rock
WAJY-FM 1994 nostalgia 55+ 10.7 3
WGAC-AM 1993 news/talk/sports 35-64 9.3 2
WGOR-FM 1992 oldies 35-64 5.2 5t
WRDW-AM pending sports/talk 25-54 men 3.0 13
WRFN-FM pending sports/talk 25-54 men * --
</TABLE>
- ---------------
* Less than 1%.
MARKET OVERVIEW
Augusta is the one hundred twelfth largest radio market in the United
States based on 1999 radio market revenue. Radio market revenues in the Augusta
market have grown from approximately $13.9 million in 1995 to approximately
$15.4 million in 1998 at an average annual rate of 3.5%. Radio market revenue
grew 7.1% in 1999, as compared to 1998. In 1998, there were 13 viable stations
in the Augusta market.
AUGUSTA STATIONS
WCHZ-FM is the only alternative rock radio station in Augusta. The station
broadcasts the Lex and Terry syndicated morning show, which has gone from 0.8%
of market share in the Spring of 1998 to 14.3% of the market share in the Fall
of 1999.
WAJY-FM has been Augusta's only nostalgia radio station since February
1995. The radio station's limited coverage and proximity to Aiken, South
Carolina have made nostalgia an attractive programming format. Aiken, South
Carolina, has been rated as one of the top 10 places to retire in America.
WAJY-FM focuses on local news and community service programming. WAJY-FM
broadcasts the Westwood One "AM Only" format.
WGAC-AM is Augusta's oldest radio station still in operation. Currently,
WGAC-AM's morning show is hosted by 40 year Augusta veteran, Harley Drew.
Middays feature the nationally syndicated shows of Dr. Laura and Rush Limbaugh.
Afternoons feature local talk celebrity, Austin Rhodes. WGAC-AM broadcasts the
Atlanta Braves baseball and the University of Georgia Bulldogs football and
basketball games.
WGOR-FM is Augusta's only oldies radio station. It has a long tradition of
hosting well known local air talent, including Harley Drew, featured during
middays, with over 40 years of experience. Ron Jones, the afternoon host, has 13
years of experience.
WRDW-AM is a sports/talk radio station. WRDW-AM broadcasts the Atlanta
Hawks, Atlanta Falcons and Georgia Tech football and basketball games. WRDW-AM
also broadcasts nationally-syndicated shows such as Don Imus during the mornings
and G. Gordon Liddy during middays.
WRFN-FM is a sports/talk radio station and simulcasts 100% of its time with
WRDW-AM.
COMPETITION; CHANGES IN BROADCASTING INDUSTRY
The radio broadcasting industry is highly competitive. The success of each
of our stations depends largely upon its audience ratings and its share of the
overall advertising revenue within its market. Our stations compete for
listeners and advertising revenue directly with other radio stations within
their respective markets. Radio stations compete for listeners primarily on the
basis of program content that appeals to a particular demographic group. By
building a strong listener base consisting of a specific demographic group in
each of our markets, we are able to attract advertisers seeking to reach those
listeners.
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<PAGE> 14
The following are some of the factors that are important to a radio
station's competitive position:
- management experience;
- the station's local audience rank in its market;
- transmitter power;
- assigned frequency;
- audience characteristics;
- local program acceptance; and
- the number and characteristics of other radio stations and other
advertising media in the market area.
In addition, we attempt to improve our competitive position with
promotional campaigns aimed at the demographic groups targeted by our stations
and by sales efforts designed to attract advertisers. Recent changes in the
Communications Act of 1934, as amended, and the Federal Communications
Commission's policies and rules permit increased ownership and operation of
multiple local radio stations.
Despite the competitiveness within the radio broadcasting industry, some
barriers to entry exist. The operation of a radio broadcast station requires a
license from the FCC. The number of radio stations that can operate in a given
market is limited by strict AM interference criteria and availability of FM
radio frequencies allotted by the FCC to communities in that market. The number
of stations that a single entity may operate in a market is further limited by
the FCC's multiple ownership rules that regulate the number of stations serving
the same area that may be owned and controlled by a single entity.
Our stations also compete for audiences and advertising revenues within
their respective markets directly with other radio stations, as well as with
other media such as newspapers, magazines, network and cable television, outdoor
advertising and direct mail. In addition, the radio broadcasting industry is
subject to competition from new media technologies that are being developed or
introduced such as:
- satellite delivered audio radio service, which could result in the
introduction of new satellite radio services with sound quality
equivalent to that of compact discs;
- audio programming by cable systems, direct broadcast satellite systems,
Internet content providers, personal communications services and other
digital audio broadcast formats; and
- in-band on-channel digital radio, which could provide multi-channel,
multi-format digital radio services in the same bandwidth currently
occupied by traditional AM and FM radio services.
The FCC has adopted proposals for the establishment of low-powered FM
stations that would be designed to serve small localized areas. The radio
broadcasting industry historically has grown despite the introduction of new
technologies for the delivery of entertainment and information, such as
television broadcasting, cable television, audio tapes and compact discs. A
growing population and greater availability of radios, particularly car and
portable radios, have contributed to this growth. We cannot assure you, however,
that this historical growth will continue or that the development or
introduction in the future of any new media technology will not have an adverse
effect on the radio broadcasting industry.
The FCC has adopted licensing and operating rules for satellite delivered
audio and in April 1997 awarded two licenses for this service. Satellite
delivered audio may provide a medium for the delivery by satellite or
terrestrial means of multiple new audio programming formats to local and/ or
national audiences. Digital technology also may be used in the future by
terrestrial radio broadcast stations either on existing or alternate
broadcasting frequencies, and the FCC has stated that it will consider making
changes to its rules to permit AM and FM radio stations to offer digital sound
following industry analysis of technical standards. In addition, the FCC has
authorized an additional 100 kHz of bandwidth for the AM band and has allotted
frequencies in this new band to certain existing AM station licensees that
applied for migration to the expanded AM band, subject to the requirement that
at the end of a transition period, those licensees return to
12
<PAGE> 15
the FCC either the license for their existing AM band station or the license for
the expanded AM band station.
We cannot predict what other matters might be considered in the future by
the FCC, nor can we assess in advance what impact, if any, the implementation of
any of these proposals or changes might have on our business.
We employ a number of on-air personalities and generally enter into
employment agreements with these personalities to protect our interests in those
relationships that we believe to be valuable. The loss of some of these
personalities could result in a short-term loss of audience share, but we do not
believe that the loss would have a material adverse effect on our business.
FEDERAL REGULATION OF RADIO BROADCASTING
The radio broadcasting industry is subject to extensive and changing
regulation of, among other things, program content, advertising content,
technical operations and business and employment practices. The ownership,
operation and sale of radio stations are subject to the jurisdiction of the FCC.
Among other things, the FCC:
- assigns frequency bands for broadcasting;
- determines the particular frequencies, locations and operating power of
stations;
- issues, renews, revokes and modifies station licenses;
- determines whether to approve changes in ownership or control of station
licenses;
- regulates equipment used by stations; and
- adopts and implements regulations and policies that directly affect the
ownership, operation and employment practices of stations.
The FCC has the power to impose penalties for violations of its rules or
the Communications Act, including the imposition of monetary forfeitures, the
issuance of short-term licenses, the imposition of a condition on the renewal of
a license, non-renewal of licenses and the revocation of operating authority.
The following is a brief summary of some provisions of the Communications
Act and of specific FCC regulations and policies. The summary is not a
comprehensive listing of all of the regulations and policies affecting radio
stations. For further information concerning the nature and extent of federal
regulation of radio stations, you should refer to the Communications Act, FCC
rules and FCC public notices and rulings.
FCC LICENSES. Radio stations operate pursuant to renewable broadcasting
licenses that are ordinarily granted by the FCC for maximum terms of eight
years. A station may continue to operate beyond the expiration date of its
license if a timely filed license renewal application is pending. During the
periods when renewal applications are pending, petitions to deny license
renewals can be filed by interested parties, including members of the public.
The FCC is required to hold hearings on a station's renewal application if a
substantial or material question of fact exists as to whether the station has
served the public interest, convenience and necessity. If, as a result of an
evidentiary hearing, the FCC determines that the licensee has failed to meet
certain requirements and that no mitigating factors justify the imposition of a
lesser sanction, then the FCC may deny a license renewal application.
Historically, FCC licenses have generally been renewed. We have no reason to
believe that our licenses will not be renewed in the ordinary course, although
there can be no assurance to that effect. The non-renewal of one or more of our
licenses could have a material adverse effect on our business.
The FCC classifies each AM and FM station. An AM station operates on either
a clear channel, regional channel or local channel. A clear channel is one on
which AM stations are assigned to serve wide areas. Clear channel AM stations
are classified as either: Class A stations, which operate on an unlimited time
basis and are designated to render primary and secondary service over an
extended area; Class B stations, which operate on an unlimited time basis and
are designed to render service only over a primary service area; or Class D
13
<PAGE> 16
stations, which operate either during daytime hours only, during limited times
only or on an unlimited time basis with low nighttime power. A regional channel
is one on which Class B and Class D AM stations may operate and serve primarily
a principal center of population and the rural areas contiguous to it. A local
channel is one on which AM stations operate on an unlimited time basis and serve
primarily a community and the immediately contiguous suburban and rural areas.
Class C AM stations operate on a local channel and are designed to render
service only over a primary service area that may be reduced as a consequence of
interference.
The minimum and maximum facilities requirements for an FM station are
determined by its class. FM class designations depend upon the geographic zone
in which the transmitter of the FM station is located. In general, commercial FM
stations are classified as follows, in order of increasing power and antenna
height: Class A, B1, C3, B, C2, C1 and C.
The following table sets forth the metropolitan market served, call
letters, FCC license classification, frequency, power and FCC license expiration
date of each of the stations that we will own or operate upon the purchase of
radio stations in Boston, Miami-Ft. Lauderdale, West Palm Beach and Augusta. In
many cases, our licenses are held by wholly-owned subsidiaries. Pursuant to FCC
rules and regulations, many AM radio stations are licensed to operate at a
reduced power during the nighttime broadcasting hours, which results in reducing
the radio station's coverage during the nighttime hours of operation. Both power
ratings are shown, where applicable. For FM stations, the maximum effective
radiated power in the main lobe is given.
<TABLE>
<CAPTION>
EXPIRATION
FCC POWER IN DATE OF
MARKET STATION CLASS FREQUENCY KILOWATTS FCC LICENSE
------ ------- ----- --------- ----------------------- -----------
<S> <C> <C> <C> <C> <C>
ATLANTA, GA................ WAEC-AM B 860 kHz 5 kW day/.5 kW night 04/01/2004
WWWE-AM D 1100 kHz 5 kW day 04/01/2004
PHILADELPHIA, PA........... WXTU-FM B 92.5 MHz 15.5 kW 08/01/2006
WWDB-FM B 96.5 MHz 17.0 kW 08/01/2006
WTMR-AM B 800 kHz 5 kW day/.5 kW night 06/01/2006
WTEL-AM D 860 kHz 10 kW day 08/01/2006
BOSTON, MA................. WRCA-AM B 1330 kHz 5 kW 04/01/2006
MIAMI-FT. LAUDERDALE, FL... WQAM-AM B 560 kHz 5 kW day/1 kW night 02/01/2004
WPOW-FM C 96.5 MHz 100 kW 02/01/2004
WKIS-FM C 99.9 MHz 100 kW 02/01/2004
WWNN-AM B 1470 kHz 50 kW day/2.5 kW 02/01/2004
WHSR-AM B 980 kHz 5 kW day/1 kW night 02/01/2004
WEST PALM BEACH, FL........ WSBR-AM B 740 kHz 2.5 kW day/.94 kW night 02/01/2004
FT. MYERS-NAPLES, FL....... WXKB-FM C1 103.9 MHz 100 kW 02/01/2004
WRXK-FM C 96.1 MHz 100 kW 02/01/2004
WJBX-FM C2 99.3 MHz 50 kW 02/01/2004
WJST-FM A 106.3 MHz 6 kW 02/01/2004
WWCN-AM B 770 kHz 10 kW day/1 kW night 02/01/2004
GREENVILLE-NEW BERN-
JACKSONSVILLE, NC........ WSFL-FM C1 106.5 MHz 100 kW 12/01/2003
WIKS-FM C1 101.9 MHz 100 kW 12/01/2003
WNCT-AM B 1070 kHz 10 kW day/night 12/01/2003
WNCT-FM C 107.9 MHz 100 kW 12/01/2003
WXNR-FM C2 99.5 MHz 16.5 kW 12/01/2003
WMGV-FM C1 103.3 MHz 100 kW 12/01/2003
FAYETTEVILLE, NC........... WZFX-FM C1 99.1 MHz 100 kW 12/01/2003
WKML-FM C 95.7 MHz 100 kW 12/01/2003
WFLB-FM C 96.5 MHz 100 kW 12/01/2003
WUKS-FM C3 107.7 MHz 5.2 kW 12/01/2003
WAZZ-AM C 1490 kHz 1 kW day/night 12/01/2003
WYRU-AM B 1160 kHz 5 kW day/.25 kW night 12/01/2003
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
EXPIRATION
FCC POWER IN DATE OF
MARKET STATION CLASS FREQUENCY KILOWATTS FCC LICENSE
------ ------- ----- --------- ----------------------- -----------
<S> <C> <C> <C> <C> <C>
AUGUSTA, GA................ WGAC-AM B 580 kHz 5 kW day/1 kW night 04/01/2004
WGOR-FM C3 93.9 MHz 13 kW 04/01/2004
WCHZ-FM C3 95.1 MHz 5.7 kW 04/01/2004
WAJY-FM A 102.7 MHz 3 kW 12/01/2003
WRFN-FM A 93.1 MHz 4.1 kW 04/01/2004
WRDW-AM B 1480 kHz 5 kW day/night 04/01/2004
</TABLE>
TRANSFERS OR ASSIGNMENT OF LICENSE. The Communications Act prohibits the
assignment of broadcast licenses or the transfer of control of a broadcast
licensee without the prior approval of the FCC. In determining whether to grant
such approval, the FCC considers a number of factors pertaining to the licensee
and proposed licensee, including:
- compliance with the various rules limiting common ownership of media
properties in a given market;
- the character of the licensee and those persons holding attributable
interests in the licensee; and
- compliance with the Communications Act's limitations on alien ownership
as well as compliance with other FCC regulations and policies.
To obtain FCC consent to assign or transfer control of a broadcast license,
appropriate applications must be filed with the FCC. If the application involves
a substantial change in ownership or control, the application must be placed on
public notice for not less than 30 days during which time petitions to deny or
other objections against the application may be filed by interested parties,
including members of the public. These types of petitions are filed from time to
time with respect to proposed acquisitions. For example, a petition to deny the
assignment of the FCC licenses involved in our pending acquisition of two radio
stations in Augusta has been filed, with the result that we are unable to
predict when the transaction will be completed. If the FCC grants an assignment
or transfer application, interested parties have 30 days from public notice of
the grant to seek reconsideration of that grant. The FCC usually has an
additional ten days to set aside the grant on its own motion. If the application
does not involve a substantial change in ownership or control, it is a pro forma
application. The pro forma application is nevertheless subject to having
informal objections filed against it. When passing on an assignment or transfer
application, the FCC is prohibited from considering whether the public interest
might be served by an assignment or transfer of the broadcast license to any
party other than the assignee or transferee specified in the application.
MULTIPLE OWNERSHIP RULES. The Communications Act and FCC rules impose
specific limits on the number of commercial radio stations an entity can own in
a single market. These rules may preclude us from acquiring certain stations we
might otherwise seek to acquire. The rules also effectively prevent us from
selling stations in a market to a buyer that has reached its ownership limit in
the market unless that buyer divests other stations. The local radio ownership
rules are as follows:
- in markets with 45 or more commercial radio stations, ownership is
limited to eight commercial stations, no more than five of which can be
either AM or FM;
- in markets with 30 to 44 commercial radio stations, ownership is limited
to seven commercial stations, no more than four of which can be either AM
or FM;
- in markets with 15 to 29 commercial radio stations, ownership is limited
to six commercial stations, no more than four of which can be either AM
or FM; and
- in markets with 14 or fewer commercial radio stations, ownership is
limited to five commercial stations or no more than 50% of the market's
total, whichever is lower, and no more than three of which can be either
AM or FM.
The FCC is also reportedly considering proposing a policy that would give
special review to a proposed transaction if it would enable a single owner to
attain a high degree of revenue concentration in a market. In connection with
this, the FCC has invited comment on the impact of concentration in public
notices
15
<PAGE> 18
concerning proposed transactions, and has delayed or refused its consent in some
cases because of revenue concentration.
The FCC recently revised its radio/television cross-ownership rule to allow
for greater common ownership of television and radio stations. The revised
radio/television cross-ownership rule permits a single owner to own up to two
television stations, consistent with the FCC's rules on common ownership of
television stations, together with one radio station in all markets. In
addition, an owner will be permitted to own additional radio stations, not to
exceed the local ownership limits for the market, as follows:
- in markets where 20 media voices will remain, an owner may own an
additional 5 radio stations, or, if the owner only has one television
station, an additional 6 radio stations; and
- in markets where 10 media voices will remain, an owner may own an
additional 3 radio stations.
A media voice includes each independently-owned, full power television and
radio station and each daily newspaper, plus one voice for all cable television
systems operating in the market.
In addition to the limits on the number of radio stations and
radio/television combinations that a single owner may own, the FCC's
broadcast/newspaper cross-ownership rule prohibits the same owner from owning a
broadcast station and a daily newspaper in the same geographic market.
The FCC generally applies its ownership limits to attributable interests
held by an individual, corporation, partnership or other association. In the
case of corporations controlling broadcast licenses, the interests of officers,
directors and those who, directly or indirectly, have the right to vote 5% or
more of the corporation's voting stock are generally attributable. In addition,
certain passive investors are attributable if they hold 20% or more of the
corporation's voting stock. If a single individual or entity controls more than
50% of a corporation's voting stock, however, the interests of other
stockholders are generally not attributable unless the stockholders are also
officers or directors of the corporation.
The FCC recently adopted a new rule, known as the equity-debt-plus rule,
that causes certain creditors or investors to be attributable owners of a
station, regardless of whether there is a single majority stockholder. Under
this new rule, a major programming supplier or a same-market owner will be an
attributable owner of a station if the supplier or owner holds debt or equity,
or both, in the station that is greater than 33% of the value of the station's
total debt plus equity. A major programming supplier includes any programming
supplier that provides more than 15% of the station's weekly programming hours.
A same-market owner includes any attributable owner of a media company,
including broadcast stations, cable television and newspapers, located in the
same market as the station, but only if the owner is attributable under an FCC
attribution rule other than the equity-debt-plus rule. If attribution under the
equity-debt-plus rule results in a violation of the FCC's multiple ownership
rules, each affected party must come into compliance with those rules, by
reducing or eliminating the party's interest in the affected media outlets or
obtaining a waiver from the FCC, no later than August 5, 2000. The attribution
rules limit the number of radio stations we may acquire or own in any market.
ALIEN OWNERSHIP RULES. The Communications Act prohibits the issuance or
holding of broadcast licenses by persons who are not U.S. citizens, whom the FCC
rules refer to as "aliens," including any corporation if more than 20% of its
capital stock is owned or voted by aliens. In addition, the FCC may prohibit any
corporation from holding a broadcast license if the corporation is controlled by
any other corporation of which more than 25% of the capital stock is owned of
record or voted by aliens, if the FCC finds that the prohibition is in the
public interest. Our certificate of incorporation prohibits the ownership,
voting and transfer of our capital stock in violation of the FCC restrictions,
and prohibits the issuance of capital stock or the voting rights such capital
stock represents to or for the account of aliens or corporations otherwise
subject to domination or control by aliens in excess of the FCC limits. The
certificate of incorporation authorizes our board of directors to enforce these
prohibitions. For example, the certificate of incorporation provides for the
redemption of shares of our capital stock by action of the board of directors to
the extent necessary to comply with these alien ownership restrictions.
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<PAGE> 19
TIME BROKERAGE AGREEMENTS. Over the past few years, a number of radio
stations have entered into what have commonly been referred to as time brokerage
agreements. While these agreements may take varying forms, under a typical time
brokerage agreement, separately owned and licensed radio stations agree to enter
into cooperative arrangements of varying sorts, subject to compliance with the
requirements of antitrust laws and with FCC's rules and policies. Under these
arrangements, separately-owned stations could agree to function cooperatively in
programming, advertising sales and similar matters, subject to the requirement
that the licensee of each station maintain independent control over the
programming and operations of its own station. One typical type of time
brokerage agreement is a programming agreement between two separately-owned
radio stations serving a common service area, whereby the licensee of one
station provides substantial portions of the broadcast programming for airing on
the other licensee's station, subject to ultimate editorial and other controls
being exercised by the latter licensee, and sells advertising time during those
program segments.
The FCC's rules provide that a radio station that brokers more than 15% of
the weekly broadcast time on another station serving the same market will be
considered to have an attributable ownership interest in the brokered station
for purposes of FCC's local radio ownership limits. As a result, in a market
where we own a radio station, we would not be permitted to enter into a time
brokerage agreement with another radio station in the same market if we could
not own the brokered station under the multiple ownership rules, unless our
programming on the brokered station constituted 15% or less of the brokered
station's programming time on a weekly basis. FCC rules also prohibit a
broadcast station from duplicating more than 25% of its programming on another
station in the same broadcast service, that is AM-AM or FM-FM through a time
brokerage agreement where the brokered and brokering stations which it owns or
programs serve substantially the same area.
PROGRAMMING AND OPERATIONS. The Communications Act requires broadcasters
to serve the public interest. The FCC gradually has relaxed or eliminated many
of the more formalized procedures it had developed in the past to promote the
broadcast of certain types of programming responsive to the needs of a station's
community of license. A licensee continues to be required, however, to present
programming that is responsive to issues of the station's community of license
and to maintain records demonstrating this responsiveness. Complaints from
listeners concerning a station's programming often will be considered by the FCC
when it evaluates renewal applications of a licensee, although listener
complaints may be filed at any time, are required to be maintained in the
station's public file and generally may be considered by the FCC at any time.
Stations also must pay regulatory and application fees and follow various rules
promulgated under the Communications Act. Those rules regulate, among other
things, political advertising, sponsorship identifications, the advertisement of
contests and lotteries, obscene and indecent broadcasts and technical
operations, including limits on human exposure to radio frequency radiation.
On January 20, 2000, the FCC adopted new rules prohibiting employment
discrimination by broadcast stations on the basis of race, religion, color,
national origin, and gender; and requiring broadcasters to implement programs to
promote equal employment opportunities at their stations. The rules generally
require broadcast stations to disseminate information about job openings widely
so that all qualified applicants, including minorities and women, have an
adequate opportunity to compete for the job. Broadcasters may fulfill this
requirement by sending the station's job vacancy information to organizations
that request it, participating in community outreach programs, or designing an
alternative recruitment program. Broadcasters with five or more full-time
employees must place in their public files annually a report detailing their
recruitment efforts and must file a statement with the FCC certifying compliance
with the rules every two years. Broadcasters with ten or more full-time
employees must file their annual reports with the FCC midway through their
license term. Broadcasters also must file employment information with the FCC
annually for statistical purposes. These new equal employment opportunity rules
are designed to replace the FCC's prior rules, some of which were ruled
unconstitutional by the U.S. Court of Appeals for the District of Columbia
Circuit.
The FCC recently issued a decision holding that a broadcast station may not
deny a candidate for federal political office a request for broadcast
advertising time solely on the grounds that the amount of time requested is not
the standard length of time which the station offers to its commercial
advertisers. This
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<PAGE> 20
decision is currently being reconsidered by the FCC. The effect that this FCC
decision will have on our programming and commercial advertising operations is
uncertain.
PROPOSED AND RECENT CHANGES. Congress and the FCC may in the future
consider and adopt new laws, regulations and policies regarding a wide variety
of matters that could affect, directly or indirectly, the operation, ownership
and profitability of our radio stations, including the loss of audience share
and advertising revenues for our radio stations, and an inability to acquire
additional radio stations or to finance those acquisitions. Such matters may
include:
- changes in the FCC's cross-interest, multiple ownership and attribution
policies.
- regulatory fees, spectrum use fees or other fees on FCC licenses;
- foreign ownership of broadcast licenses;
- restatement in revised form of FCC's equal employment opportunity rules
and revisions to the FCC's rules relating to political broadcasting;
- technical and frequency allocation matters; and
- proposals to restrict or prohibit the advertising of beer, wine and other
alcoholic beverages on radio.
The FCC currently is considering standards for evaluating, authorizing, and
implementing terrestrial digital audio broadcasting technology, including
In-Band On-Channel(TM) technology for FM radio stations. Digital audio
broadcasting's advantages over traditional analog broadcasting technology
include improved sound quality and the ability to offer a greater variety of
auxiliary services. In-Band On-Channel technology would permit an FM station to
transmit radio programming in both analog and digital formats, or in digital
only formats, using the bandwidth that the radio station is currently licensed
to use. It is unclear what regulations the FCC will adopt regarding Digital
Audio Broadcasting or In-Band On-Channel technology and what effect such
regulations would have on our business or the operations of its radio stations.
On January 20, 2000, the FCC voted to adopt rules creating a new low power
FM radio service. The new low power stations will operate at a maximum power of
between 10 and 100 watts in the existing FM commercial and non-commercial band.
Low power stations may be used by governmental and non-profit organizations to
provide noncommercial educational programming or public safety and
transportation radio services. No existing broadcaster or other media entity,
including Beasley, will be permitted to have an ownership interest or enter into
any program or operating agreement with any low power FM station. During the
first two years of the new service, applicants must be based in the area that
they propose to serve. Applicants will not be permitted to own more than one
station nationwide during the initial two year period. After the initial two
year period, entities will be allowed to own up to five stations nationwide, and
after three years, the limit will be raised to ten stations nationwide. A single
person or entity may not own two low power stations whose transmitters are less
than seven miles from each other. The authorizations for the new stations will
not be transferable. The FCC has stated that it intends to begin accepting
applications for new stations during the next several months.
At this time, it is difficult to assess the competitive impact of these new
stations. The new low power stations must comply with certain technical
requirements aimed at protecting existing FM radio stations from interference,
although we cannot be certain of the level of interference that low power
stations will cause after they begin operating. Moreover, if low power FM
stations are licensed in the markets which Beasley operates its stations, the
low power stations may compete for listeners and advertisers. The low power
stations may also limit the ability of Beasley to obtain new license or to
modify its existing facilities. Any of these events may materially and adversely
impact the operating performance of Beasley.
Finally, the FCC has adopted procedures for the auction of broadcast
spectrum in circumstances where two or more parties have filed for new or major
change applications which are mutually exclusive. Such procedures may limit our
efforts to modify or expand the broadcast signals of our stations.
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<PAGE> 21
We cannot predict what other matters might be considered in the future by
the FCC or Congress, nor can we judge in advance what impact, if any, the
implementation of any of these proposals or changes might have on our business.
FEDERAL ANTITRUST LAWS. The agencies responsible for enforcing the federal
antitrust laws, the Federal Trade Commission or the Department of Justice, may
investigate certain acquisitions. We cannot predict the outcome of any specific
FTC or Department of Justice investigation. Any decision by the FTC or the
Department of Justice to challenge a proposed acquisition could affect our
ability to consummate the acquisition or to consummate it on the proposed terms.
For an acquisition meeting certain size thresholds, the Hart-Scott-Rodino
Act requires the parties to file Notification and Report Forms concerning
antitrust issues with the FTC and the Department of Justice and to observe
specified waiting period requirements before consummating the acquisition. If
the investigating agency raises substantive issues in connection with a proposed
transaction, then the parties frequently engage in lengthy discussions or
negotiations with the investigating agency concerning possible means of
addressing those issues, including restructuring the proposed acquisition or
divesting assets. In addition, the investigating agency could file suit in
federal court to enjoin the acquisition or to require the divestiture of assets,
among other remedies. Acquisitions that are not required to be reported under
the Hart-Scott-Rodino Act may be investigated by the FTC or the Department of
Justice under the antitrust laws before or after consummation. In addition,
private parties may under certain circumstances bring legal action to challenge
an acquisition under the antitrust laws.
As part of its increased scrutiny of radio station acquisitions, the
Department of Justice has stated publicly that it believes that local marketing
agreements, joint sales agreements, time brokerage agreements and other similar
agreements customarily entered into in connection with radio station transfers
could violate the Hart-Scott-Rodino Act if such agreements take effect prior to
the expiration of the waiting period under the Hart-Scott-Rodino Act.
Furthermore, the Department of Justice has noted that joint sales agreements may
raise antitrust concerns under Section 1 of the Sherman Act and has challenged
joint sales agreements in certain locations. The Department of Justice also has
stated publicly that it has established certain revenue and audience share
concentration benchmarks with respect to radio station acquisitions, above which
a transaction may receive additional antitrust scrutiny. However, to date, the
Department of Justice has also investigated transactions that do not meet or
exceed these benchmarks and has cleared transactions that do exceed these
benchmarks.
EMPLOYEES
On December 31, 1999, we had a staff of 418 full-time employees and 127
part-time employees. We are a party to a collective bargaining agreement with
the American Federation of Television and Radio Artists. This agreement applies
only to some employees at WXTU-FM in Philadelphia. The provisions of the
collective bargaining agreement remain in full force until March 31, 2000 and
continue thereafter for one-year periods unless notice of proposed termination
is given by either party at least 60 days before the termination date. We
believe that our relations with our employees are good.
ENVIRONMENTAL
As the owner, lessee or operator of various real properties and facilities,
we are subject to various federal, state and local environmental laws and
regulations. Historically, compliance with these laws and regulations has not
had a material adverse effect on our business. There can be no assurance,
however, that compliance with existing or new environmental laws and regulations
will not require us to make significant expenditures of funds.
ITEM 2. PROPERTIES
The types of facilities required to support each of our radio stations
include offices, studios and transmitter and antenna sites. We typically lease
our studio and office space with lease terms that expire in six months to ten
years, although we do own some of our facilities. Our principal executive
offices are located at
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<PAGE> 22
3033 Riviera Drive, Suite 200, Naples, Florida 34103. We lease that building
from an affiliated company. We currently have a month to month lease and we pay
approximately $7,400 per month. We lease a majority of our main transmitter and
antenna sites from related parties. The transmitter and antenna site for each
station is generally located so as to provide maximum market coverage,
consistent with the station's FCC license.
No one facility is material to us. We believe that our facilities are
generally in good condition and suitable for our operations. However, we
continually look for opportunities to upgrade our facilities and may do so in
the future. Substantially all of our properties and equipment serve as
collateral for our obligations under our credit facility.
ITEM 3. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Beasley Broadcast Group has two authorized and outstanding classes of
equity securities: Class A common stock, $.001 par value, and Class B commons
stock, $.001 par value. No equity securities were sold by us during the year
ended December 31, 1999. Class A common stock began trading on Nasdaq's National
Market System on February 11, 2000. There is no established public trading
market for our Class B common stock.
Before our reorganization on February 11, 2000, the various subchapter S
corporations and partnerships comprising Beasley Broadcast Group have
occasionally made cash distributions to their equity holders. As a public
company, we expect to retain earnings, if any, for use in the operation and
expansion of our business. We do not anticipate paying any cash dividends in the
foreseeable future. Additionally, our credit facility prohibits us from paying
cash dividends and restricts our ability to make other distributions with
respect to our capital stock.
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 will become Beasley Broadcast Group, Inc.
Therefore, based on the initial public offering price of $15.50, Beasley
Broadcast Group received approximately $6.2 million of value for the interests
in Beasley-Reed
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<PAGE> 23
Acquisition Partnership and Beasley Broadcasting of Eastern North Carolina,
Incorporated in exchange for approximately $6.2 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 will become 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.
(b) On February 11, 2000, the Company commenced the IPO of its Class A
Common Stock, $.001 par value. The registration statement relating to this
offering (File No. 333-91683) was declared effective on February 11, 2000.
Credit Suisse First Boston Corporation, Banc of American Securities LLC,
Deutsche Banc Alex. Brown and Salomon Smith Barney were the managing
underwriters of the IPO. On February 16, 2000, the Company consummated the IPO.
The number of shares registered, the aggregate price of the offering amount
registered, the amount sold and the aggregate offering price of the amount sold
by the Company in the IPO, were as follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
SHARES OF CLASS A PRICE OF AMOUNT OF PRICE OF
COMMON REGISTERED SHARES REGISTERED SHARES SOLD SHARES SOLD
----------------- ----------------- ----------- ------------
<S> <C> <C> <C> <C>
The Company........... 6,850,000 $106,175,000 6,850,000 $106,175,000
</TABLE>
As of March 20, 2000 the Company incurred the following estimate of
expenses with respect to the IPO. None of the following expenses were direct or
indirect payments to directors, officers, general partners of the Company or
their affiliates or to persons owning 10% or more of any class of equity
securities of the Company or to affiliates of the Company:
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS UNDERWRITERS' TOTAL COMPANY
AND COMMISSIONS FINDERS' FEES EXPENSES OTHER EXPENSES EXPENSES
- --------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
$7,165,100 $0 $0 $1,560,000 $1,560,000
</TABLE>
The net proceeds from the IPO to the Company after deducting the foregoing
discounts, commissions, fees and expenses were $99,009,900. All of these
proceeds have been used by the Company since the IPO to repay existing
indebtedness outstanding under the credit facility and to certain of our
directors, officers and station general managers.
ITEM 6. SELECTED FINANCIAL DATA
We have derived the selected financial data shown below for the years ended
December 31, 1997, 1998 and 1999 from our audited combined financial statements
included elsewhere in this report. We have derived
21
<PAGE> 24
the selected financial data shown below for the years ended December 31, 1995
and 1996 from our audited combined financial statements, which are not included
in this report.
As you review the information contained in the following table and
throughout this report, you should note the following:
- During the periods presented we operated as a series of partnerships and
subchapter S corporations under the Internal Revenue Code. Accordingly,
we were not liable for federal and some state and local corporate income
taxes, as we would have been if we had been treated as a subchapter C
corporation. During these periods, our stockholders included our taxable
income or loss in their federal and applicable state and local income tax
returns. The pro forma amounts shown in the table reflect provisions for
federal, state and local income taxes, applied to income (loss) before
pro forma income taxes, as if we had been taxed as a subchapter C
corporation. On February 11, 2000, our subchapter S status terminated.
For a more detailed description of our corporate reorganization, see
"Business--Initial Public Offering and Corporate Reorganization."
- For purposes of our historical financial statements, the term pro forma
refers to the adjustments necessary to reflect our status as a subchapter
C corporation for income tax purposes rather than a series of subchapter
S corporations and partnerships, distributions to equity holders for
income taxes on income of entities comprising Beasley Broadcast Group
prior to the reorganization, the distribution of untaxed retained income
and subsequent re-contribution of the same amounts as additional paid-in
capital and the fair value adjustment necessary to record the acquisition
of minority shareholder interest using the purchase method of accounting.
- Broadcast cash flow consists of operating income (loss) before corporate
general and administrative expenses, depreciation and amortization,
equity appreciation rights expense and impairment loss on long-lived
assets. For the periods shown in the following table, broadcast cash flow
is unaffected by local management and time brokerage agreements of
$1,075,000 for the fiscal year ended December 31, 1996 and zero for other
periods. The fees are included in other non-operating income (expense).
- Broadcast cash flow margin represents broadcast cash flow as a percentage
of net revenues.
- EBITDA consists of broadcast cash flow minus corporate general and
administrative expenses.
- Pro forma after-tax cash flow consists of pro forma net income (loss)
minus net gains on sale of radio stations plus the following: loss on
sale of radio stations, depreciation and amortization, equity
appreciation rights expense, impairment loss on long-lived assets,
deferred tax provision (or minus deferred income tax benefit),
nonrecurring items and other non-cash charges.
- No expense for equity appreciation rights has been recorded for the
periods presented other than the year ended December 31, 1999. We expect
to record approximately $1.2 million of equity appreciation rights
expense in the first quarter of 2000.
Although broadcast cash flow, EBITDA and pro forma after-tax cash flow are
not measures of performance or liquidity calculated in accordance with generally
accepted accounting principles, we believe that these measures are useful to an
investor in evaluating our performance. These measures are widely used in the
broadcast industry to evaluate a radio company's operating performance. However,
you should not consider these measures in isolation or as substitutes for
operating income, cash flows from operating activities or any other measure for
determining our operating performance or liquidity that is calculated in
accordance with generally accepted accounting principles. In addition, because
broadcast cash flow, EBITDA and pro forma after-tax cash flow are not calculated
in accordance with generally accepted accounting principles, they are not
necessarily comparable to similarly titled measures employed by other companies.
The comparability of the historical financial information reflected below
has been significantly affected by acquisitions and dispositions. You should
read the selected financial data together with "Management
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<PAGE> 25
Discussion and Analysis of Financial Condition and Results of Operations" and
our combined financial statements and the related notes included elsewhere in
this report.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1995 1996 1997 1998 1999
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS EXCEPT PER SHARE DATA, SHARES OUTSTANDING AND MARGIN DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net revenues.......................... $ 47,489 $ 62,413 $ 73,704 $ 81,433 $ 93,621
Operating expenses:
Radio station operating expenses.... 33,076 42,163 55,247 61,692 66,661
Corporate general and
administrative.................... 2,124 2,233 2,055 2,498 2,764
Equity appreciation rights.......... -- -- -- -- 606
Depreciation and amortization....... 8,361 8,317 14,174 16,096 16,410
Impairment loss on long-lived
assets............................ -- -- 4,124 -- --
----------- ----------- ----------- ----------- -----------
Total operating expenses........ 43,561 52,713 75,600 80,286 86,441
Operating income (loss)...... 3,928 9,700 (1,896) 1,147 7,180
Other income (expense):
Interest expense.................... (8,345) (9,340) (13,606) (13,602) (14,008)
Other non-operating income
(expense)......................... (5) (2,025) 54 (160) 776
Gain (loss) on sale of radio
stations.......................... 121 16,773 82,067 4,028 --
----------- ----------- ----------- ----------- -----------
Total other income (expense).... (8,229) 5,408 68,515 (9,734) (13,232)
Income (loss) before income
taxes...................... (4,301) 15,108 66,619 (8,587) (6,052)
Pro-forma current income tax expense
(benefit)........................... (3,302) 567 7,054 (5,010) 692
Pro-forma deferred income tax expense
(benefit)........................... 1,657 5,318 18,741 1,760 (2,896)
----------- ----------- ----------- ----------- -----------
Pro-forma net income (loss)......... $ (2,656) $ 9,223 $ 40,824 $ (5,337) $ (3,848)
=========== =========== =========== =========== ===========
Basic and diluted net income (loss)
per share........................... (0.15) 0.53 2.34 (0.31) (0.22)
Weighted average common shares
outstanding -- basic and diluted.... 17,423,441 17,423,441 17,423,441 17,423,441 17,423,441
OTHER DATA:
Broadcast cash flow................... $ 14,413 $ 20,250 $ 18,457 $ 19,741 $ 26,960
Broadcast cash flow margin............ 30% 32% 25% 24% 29%
EBITDA before net income or loss from
local management and time brokerage
agreements.......................... $ 12,289 $ 18,017 $ 16,402 $ 17,243 $ 24,196
Pro-forma after tax cash flow......... 7,241 6,085 (4,204) 8,491 10,379
Cash provided by (used in):
Operating activities................ $ 1,149 $ 5,303 $ 1,586 $ 4,921 $ 7,195
Investing activities................ 2,462 (66,300) 18,871 (12,527) (2,760)
Financing activities................ (4,347) 63,152 (17,052) 4,689 (2,192)
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET:
Cash and cash equivalents.......................... $ 2,118 $ 4,273 $ 7,678 $ 4,760 $ 7,003
Intangibles, net................................... 38,214 100,442 145,487 151,048 137,287
Total assets....................................... 66,723 145,707 193,440 194,773 185,861
Long-term debt..................................... 97,370 155,149 152,644 163,285 163,123
Total stockholders' equity (deficit)............... (42,790) (25,703) 19,579 6,041 (2,919)
</TABLE>
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<PAGE> 26
ITEM 7. 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.
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.
In 1999, we generated 74.5% of our revenues from local advertising, which
is sold primarily by each individual local radio station's sales staff. We
generated 20.6% of our revenues from national spot advertising in 1999, which is
purchased through independent, national advertising sales representatives by
customers that want to advertise nationwide. We generated the balance of our
revenues principally from promotional events and sales to broadcasting networks
that purchase commercial airtime.
We include revenues recognized under a time brokerage agreement or similar
sales agreement for radio stations operated by us before acquiring the radio
stations in net revenues, while we reflect operating expenses associated with
these radio stations in station operating expenses. Consequently, there is no
difference in the method of revenue and operating expense recognition between a
radio station operated by us under a time brokerage agreement or similar sales
agreement and a radio station owned and operated by us. For the periods
discussed below, revenues and operating expenses under time brokerage agreements
or similar sales agreements were not material for years subsequent to 1996.
Since 1997, we have not operated any stations under time brokerage agreements or
other similar sales agreements.
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 (loss) before corporate general
and administrative expenses, depreciation and amortization, equity appreciation
rights expense and impairment loss on long-lived assets 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.
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<PAGE> 27
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.
RESULTS OF OPERATIONS
Several factors are expected to affect our results of operations on a
going-forward basis that have not affected our historical results of operations.
First, we redeemed, for cash, equity appreciation rights previously granted to
some 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 in the fourth quarter of 1999 and expect to
record an expense of approximately $1.2 million in the first quarter of 2000.
Second, in connection with our recent reorganization, our net stockholders'
equity will be reduced by approximately $24.5 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. The proper accounting treatment for executory contracts
such as these is currently the subject of Emerging Issues Task Force 99-14.
Depending on the resolution of this issue by the task force, we may be required
to record a charge reflecting an impairment of these committed contracts. Such a
charge could also have a material adverse effect on future results of
operations.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
Net Revenue. Net revenue increased 15.0% to $93.6 million for 1999 from
$81.4 million for 1998. The increase was primarily due to revenue growth at some
of our radio stations, particularly in the Miami-Ft. Lauderdale market. On a
same station basis, net revenues increased 14.4% to $93.6 million for 1999 from
$81.8 million for 1998.
Station Operating Expenses. Station operating expenses increased 8.1% to
$66.7 million for 1999 from $61.7 million for 1998. The increase was primarily
due to increased program and production, sales and advertising, and general and
administrative expenses associated with generating our revenue growth. On a same
station basis, station operating expenses increased 8.5% to $66.6 million for
1999 from $61.4 million for 1998.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased 12.0% to $2.8 million for 1999 from $2.5
million for 1998. The increase was primarily due to higher general and
administrative expenses associated with our revenue growth over the same period.
Depreciation and Amortization. Depreciation and amortization increased
1.9% to $16.4 million for 1999 from $16.1 million for 1998. The increase was
primarily due to radio station acquisitions in 1998.
Interest Expense. Interest expense increased 2.9% to $14.0 million in 1999
from $13.6 million for 1998. The increase was primarily due to radio station
acquisitions in 1998 and increasing interest rates in 1999.
Broadcast Cash Flow. Broadcast cash flow increased 37.1% to $27.0 million
for 1999 from $19.7 million for 1998. The increase was primarily due to revenue
growth at some of our stations, particularly in the Miami-
25
<PAGE> 28
Ft. Lauderdale market. On a same station basis, broadcast cash flow increased
32.3% to $27.0 million for 1999 from $20.4 million for 1998.
Gain (Loss) on Sale of Radio Stations. We did not dispose of any radio
stations in 1999. In 1998, we recognized a gain of $4.0 million primarily as a
result of the sale of two radio stations, KAAY-AM in Little Rock, Arkansas and
WEWO-AM in Fayetteville, North Carolina, for a total of approximately $5.2
million.
Income (Loss) Before Pro Forma Income Taxes. We experienced a loss before
pro forma income taxes of $6.1 million for 1999 versus a loss before pro forma
income taxes of $8.6 million for 1998. The difference between 1999 and 1998 is
mainly attributable to revenue growth at some of our radio stations,
particularly in the Miami-Ft. Lauderdale market. Excluding gains on sales of
radio stations, loss before pro forma income taxes would have been $12.6 million
for 1998.
Pro Forma Net Income (Loss). Pro forma net loss for 1999 was $3.8 million
compared to pro forma net loss of $5.3 million for 1998. The change was mainly
attributable to revenue growth at some of our radio stations, particularly in
the Miami-Ft. Lauderdale market.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net Revenue. Net revenue increased 10.5% to $81.4 million for 1998 from
$73.7 million for 1997. Approximately $6.8 million of the increase was
attributable to the inclusion, during the entire period, of operating results
from the stations acquired in 1998. The increase was also attributable to
revenue growth at some of our radio stations, especially in the Miami-Ft.
Lauderdale market. On a same station basis, net revenues increased 10.7% to
$81.8 million for 1998 from $73.9 million for 1997.
Station Operating Expenses. Station operating expenses increased 11.8% to
$61.7 million for 1998 from $55.2 million for 1997. Approximately $5.9 million
of the increase was attributable to the inclusion during the entire period of
operating results from the radio stations acquired in 1997. The increase was
also attributable to the introduction of additional news programming at WWDB-FM,
the increased rights fees associated with our contracts to broadcast Miami
sports teams and the addition of Neil Rogers, a top ranked personality in the
Miami-Ft. Lauderdale market to our programming line-up at WQAM-AM. On a same
station basis, station operating expenses increased 13.7% to $61.4 million for
1998 from $54.0 million for 1997.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased 21.6% to $2.5 million for 1998 from $2.1
million for 1997. The increase was mainly attributable to higher administrative
expenses associated with supporting our growth.
Depreciation and Amortization. Depreciation and amortization increased
13.6% to $16.1 million for 1998 from $14.2 million for 1997. The increase was
mainly attributable to radio station acquisitions in 1998.
Interest Expense. Interest expense remained constant at $13.6 million for
1998 and 1997. This was attributable to a reduction in the interest rate charged
on our credit facility as a result of more favorable terms, offset by a higher
debt balance due to borrowings to fund acquisitions.
Broadcast Cash Flow. Broadcast cash flow increased 7.1% to $19.7 million
for 1998 from $18.4 million for 1997. Approximately $900,000 of the increase was
attributable to the inclusion, during the entire period, of operating results
from the stations acquired in 1997. The increase was also attributable to
revenue growth at most of our radio stations, in particular WQAM-AM and WKIS-FM
in the Miami-Ft. Lauderdale market. On a same station basis, broadcast cash flow
increased 3.0% to $20.4 million for 1998 from $19.8 million for 1997.
Gain (Loss) on Sale of Radio Stations. We recognized a gain on sale of
radio stations of $4.0 million for 1998 primarily as a result of the sale of two
radio stations, KAAY-AM in Little Rock, Arkansas and WEWO-AM in Fayetteville,
North Carolina, for a total of approximately $5.2 million. In 1997, we sold
WDAS-AM/FM in Philadelphia for approximately $100 million, for which we
recognized a gain of $79.8 million.
26
<PAGE> 29
Income (Loss) Before Pro Forma Income Taxes. We experienced a loss before
pro forma income taxes of $8.6 million for 1998 versus income of $66.6 million
for 1997. The difference between 1998 and 1997 is mainly attributable to the
recognition of an $82.1 million gain on sale of radio stations in 1997.
Excluding gains on sales of radio stations, loss before pro forma income taxes
would have been $12.6 million for 1998 and $15.4 million for 1997.
Pro Forma Net Income (Loss). Pro forma net loss for 1998 was $5.3 million
compared to pro forma net income of $40.8 million for 1997. The change was
mainly attributable to the reduction of the gain on the sale of radio stations
and taking into account pro forma income taxes or tax benefits.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net Revenue. Net revenue increased 18.1% to $73.7 million for 1997 from
$62.4 million for 1996. The increase was partly attributable to revenue growth
at some of our radio stations, especially in the Miami-Ft. Lauderdale market,
partially offset by a decline in revenues from the Philadelphia market. In
addition, approximately $8.3 million of the increase was attributable to the
inclusion, during the entire period, of operating results from the stations
acquired in 1996. On a same station basis, net revenues increased 15.1% to $71.5
million for 1997 from $62.1 million for 1996.
Station Operating Expenses. Station operating expenses increased 30.8% to
$55.2 million for 1997 from $42.2 million for 1996. Approximately $5.2 million
of the increase was attributable to the inclusion, during the entire period, of
operating results from the stations acquired in 1996. The increase was also
attributable to the addition of our contracts to broadcast Miami sports teams.
On a same station basis, station operating expenses increased 30.4% to $52.7
million for 1997 from $40.4 million for 1996.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses decreased 8.0% to $2.1 million for 1997 from $2.2
million for 1996.
Depreciation and Amortization. Depreciation and amortization increased
70.4% to $14.2 million for 1997 from $8.3 million for 1996. The increase was
mainly attributable to the radio station acquisitions in 1997.
Impairment Loss on Long-Lived Assets. In 1997, we recognized an impairment
loss on long-lived assets of $4.1 million, resulting from a write down of our
building in the Los Angeles area during that period.
Interest Expense. Interest expense increased 45.7% to $13.6 million for
1997 from $9.3 million for the 1996. This increase was primarily attributable to
an increase in borrowings to finance acquisitions.
Broadcast Cash Flow. Broadcast cash flow decreased 10.3% to $18.4 million
for 1997 from $20.3 million for 1996. The decrease was mainly attributable to
the addition of the sports rights fees at WQAM-AM in Miami and the introduction
of additional news programming changes at WWDB-FM in Philadelphia and a
reduction in ratings and revenues at WXTU-FM in Philadelphia. On a same station
basis, broadcast cash flow decreased 13.8% to $18.7 million for 1997 from $21.7
million for 1996.
Gain (Loss) on Sale of Radio Stations. Net gain on sale of radio stations
was $82.1 million for 1997 versus a gain of $16.8 million for 1996. The increase
was mainly attributable to the sale of WDAS-AM/FM in Philadelphia for
approximately $100 million in 1997.
Income (Loss) Before Pro forma Income Taxes. Income before pro forma
income taxes was $66.6 million for 1997 versus $15.1 million in 1996. The
increase was mainly attributable to the gain on sale of WDAS-FM in Philadelphia.
Pro Forma Net Income (Loss). Pro forma net income was $40.8 million for
1997 versus $9.2 million for 1996, which was mainly attributable to the gain on
sale of WDAS-FM in Philadelphia.
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;
27
<PAGE> 30
- 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 this offering
to pay down debt on our credit facility, which increased the availability of
cash to fund future acquisitions, including the pending acquisitions, and other
general corporate purposes. We also used approximately $40.5 million of the
proceeds of this 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.
As of December 31, 1999, we held $7.0 million in cash and cash equivalents
and had $24.8 million in availability under our credit facility. We have four
pending acquisitions with an aggregate purchase price of $34.8 million. 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 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 $7.2 million and $4.9 million for 1999 and 1998,
respectively. The increase of approximately $2.3 million was primarily due to
the increase in revenue growth, from $81.4 million to $93.6 million.
Net cash provided by operating activities was $4.9 million and $1.6 million
for 1998 and 1997, respectively. The increase of approximately $3.3 million from
1997 to 1998 was primarily a result of an increase in revenues, from $73.7
million to $81.4 million.
Net cash provided by operating activities was $1.6 million and $5.3 million
for 1997 and 1996, respectively. The decrease of approximately $3.7 million from
1996 to 1997 was primarily a result of an increase in program rights paid from
$2.8 million in 1996 to $6.3 million in 1997.
Net Cash Provided by (Used in) Investing Activities. Net cash used in
investing activities was $2.8 million and $12.5 million for 1999 and 1998,
respectively. The decrease of $9.7 million was primarily due to the acquisitions
and dispositions in 1998, the proceeds from the sale of property in 1998 and the
release of restricted cash in 1998. In 1999, cash used in investing activities
primarily consisted of expenditures for property and equipment; however, there
were no acquisitions or dispositions in 1999.
Net cash used in investing activities was $12.5 million for 1998 compared
with net cash provided by investing activities of $18.9 million for 1997. The
increase of $31.4 million of net cash used was primarily a result of the use of
approximately $19 million for the acquisitions of WJBX-FM, WJST-FM and WTMR-AM
in 1998, partially offset by the net proceeds of $5.2 million from the sale of
KAAY-AM and WEWO-AM in 1998. In 1997, we used $77.7 million of cash to acquire
six stations, which was offset by the proceeds of $103.5 million from the sale
of WDAS-AM/FM, WEGX-FM, WDSC-AM and WTSB-AM.
Net cash provided by investing activities was $18.9 million for 1997
compared with net cash used in investing activities of $66.3 million for 1996.
The increase of $85.2 million of net cash provided by investing activities was a
result of the sale of WDAS-AM/FM, WEGX-FM and WDSC-AM for $103.5 million, offset
by the acquisition of six stations for $77.7 million in 1997. In 1996, we used
$79.6 million of cash to acquire six stations in 1996, which was offset by the
proceeds of $20.7 million from the sale of one station in 1996.
28
<PAGE> 31
Net Cash Provided by (Used in) by Financing Activities. Net cash used in
financing activities was $2.2 million for 1999 and net cash provided by
financing activities was $4.7 million for 1998. This increase of net cash used
in financing activities of $6.9 million was primarily due to the refinancing of
the revolving credit loan in 1998 which was offset by loan fees associated with
the refinancing in 1998 and higher capital contributions and decreased
stockholder distributions in 1999.
Net cash provided by financing activities was $4.7 million for the year
ended 1998 compared to net cash used in financing activities of $17.1 million
for 1997. The increase of net cash provided of $21.8 million from 1997 to 1998
was primarily a result of lower stockholder distributions of $6.0 million,
offset by cash from additional borrowings during 1998. In 1997, we had
stockholder distributions of $20.7 million that were not offset by additional
borrowings.
Net cash used in financing activities was $17.1 million for the year ended
1997 compared to net cash provided by financing activities of $63.2 million for
1996. The increase of cash used of $80.3 million from 1996 to 1997 was partially
attributable to stockholder distributions of $20.6 million made in 1997 versus
$11.6 million in 1996. The like-kind exchange of WJHM-FM for WKIS-FM in 1996
also generated $18.1 million in capital contributions compared to a capital
contribution of $2.7 million generated from the like kind exchange of
WEGX-FM/WDSC-AM in 1997.
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 December 31, 1999, the scheduled reductions of the revised maximum
commitment of the credit facility for the next five 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. 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 December 31, 1999, we would have had an outstanding balance under our
credit facility of approximately $104.3 million and availability under our
credit facility of $45.7 million for future acquisitions and other corporate
purposes. These amounts are after giving effect to:
- the Atlanta acquisitions;
- the pending acquisitions in Boston, Miami-Ft. Lauderdale, West Palm Beach
and Augusta;
- the repayment of all indebtedness we owe to Mr. Beasley and affiliated
companies and the repayment of all indebtedness affiliates owe to us; and
- the application of a portion of the net proceeds from the offering to
reduce borrowings outstanding under our credit facility.
At December 31, 1999, the weighted average annual interest rate applicable
to our credit facility was approximately 8.625%. The credit facility expires on
December 31, 2006.
29
<PAGE> 32
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
year ended December 31, 1999, our unused commitment fee was approximately
$96,000.
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.
Pending Acquisitions. The total cash required to fund our pending
acquisitions in Boston, Miami-Ft. Lauderdale, West Palm Beach and Augusta is
expected to be approximately $24.8 million. The consummation of the pending
transactions 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. For example, a petition to
deny the assignment application for the pending acquisitions in Augusta was
filed with the FCC on November 5, 1999. Additionally, a lawsuit has been filed
seeking to enjoin the consummation of the transaction and other equitable
relief. Although the FCC approved the proposed assignment on February 23, 2000,
we do not know when this acquisition will close.
YEAR 2000 COMPLIANCE
The year 2000 issue is the result of computer-controlled systems using two
digits rather than four to define the applicable year. For example, certain
computer programs that have time-sensitive software may recognize a date ending
in "00" as the year 1900 rather than the year 2000. This could result in system
failure or miscalculations causing disruptions of operations including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
30
<PAGE> 33
As of March 20, 2000, we have experienced no material problems as a result
of the year 2000 issue. We do not anticipate experiencing any latent material
problems. Costs to ensure that our systems are year 2000 compliant have not
been, and are not expected to be, over the course of the current year, material.
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 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
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 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. We are currently negotiation
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 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 $ --
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>
31
<PAGE> 34
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COMBINED FINANCIAL STATEMENTS
Independent Auditors' Report................................ 33
Combined Balance Sheets as of December 31, 1998 and 1999.... 34
Combined Statements of Operations for the Years Ended
December 31, 1997, 1998 and 1999.......................... 35
Combined Statements of Stockholders' Equity for the Years
Ended December 31, 1997, 1998 and 1999.................... 36
Combined Statements of Cash Flows for the Years Ended
December 31, 1997, 1998 and 1999.......................... 37
Notes to Combined Financial Statements...................... 38
Financial Statement Schedule -- Valuation and Qualifying
Accounts.................................................. 52
</TABLE>
32
<PAGE> 35
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Beasley FM Acquisition Corp.
and Related Companies:
We have audited the accompanying combined balance sheets of Beasley FM
Acquisition Corp. and Related Companies as of December 31, 1998 and 1999, and
the related combined statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1999. In
connection with our audits of the combined financial statements, we have also
audited the accompanying financial statement schedule as listed in the
accompanying index. These combined financial statements and the accompanying
financial statement schedule are the responsibility of the management of Beasley
FM Acquisition Corp. and Related Companies. Our responsibility is to express an
opinion on these combined financial statements and the accompanying financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Beasley FM
Acquisition Corp. and Related Companies as of December 31, 1998 and 1999, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 1999, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic combined financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
/s/ KPMG LLP
Tampa, Florida
February 11, 2000
33
<PAGE> 36
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
--------------------------- DECEMBER 31,
1998 1999 1999
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 4,759,598 $ 7,002,669 $ 4,002,669
Accounts receivable, less allowance for doubtful
accounts of $589,352 in 1998 and $560,282 in
1999.......................................... 16,452,751 19,915,098 19,915,098
Trade sales receivable........................... 1,744,225 735,607 735,607
Other receivables................................ 894,319 676,478 676,478
Prepaid expenses and other....................... 1,292,333 1,918,223 1,918,223
Deferred tax asset............................... -- -- 4,080,000
------------ ------------ ------------
Total current assets........................ 25,143,226 30,248,075 31,328,075
Property and equipment, net........................ 16,504,051 15,773,175 15,773,175
Notes receivable from related parties.............. 556,796 556,796 556,796
Intangibles, net................................... 151,048,465 137,287,291 145,617,380
Other assets....................................... 1,520,515 1,995,819 1,995,819
------------ ------------ ------------
Total assets....................................... $194,773,053 $185,861,156 $195,271,245
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current installments of long-term debt........... $ 161,048 $ 166,319 $ 166,319
Notes payable to related parties................. 10,303,427 10,447,454 10,447,454
Accounts payable................................. 6,291,719 5,027,145 5,027,145
Accrued expenses................................. 7,474,126 9,213,133 9,213,133
Trade sales payable.............................. 1,378,116 970,108 970,108
------------ ------------ ------------
Total current liabilities................... 25,608,436 25,824,159 25,824,159
Long-term debt, less current installments.......... 125,847,961 125,680,696 125,680,696
Long-term debt to related parties.................. 37,275,622 37,275,622 37,275,622
Deferred tax liability............................. -- -- 28,564,000
------------ ------------ ------------
Total liabilities........................... 188,732,019 188,780,477 217,344,477
------------ ------------ ------------
Commitments and contingencies (note 8)
Common stock..................................... 4,530,352 4,530,352 4,530,352
Additional paid-in capital......................... 32,010,375 34,774,928 (17,197,007)
Accumulated deficit................................ (21,827,398) (32,818,024) --
Treasury stock..................................... (548,600) (548,600) (548,600)
------------ ------------ ------------
Stockholders' equity (deficit)..................... 14,164,729 5,938,656 (13,215,255)
Notes receivable from stockholders................. (8,123,695) (8,857,977) (8,857,977)
------------ ------------ ------------
Net stockholders' equity (deficit)................. 6,041,034 (2,919,321) (22,073,232)
------------ ------------ ------------
Total liabilities and stockholders' equity
(deficit)........................................ $194,773,053 $185,861,156 $195,271,245
============ ============ ============
</TABLE>
See accompanying notes to combined financial statements
34
<PAGE> 37
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net revenues....................................... $ 73,703,506 $ 81,433,406 $ 93,621,404
------------ ------------ ------------
Costs and expenses:
Program and production........................ 22,760,517 25,116,151 27,176,460
Sales and advertising......................... 19,526,240 23,110,566 25,040,086
Station general and administrative............ 12,959,606 13,464,792 14,443,785
Corporate general and administrative.......... 2,055,211 2,498,411 2,764,216
Equity appreciation rights.................... -- -- 606,407
Depreciation and amortization................. 14,173,650 16,096,653 16,410,321
Impairment loss on long-lived assets.......... 4,124,249 -- --
------------ ------------ ------------
Total costs and expenses................. 75,599,473 80,286,573 86,441,275
------------ ------------ ------------
Operating income (loss)............................ (1,895,967) 1,146,833 7,180,129
Other income (expense):
Interest expense.............................. (13,605,937) (13,601,867) (14,008,312)
Other non-operating expenses.................. (2,003,745) (1,580,554) (107,154)
Interest income............................... 887,904 817,567 883,704
Other non-operating income.................... 93,191 348,890 --
Gain on sale of radio stations................ 82,067,223 4,028,013 --
Minority interest............................. 1,076,689 253,993 --
------------ ------------ ------------
Net income (loss).................................. $ 66,619,358 $ (8,587,125) $ (6,051,633)
============ ============ ============
Pro forma income tax expense (benefit)
(unaudited)...................................... $ 25,795,000 $ (3,250,000) $ (2,204,000)
============ ============ ============
Pro forma net income (loss) (unaudited)............ $ 40,824,358 $ (5,337,125) $ (3,847,633)
============ ============ ============
Pro forma basic and diluted net income (loss) per
share (unaudited)................................ $ 2.34 $ (0.31) $ (0.22)
============ ============ ============
Pro forma basic and diluted common shares
outstanding (unaudited).......................... 17,423,441 17,423,441 17,423,441
</TABLE>
See accompanying notes to combined financial statements
35
<PAGE> 38
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
NOTES NET
RECEIVABLE STOCKHOLDERS'
STOCKHOLDERS' FROM EQUITY
EQUITY STOCKHOLDERS (DEFICIT)
------------- ------------ -------------
<S> <C> <C> <C>
Balances at December 31, 1996....................... $(21,021,539) $(4,680,256) $(25,701,795)
Net income.......................................... 66,619,358 -- 66,619,358
Capital contributions............................... 2,764,553 -- 2,764,553
Stockholders distributions.......................... (20,684,193) -- (20,684,193)
Loans to stockholders............................... -- (3,419,335) (3,419,335)
------------ ----------- ------------
Balances at December 31, 1997....................... 27,678,179 (8,099,591) 19,578,588
Net loss............................................ (8,587,125) -- (8,587,125)
Capital contributions............................... 1,582,211 -- 1,582,211
Stockholders distributions.......................... (5,959,936) -- (5,959,936)
Purchase of common stock............................ (548,600) -- (548,600)
Loans to stockholders............................... -- (1,206,446) (1,206,446)
Payments of notes receivable from stockholders...... -- 1,182,342 1,182,342
------------ ----------- ------------
Balances at December 31, 1998....................... 14,164,729 (8,123,695) 6,041,034
Net loss............................................ (6,051,633) -- (6,051,633)
Capital contributions............................... 2,764,553 -- 2,764,553
Stockholders distributions.......................... (4,938,993) -- (4,938,993)
Loans to stockholders............................... -- (734,282) (734,282)
------------ ----------- ------------
Balances at December 31, 1999....................... $ 5,938,656 $(8,857,977) $ (2,919,321)
============ =========== ============
</TABLE>
See accompanying notes to combined financial statements
36
<PAGE> 39
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1997 1998 1999
------------- ------------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................. $ 66,619,358 $ (8,587,125) $(6,051,633)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization................. 14,173,650 16,096,653 16,410,321
Loss on sale of equipment..................... -- -- 107,154
Gain on sale of radio stations................ (82,067,223) (4,028,013) --
Impairment loss on long-lived assets.......... 4,124,249 -- --
Minority interest............................. (1,076,689) (253,993) --
Change in assets and liabilities net of
effects of acquisitions and dispositions of
radio stations:
Increase in receivables.................. (2,230,690) (782,146) (2,235,888)
Increase prepaid expense and other....... (600,293) (476,296) (625,890)
Increase in intangibles.................. (100,000) (267,331) --
Increase in other assets................. (233,426) (506,431) (475,304)
Increase in payables and accrued
expenses............................... 2,977,086 3,725,220 66,425
------------- ------------- -----------
Net cash provided by operating activities..... 1,586,022 4,920,538 7,195,185
------------- ------------- -----------
Cash flows from investing activities:
Capital expenditures for property and equipment.... (2,307,214) (1,586,933) (2,025,425)
Proceeds from sale of property and equipment....... -- 1,700,000 --
Proceeds from sale of radio stations............... 103,525,000 5,150,000 --
Payments for purchase of radio stations............ (77,677,895) (19,000,000) --
(Increase) decrease in restricted cash............. (1,250,000) 1,250,000 --
Loans to related parties........................... -- (16,325) --
Loans to stockholders.............................. (3,419,335) (1,206,446) (734,282)
Payments from stockholders......................... -- 1,182,342 --
------------- ------------- -----------
Net cash provided by (used in) investing
activities.................................. 18,870,556 (12,527,362) (2,759,707)
------------- ------------- -----------
Cash flows from financing activities:
Proceeds from issuance of indebtedness............. 1,068,900 135,040,061 --
Proceeds from issuance of related party notes...... 3,390,920 663,538 144,027
Principal payments on indebtedness................. (3,578,525) (124,463,715) (161,994)
Payments of loan fees.............................. (13,428) (1,625,000) --
Capital contributions.............................. 2,764,553 1,582,211 2,764,553
Stockholders distributions......................... (20,684,193) (5,959,936) (4,938,993)
Purchase of common stock........................... -- (548,600) --
------------- ------------- -----------
Net cash provided by (used in) financing
activities.................................. (17,051,773) 4,688,559 (2,192,407)
------------- ------------- -----------
Net increase (decrease) in cash and cash equivalents... 3,404,805 (2,918,265) 2,243,071
Cash and cash equivalents at beginning of year......... 4,273,058 7,677,863 4,759,598
------------- ------------- -----------
Cash and cash equivalents at end of year............... $ 7,677,863 $ 4,759,598 $ 7,002,669
============= ============= ===========
Cash paid for interest................................. $ 13,034,000 $ 13,017,000 $12,853,000
============= ============= ===========
Cash paid for state taxes.............................. $ 18,000 $ 22,000 $ 25,000
============= ============= ===========
Supplemental disclosure of non-cash investing and
financing activities:
Note receivable taken in conjunction with the sale
of a radio station.............................. $ 50,000 $ -- $ --
============= ============= ===========
Financed purchases of property and equipment....... $ -- $ 35,649 $ --
============= ============= ===========
</TABLE>
See accompanying notes to combined financial statements
37
<PAGE> 40
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION AND CORPORATE REORGANIZATION
Beasley FM Acquisition Corp. and related companies (the "Company") consists
of subchapter S corporations and partnerships related to one another through
common ownership and control. The Company operates 28 radio stations with its
primary source of revenue generated from the sale of advertising time to local
and national spot advertisers and national network advertisers. All significant
inter-company balances and transactions have been eliminated in presenting the
Company's combined financial statements.
The number of shares authorized, issued and outstanding for Beasley FM
Acquisition Corp. and Related Companies for all periods is as follows:
<TABLE>
<CAPTION>
COMMON
STOCK
OUTSTANDING
-----------
<S> <C>
Beasley FM Acquisition Corp. common stock, no par value;
authorized 1,000 shares; issued and outstanding 1,000
shares.................................................... $4,464,099
Beasley Broadcasting of Eastern North Carolina, Inc. common
stock, $1 par value; authorized 100,000 shares; issued and
outstanding 50,000 shares................................. 50,000
CSRA Broadcasters, Inc. common stock, $100 par value;
authorized 600 shares; issued and outstanding 100
shares.................................................... 10,000
W&B Media, Inc. common stock, $1 par value; authorized
100,000 shares; issued and outstanding 2,223 shares....... 2,223
Beasley Broadcasting of Arkansas, Inc. common stock, $1 par
value; authorized 10,000 shares; issued and outstanding
1,000 shares.............................................. 1,000
Beasley Broadcasting of Eastern Pennsylvania, Inc. common
stock, $1 par value; authorized 10,000 shares; issued and
outstanding 1,000 shares.................................. 1,000
Beasley Broadcasting of Southwest Florida, Inc. common
stock, $1 par value; authorized 10,000 shares; issued and
outstanding 1,000 shares.................................. 1,000
Beasley Radio, Inc. common stock, $1 par value; authorized
10,000 shares; issued and outstanding 1,000 shares........ 1,000
Beasley Broadcasting of Coastal Carolina, Inc. common stock,
$.01 par value; authorized 1,000 shares issued and
outstanding 1,000 shares.................................. 10
Beasley Broadcasting of Augusta, Inc. common stock, $.01 par
value; authorized 1,000 shares; issued and outstanding
1,000 shares.............................................. 10
Beasley Communications, Inc. common stock, $.01 par value;
authorized 1,000 shares; issued and outstanding 1,000
shares.................................................... 10
----------
$4,530,352
==========
</TABLE>
The Company completed an initial public offering of common stock on
February 11, 2000. Immediately prior to the initial public offering, pursuant to
a corporate reorganization (the "Reorganization"), stockholders of the various S
corporations and George G. Beasley as limited partner in the various license
limited partnerships contributed their interests in those entities to Beasley
Broadcast Group, Inc., a newly formed holding company, in exchange for common
stock. Immediately after these transactions, Beasley Broadcast Group, Inc.
contributed the capital stock and partnership interests acquired to Beasley
Mezzanine Holdings, LLC and Beasley Mezzanine Holdings, LLC become a
wholly-owned subsidiary of Beasley Broadcast Group, Inc. All S corporation
elections were terminated and the resulting entities became C corporations. The
reorganization and contribution of capital stock and partnership interests was
accounted for in a manner similar to a pooling
38
<PAGE> 41
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
of interests as to the majority owners, and as an acquisition of minority
interest using the purchase method of accounting.
The Company has two classes of common stock and one or more series of
preferred stock. In addition, the Company adopted an equity participation plan
providing various stock based compensation awards. Class B common shares are
held by majority stockholders of the S corporations. Class A common shares were
issued in the initial public offering including shares to current
minority-interest stockholders. No shares of preferred stock were issued in the
offering. The only difference between the Class A and Class B common stock is
that Class A is entitled to one vote per share and Class B is entitled to ten
votes per share. Class B is convertible into Class A shares on a one for one
share basis under certain circumstances.
(b) PRO FORMA INFORMATION
The pro forma balance sheet as of December 31, 1999 reflects the capital
structure of the Company immediately prior to the effectiveness of the initial
public offering. Common stock represents Class A and Class B common shares. It
reflects the establishment of deferred tax assets and liabilities upon
conversion from a subchapter S to a subchapter C corporation which will result
in a charge to operations at the time of effectiveness (see note 11),
distributions to equity holders for income taxes on income of entities
comprising Beasley Broadcast Group prior to the Reorganization, the distribution
of untaxed retained income and subsequent recontribution of the same amounts as
additional paid-in capital and the fair value adjustment necessary to record the
acquisition of minority shareholder interest using the purchase method of
accounting as follows:
<TABLE>
<S> <C>
Net stockholders' deficit -- actual......................... $ (2,919,321)
Deferred tax assets and liabilities......................... (24,484,000)
Fair value adjustment to minority interests................. 8,330,089
Distributions to stockholders............................... (3,000,000)
------------
Net stockholders' deficit -- pro-forma...................... $(22,073,232)
============
</TABLE>
The pro forma balance sheet does not include any proceeds from the initial
public offering. Pro forma earnings per share, for all periods presented, is
based on the number of common shares issued immediately prior to the
effectiveness of the initial public offering.
For all periods presented, the unaudited pro forma income tax information
included on the face of the statements of operations and in note 11 is presented
in accordance with SFAS No. 109, Accounting for Income Taxes, as if the Company
had been subject to Federal and state income taxes for the years ended December
31, 1997, 1998 and 1999.
(c) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include demand deposits and short-term
investments with an original maturity of three months or less.
(d) RESTRICTED CASH
Restricted cash represents cash held in escrow pending the outcome of
binding arbitration relating to a dispute over the purchase price of radio
station WWDB-FM. The dispute was resolved in 1998 and these funds were released
to the seller.
39
<PAGE> 42
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(e) PROGRAM RIGHTS
The total fixed cost of the contracts for the radio broadcast rights
relating to the Miami Dolphins, Florida Marlins and Florida Panthers sports
contracts is expensed on a straight-line basis in the quarters in which the
programs are broadcast. Other payments are expensed when additional contract
elements, such as post-season games, are paid for and broadcast.
(f) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated on
the straight-line method over the estimated useful lives of the assets.
(g) INTANGIBLES
Intangibles consist primarily of FCC broadcasting licenses, goodwill,
advertising base, loan fees, noncompete agreements, and other intangibles which
are amortized straight-line over their estimated useful lives.
(h) IMPAIRMENT
The Company assesses the recoverability of intangibles and other long-lived
assets on an ongoing basis based on estimates of related future undiscounted
cash flows compared to net book value. If the future undiscounted cash flow
estimate is less than net book value, the net book value is reduced to the
estimated fair value. The Company also evaluates the amortization and
depreciation periods of intangibles and other long-lived assets to determine
whether events or circumstances warrant revised estimates of useful lives.
(i) 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 cap, 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.
(j) REVENUE RECOGNITION
Revenue is recognized as advertising air time is broadcast and is net of
advertising agency commissions.
(k) BARTER TRANSACTIONS
Trade sales are recorded at the fair value of the products or services
received. For the years ended December 31, 1997, 1998 and 1999, trade sales were
approximately $3,488,000, $4,018,000 and $4,449,000, respectively. For the years
ended December 31, 1997, 1998 and 1999, trade expenses were approximately
$2,643,000, $3,481,000 and $5,002,000, respectively.
(l) INCOME TAXES
The Company has elected to be treated as a subchapter S Corporation under
provisions of the Internal Revenue Code. Under this corporate status, the
stockholders of the Company are individually responsible for reporting their
share of taxable income or loss. Accordingly, no provision for federal or
certain state income taxes has been reflected in the accompanying combined
financial statements. The Company converted to a regular C Corporation and
became subject to Federal and state corporate income taxes in conjunction with
its initial public offering.
40
<PAGE> 43
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(m) SEGMENT REPORTING
As of December 31, 1999 the Company operates two reportable segments
comprised of 28 separate radio stations in the eastern United States. The
reportable segments are in the radio broadcasting industry, providing a similar
product to similar customers. Net revenues, consisting primarily of national and
local advertising, are derived from external sources. The Company does not rely
on any major customer as a source of net revenue. The Company identifies its
reportable segments based on the operating management responsibility for the
segment. The chief operating decision maker uses net revenues and broadcast cash
flow as measures of profitability to assess segment profit or loss and to
allocate resources between the two segments. The accounting policies of the
segments are the same as those described in the summary of significant
accounting policies.
(n) DEFINED CONTRIBUTION PLAN
The Company has a defined contribution plan that conforms with Section
401(k) of the Internal Revenue Code. Under this plan, employees may contribute a
minimum of 1% of their compensation (no maximum) to the Plan. The Internal
Revenue Code, however, limited contributions to $9,500 in 1997 and $10,000 in
1998 and 1999. There are no employer matching contributions.
(o) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from these estimates. To the
extent management's estimates prove to be incorrect, financial results for
future periods may be adversely affected.
(p) 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.
41
<PAGE> 44
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(2) PROPERTY AND EQUIPMENT
Property and equipment, at cost, is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, ESTIMATED
--------------------------- USEFUL LIVES
1998 1999 (YEARS)
------------ ------------ ------------
<S> <C> <C> <C>
Land, buildings and improvements............... $ 4,319,379 $ 4,369,458 31.5
Broadcast equipment............................ 19,551,560 20,438,606 5
Transportation equipment....................... 814,127 876,987 5
Office equipment and other..................... 4,109,181 4,329,267 5-7
Construction in progress....................... 18,439 800,778 --
------------ ------------ ----
28,912,686 30,815,096
Less accumulated depreciation.................. (12,408,635) (15,041,921)
------------ ------------
$ 16,504,051 $ 15,773,175
============ ============
</TABLE>
In 1997, property and equipment includes certain land, a building, and
building improvements with a net book value of $5,824,249 associated with the
Company's former ownership of a radio station in Los Angeles, California. This
property was leased under an operating lease agreement until it was sold for
$1,700,000 on April 20, 1998. The Company recognized an impairment loss of
$4,124,249 on this property for the year ended December 31, 1997.
(3) INTANGIBLES
Intangibles, at cost, is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31, ESTIMATED
---------------------------- USEFUL LIVES
1998 1999 (YEARS)
------------ ------------ ------------
<S> <C> <C> <C>
FCC broadcasting licenses........... $157,700,379 $157,700,379 10-15
Goodwill............................ 16,763,990 16,763,990 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 5,666,932 5-15
------------ ------------ -----
188,366,233 188,366,233
Less accumulated amortization....... (37,317,768) (51,078,942)
------------ ------------
$151,048,465 $137,287,291
============ ============
</TABLE>
42
<PAGE> 45
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(4) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1999
------------ ------------
<S> <C> <C>
Revolving credit loan, see below for terms of note
agreement.............................................. $124,680,420 $124,680,420
Note payable to Georgia Bank and Trust, payable in
monthly payments of $3,500, including interest at 8.5%
per annum, maturing on December 5, 2002................ 369,911 358,930
Note payable to Aiken Radio, Inc., payable in monthly
payments ranging from $4,167 to $7,844, including
interest at 10% per annum, maturing in June 2003....... 317,568 262,627
Note payable to G.R.R. Marketing, Inc., payable in
monthly payments of $5,592, including interest at prime
plus 1% per annum (9.5% at December 31, 1999), maturing
in February, 2005...................................... 318,788 281,677
Note payable to Columbia County Broadcasters, Inc.,
payable in quarterly payments of $7,062, including
interest at 8% per annum, maturing on December 15,
2002................................................... 95,192 73,665
Note payable to SunTrust Bank, payable in monthly
payments of $893, including interest at 8.68% per
annum, maturing on March 15, 2002...................... 83,469 79,853
Note payable to Georgia Bank and Trust, payable in
monthly payments of $1,134, including interest at 9.25%
per annum, maturing on December 22, 2001............... 35,044 24,227
Note payable to Myer Feldman, payable in monthly payments
of $527, including interest at 12% per annum, maturing
on April 1, 2013....................................... 43,245 42,155
Note payable to Pontiac Master-GMC Truck, payable in
monthly payments of $565, including interest at 3.9%
per annum, maturing on November 15, 1999............... 6,091 --
Note payable to Georgia Bank and Trust, payable in
monthly payments of $648, including interest at 8% per
annum, maturing on January 25,2002..................... 21,269 14,964
Capital lease obligations, payable in monthly payments
ranging from $399 to $532, including interest ranging
from 8% to 20% per annum, maturing on various dates
through April 27, 2003. The leases are secured by the
leased property........................................ 38,012 28,497
------------ ------------
126,009,009 125,847,015
Less current installments of long-term debt.............. (161,048) (166,319)
------------ ------------
Long-term debt, less current installments................ $125,847,961 $125,680,696
============ ============
</TABLE>
As of December 31, 1999, the maximum commitment under the revolving credit
loan is $150 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, 1998 and December 31, 1999,
the revolving credit loan carried interest at an average rate of 7.47% and 7.95%
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
43
<PAGE> 46
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
revolving credit loan. The Company has entered into interest rate hedge
agreements as discussed in note 9. The loan agreement includes restrictive
covenants and requires the Company to maintain certain financial ratios. The
loan is secured by substantially all assets of the Company.
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 combined balance sheet. Other terms of the
revolving credit loan are expected to remain substantially the same.
On February 16, 2000, all long-term debt, except the revolving credit loan
and capital lease obligations, was repaid in full. As of December 31, 1999,
scheduled payments of the capital lease obligations are as follows: $7,713 in
2000, $8,352 in 2001, $9,045 in 2002 and $3,387 in 2003.
(5) LONG-TERM DEBT TO RELATED PARTIES
Long-term debt to related parties consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
7.67% notes payable to affiliate Beasley Broadcasting of
Philadelphia, Inc., interest-only payments are due
annually, principal and any unpaid interest due August
11, 2004............................................... $25,699,530 $25,699,530
7.67% notes payable to affiliate Beasley-Reed
Broadcasting of Miami, Inc., interest-only payments are
due annually, principal and any unpaid interest due
August 11, 2004........................................ 11,576,092 11,576,092
----------- -----------
$37,275,622 $37,275,622
=========== ===========
</TABLE>
For each of the years ended December 31, 1997, 1998 and 1999, interest
expense on long-term debt to related parties was approximately $2,859,000. On
February 16, 2000, all long-term debt to related parties was repaid in full.
(6) ACQUISITIONS AND DISPOSITIONS
Station acquisitions, including tax-deferred exchange were accounted for by
the purchase method for financial statement purposes, and accordingly, the
purchase price has been allocated to the assets acquired based on their
estimated fair market values at the date of the acquisition. A substantial
portion of each purchase price was allocated to intangible assets to reflect the
FCC broadcasting licenses acquired. These FCC broadcasting licenses are being
amortized over 15 years using the straight-line basis. The excess of the
purchase price over the fair value of the net assets acquired has been recorded
as goodwill and is being amortized over 15 years using the straight-line basis.
No liabilities were assumed by the Company as a result of these acquisitions.
Operations of acquired stations have been included in the combined results of
the Company since the acquisition date of each such station.
(a) 1999 ACQUISITIONS AND DISPOSITIONS
There were no acquisitions or dispositions during 1999.
(b) 1998 ACQUISITIONS AND DISPOSITIONS
- On February 11, 1998, BFMA acquired the assets of WJBX-FM for
approximately $6,000,000.
44
<PAGE> 47
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
- On February 11, 1998, BRI acquired the assets of WJST-FM for
approximately $5,000,000.
- On December 1, 1998, BBA acquired the assets of WTMR-AM for approximately
$8,000,000.
- BBA sold substantially all of the assets of KAAY-AM to Citadel
Broadcasting Company on November 17, 1998. Net proceeds from the sale
were approximately $5,000,000, which resulted in a gain of approximately
$4,356,000.
- BFMA sold substantially all of the assets of WEWO-AM to Service Media,
Inc. on August 1, 1998. Net proceeds from the sale were approximately
$150,000, which resulted in a loss of approximately $328,000.
For tax purposes, the sale of KAAY-AM and the acquisition of WTMR-AM were
treated as a tax-deferred exchange under Section 1031 of the Internal Revenue
Code to a substantial extent.
For tax purposes, the sale of WEGX-FM and WDSC-AM and the acquisition of
WJBX-FM were treated as a tax-deferred exchange under Section 1031 of the
Internal Revenue Code.
(c) 1997 ACQUISITIONS AND DISPOSITIONS
- On January 22, 1997, BCI acquired the assets of WCHZ-FM for approximately
$1,200,000. BCI had operated this station under an LMA since December 9,
1996.
- On January 31, 1997, BFMA acquired the assets of WFLB-AM (subsequently
changed to WAZZ-AM) for approximately $228,000.
- On May 19, 1997, BFMA acquired the assets of WZFX-FM for approximately
$11,500,000.
- On May 9, 1997, BFMA acquired the assets of WWDB-FM for approximately
$63,250,000.
- On July 29, 1997, BFMA acquired the assets of WLRD-FM (subsequently
changed to WUKS-FM) and WYRU-AM (subsequently changed to WTEL-AM) for
$1,500,000.
- On June 30, 1997, BFMA entered into a time brokerage agreement (TBA) with
Root Communications, Ltd. (Root) to operate WEGX-FM and WDSC-AM. BFMA
subsequently completed the sale of substantially all assets of WEGX-FM
and WDSC-AM to Root on October 7, 1997. Net proceeds from the sale were
approximately $3,500,000, which resulted in a gain of approximately
$2,232,000.
- BFMA sold substantially all of the assets of WDAS-AM/FM to Evergreen
Media Corporation of Los Angeles on May 1, 1997. Net proceeds from the
sale were approximately $100,000,000, which resulted in a gain of
approximately $79,831,000.
- BBENC sold substantially all of the assets of WTSB-AM to Lumberton
Christian Radio, Inc. on August 1, 1997. Net proceeds from the sale were
approximately $75,000, which resulted in a gain of approximately $5,000.
For tax purposes, the sale of WDAS-FM and the acquisitions of WZFX-FM,
WWDB-FM, WLRD-FM and WYRU-AM were treated as a tax-deferred exchange under
Section 1031 of the Internal Revenue Code to a substantial extent.
45
<PAGE> 48
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Acquisitions for the years ended December 31, 1997 and 1998 are summarized
as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------
1997 1998
----------- -----------
<S> <C> <C>
Property and equipment........................... $ 3,348,028 $ 1,499,641
Other assets..................................... 6,289 2,142
FCC broadcasting licenses........................ 72,116,204 17,226,517
Goodwill......................................... 2,207,374 271,700
----------- -----------
Payments for purchase of radio stations.......... $77,677,895 $19,000,000
=========== ===========
</TABLE>
Dispositions for the years ended December 31, 1997 and 1998 are summarized
as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------
1997 1998
------------ ----------
<S> <C> <C>
Proceeds from sale of stations................... $103,525,000 $5,150,000
Accounts receivable, net......................... -- (5,720)
Prepaid expenses and other....................... (101,844) --
Property and equipment, net...................... (4,012,539) (797,915)
Intangibles, net................................. (17,261,967) (193,755)
Trade sales, net................................. (81,427) --
Selling expenses................................. -- (124,597)
------------ ----------
Gain on sale of radio stations................... $ 82,067,223 $4,028,013
============ ==========
</TABLE>
Under a TBA or LMA the Company operating a station generally receives all
broadcast revenues and provides the necessary programming, technical, sales and
marketing, and other support. The Company then pays a monthly fee to the owner
of the station for the use of the station assets. The broadcast revenues and
operating expenses of stations operated by the Company under TBAs and LMAs have
been included in the Company's operations since the dates of such agreements.
(e) UNAUDITED PRO FORMA RESULTS OF OPERATIONS
The following unaudited pro forma information presents the results of
operations for the years ended December 31, 1997, 1998 and 1999, with pro forma
adjustments as if the acquisitions of the stations in 1997, 1998 and 1999, had
occurred prior to January 1 in the prior year.
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 results that may occur in the future.
46
<PAGE> 49
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenues................................ $ 80,204,000 $ 82,550,000 $ 93,621,000
------------ ------------ ------------
Costs and expenses:
Program and production................ 24,061,000 25,253,000 27,177,000
Sales and advertising................. 21,431,000 23,268,000 25,040,000
General and administrative............ 13,980,000 13,628,000 14,444,000
Corporate general and
administrative..................... 2,295,000 2,604,000 2,764,000
Equity appreciation rights............ -- -- 606,000
Depreciation and amortization......... 17,468,000 16,692,000 16,410,000
Impairment loss on long lived
assets............................. 4,124,000 -- --
------------ ------------ ------------
Total costs and expenses...... $ 83,359,000 $ 81,445,000 $ 86,441,000
------------ ------------ ------------
Operating income (loss)............... (3,155,000) 1,105,000 7,180,000
------------ ------------ ------------
Other income (expense):
Interest expense...................... (14,037,000) (13,649,000) (14,008,000)
Other non-operating expenses.......... (2,004,000) (1,581,000) (107,000)
Interest income....................... 888,000 818,000 883,000
Other non-operating income............ 93,000 349,000 --
Gain on sale of radio stations........ 82,067,000 4,028,000 --
Minority interest..................... 1,077,000 254,000 --
------------ ------------ ------------
Net income (loss) before pro forma
income tax expense (benefit)..... $ 64,929,000 $ (8,676,000) $ (6,052,000)
============ ============ ============
Pro forma income tax expense
(benefit)............................. 25,142,000 (3,284,000) (2,204,000)
------------ ------------ ------------
Net income (loss)............. 39,787,000 (5,392,000) (3,848,000)
============ ============ ============
Pro forma basic and diluted net income
(loss) per share...................... $ 2.28 $ (0.31) $ (0.22)
============ ============ ============
Pro forma basic and diluted common
shares outstanding.................... 17,423,441 17,423,441 17,423,441
</TABLE>
(f) SUBSEQUENT AND PENDING ACQUISITIONS
- On January 6, 2000, BFMA acquired the assets of WAEC-AM and WWWE-AM for
approximately $10,000,000.
- In September 1999, the Company entered into an agreement to acquire
WRFN-FM and WRDW-AM for approximately $800,000.
- In December 1999, the Company entered into an agreement to acquire
WWNN-AM, WHSR-AM and WSBR-AM for approximately $18,000,000.
- In December 1999, the Company entered into an agreement to acquire
WRCA-AM for approximately $6,000,000.
(7) RELATED PARTY TRANSACTIONS
The Company has a management agreement with Beasley Broadcasting Management
Corp., an affiliate of the Company's principal stockholder, George G. Beasley.
For the years ended December 31, 1997, 1998 and 1999, management fee expense
under the agreement was approximately $2,055,000, $2,498,000 and
47
<PAGE> 50
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
$2,764,000, respectively. Management fee expense is reported as corporate
general and administrative in the accompanying combined statements of
operations.
The Company leases certain office space from its principal stockholder,
George G. Beasley. For the years ended December 3 1, 1997, 1998 and 1999, rental
expense paid to Mr. Beasley was approximately $111,000, $77,000 and $96,000,
respectively.
Distributions to stockholders of the S corporations during the years ended
December 31, 1997, 1998 and 1999 were $20,684,193, $5,959,936 and $4,938,993,
respectively.
Notes receivable from related parties are due on demand.
Notes payable to related parties bear interest at 7.67% to 9.25% and are
due on demand. For the years ended December 31, 1997, 1998 and 1999, interest
expense on notes payable to related parties was approximately $532,000, $666,000
and $642,000, respectively.
Notes receivable from stockholders bear interest at 9.25% and are due on
demand. For the years ended December 31, 1997, 1998 and 1999, interest income on
notes receivable from related parties was approximately $551,000, $618,000 and
$707,000, respectively.
(8) 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. As of
December 31, 1999, remaining payments of fees are as follows: $8,500,000 in
2000, $8,844,000 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 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. The proper accounting treatment for executory contracts such as these
is currently the subject of Emerging Issues Task Force 99-14. Depending on the
resolution of this issue by the task force, the Company may be required to
record a charge reflecting an impairment of these committed contracts. Such a
charge could also have a material adverse effect on future results of
operations.
The Company leases facilities under one- to ten-year operating leases and
towers under 5 to 40 year operating leases. For the years ended December 31,
1997, 1998 and 1999, lease expense was approximately $1,530,000, $1,503,000 and
$1,815,000, respectively. As of December 31, 1999, future minimum lease payments
for the next five years and thereafter are summarized as follows:
<TABLE>
<S> <C>
2000........................................................ $1,703,000
2001........................................................ 1,400,000
2002........................................................ 967,000
2003........................................................ 860,000
2004........................................................ 806,000
Thereafter.................................................. 3,361,000
----------
Total.................................................. $9,097,000
==========
</TABLE>
48
<PAGE> 51
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Employment agreements with two radio station managers contain provisions
that allow the station manager to participate in the gain on the sale of the
station managed in the event it is sold, and while the station manager is still
employed by the Company. In addition, these agreements provide that upon the
occurrence of certain liquidity events the station manager will be paid a
percentage of the increase in value of the station managed upon completion of
the offering. As of December 31, 1999, no amounts have been reported in the
combined financial statements. On February 16, 2000, the Company paid
approximately $1,200,000 to the station managers as a result of the initial
public offering.
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.
(9) DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses interest rate cap, collar and swap agreements to hedge
against the potential impact of increases in interest rates on the revolving
credit loan. For the years ended December 31, 1997 and 1998, the Company
received additional interest of approximately $9,000 and $11,000, respectively.
For the year ended December 31, 1999, the Company paid additional interest of
approximately $87,000. 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. There was no additional interest paid or received under
the cap and collar agreements.
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's significant financial instruments and the methods used to estimate
their fair values are as follows:
- Revolving credit loan -- The fair value approximates carrying value due
to the interest rate being based on current market rates.
- Notes payable to affiliates -- It is not practicable to estimate the fair
value of notes payable to affiliates due to their related party nature.
- Non-interest bearing note payable -- The fair value is estimated using
the present value of discounted cash flows at rates currently available
to the Company for borrowings with similar terms and remaining
maturities. The fair value of this note approximates its carrying value
due to its short-term maturity.
- Hedge agreements -- The Company has entered into various agreements to
hedge against the potential impact of increases in interest rates on the
revolving credit loan. These agreements at December 31, 1999 are
summarized as follows:
<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 4.99% 7% -- January 2000 $ --
Interest rate collar........ 10,000,000 5.25% 7% -- January 2000 --
Interest rate collar........ 10,000,000 5.17% 7% -- May 2000 --
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>
The Company is exposed to credit loss in the event of nonperformance by the
other parties to the agreements. The Company, however, does not anticipate
nonperformance by the counterparties. The fair value of the interest rate swap
agreements is estimated using the difference between the present value of
discounted
49
<PAGE> 52
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
cash flows using the base rate stated in the swap agreement and the present
value of discounted cash flows using the LIBOR rate at December 31, 1999. The
fair values of the interest rate cap agreement and the interest rate collar
agreements are estimated based on the amounts the Company would expect to
receive or pay to terminate the agreement.
(11) PRO FORMA INCOME TAXES
Pro forma 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>
DECEMBER 31,
---------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Expected pro forma tax expense (benefit).............. $22,651,000 $(2,920,000) $(2,058,000)
State income taxes, net of federal benefit............ 3,078,000 (397,000) (280,000)
Other................................................. 66,000 67,000 134,000
----------- ----------- -----------
$25,795,000 $(3,250,000) $(2,204,000)
=========== =========== ===========
</TABLE>
Temporary differences that give rise to the components of pro forma
deferred tax assets and liabilities, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Allowance for doubtful accounts.................... $ 2,747,000 $ 2,660,000 $ 2,623,000
Accrued interest on notes receivable from related
parties.......................................... 994,000 1,222,000 1,457,000
Notes receivable from related parties.............. 478,000 478,000 478,000
Property and equipment............................. 531,000 -- --
------------ ------------ ------------
Gross deferred tax assets........................ 4,750,000 4,360,000 4,558,000
Intangibles........................................ (30,370,000) (30,541,000) (27,929,000)
Property and equipment............................. -- (1,199,000) (1,113,000)
------------ ------------ ------------
Gross deferred tax liabilities..................... (30,370,000) 31,740,000 (29,042,000)
------------ ------------ ------------
Net deferred tax liabilities..................... $(25,620,000) $(27,380,000) $(24,484,000)
============ ============ ============
</TABLE>
50
<PAGE> 53
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(12) SEGMENT INFORMATION
Segment information, in thousands of dollars for the years ended December
31, 1997, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Total assets:
Radio Group One........................................... $ 97,282 $ 97,530 $ 97,802
Radio Group Two........................................... 96,158 97,243 88,059
-------- -------- --------
Total.............................................. $193,440 $194,773 $185,861
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net revenues:
Radio Group One........................................... $ 44,755 $ 50,825 $ 59,798
Radio Group Two........................................... 28,948 30,608 33,823
-------- -------- --------
Total.............................................. 73,703 81,433 93,621
-------- -------- --------
Broadcast cash flow:
Radio Group One........................................... $ 8,924 $ 10,922 $ 18,116
Radio Group Two........................................... 9,533 8,820 8,845
-------- -------- --------
Total.............................................. 18,457 19,742 26,961
-------- -------- --------
Reconciliation to net income (loss):
Corporate general and administrative expenses............... $ (2,055) $ (2,498) $ (2,764)
Depreciation and amortization............................... (14,173) (16,097) (16,410)
Equity appreciation rights.................................. -- -- (606)
Impairment loss on long-lived assets........................ (4,124) -- --
Interest expense............................................ (13,606) (13,602) (14,008)
Other non-operating income (expense)........................ 53 (160) 775
Gain (loss) on sale of radio stations....................... 82,067 4,028 --
-------- -------- --------
Net income (loss)........................................... $ 66,619 $ (8,587) $ (6,052)
======== ======== ========
</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 and
Augusta, GA.
Broadcast cash flow consists of operating income (loss) before corporate
general and administrative expenses, depreciation and amortization, equity
appreciation rights expenses and impairment loss on long-lived assets.
(13) EQUITY PLAN
On February 11, 2000, the Company adopted The 2000 Equity Plan (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. 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.
(14) SUBSEQUENT EVENT
The Company has reached a set of agreements to sell its radio towers and
related real estate assets owned by the Company to Beasley Family Towers, Inc.
(BFT) for approximately $5,100,000. No gain or loss is expected to be reported
in the combined statements of operations. In conjunction with this sale, the
agreements provide for twenty-year leases of the towers from BFT to us.
51
<PAGE> 54
BEASLEY FM ACQUISITION CORP. AND RELATED COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
COLUMN B COLUMN E
BALANCE AT COLUMN C COLUMN D BALANCE AT
COLUMN A BEGINNING OF PROVISION FOR CHARGE END OF
DESCRIPTION PERIOD BAD DEBTS OFFS PERIOD
----------- ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1997:
Allowance for doubtful accounts................. 594,471 1,218,755 721,226 1,092,000
Year ended December 31, 1998:
Allowance for doubtful accounts................. 1,092,000 1,129,211 1,631,859 589,352
Year ended December 31, 1999:
Allowance for doubtful accounts................. 589,352 803,074 832,144 560,282
</TABLE>
52
<PAGE> 55
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table provides information concerning our directors and
executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
George G. Beasley..................... 67 Chairman and Chief Executive Officer
Bruce G. Beasley...................... 42 President, Chief Operating Officer and
Director
B. Caroline Beasley................... 37 Vice President, Chief Financial
Officer, Secretary, Treasurer and
Director
Brian E. Beasley...................... 40 Vice President of Operations and
Director
Joe B. Cox............................ 60 Director
Mark S. Fowler........................ 58 Director
</TABLE>
George G. Beasley founded Beasley Broadcast Group in 1961 and has served
since inception as our Chairman and Chief Executive Officer. Mr. Beasley served
on the North Carolina Association of Broadcasters' Board of Directors for eight
years and has served that Association as President and Vice President. Mr.
Beasley was awarded the Distinguished Broadcaster of North Carolina Award in
1998. Mr. Beasley has a B.A. and M.A. from Appalachian State University. George
G. Beasley is the father of Bruce G. Beasley, B. Caroline Beasley and Brian E.
Beasley.
Bruce G. Beasley has served as our President and Chief Operating Officer
since 1997 and as one of our directors since 1980. He began his career in the
broadcasting business with Beasley Broadcast Group in 1975 and since that time
has served in various capacities including General Sales Manager of a radio
station, General Manager of a radio station and Vice President of Operations of
Beasley. Currently, Mr. Beasley oversees the operation of all radio stations.
Mr. Beasley serves on the Boards of Directors of the North Carolina Association
of Broadcasters and the Radio Advertising Bureau. Mr. Beasley has a B.S. from
East Carolina University. Mr. Beasley is the son of George G. Beasley and the
brother of B. Caroline Beasley and Brian E. Beasley.
B. Caroline Beasley has served as our Vice President, Chief Financial
Officer and Secretary since 1994 and as one of our directors since 1983. She
joined Beasley Broadcast Group in 1983 and since that time has served in various
capacities including Business Manager, Assistant Controller and Corporate
Controller. Ms. Beasley is a member of the Broadcast and Cable Financial
Management Association. Ms. Beasley has a B.S. from the University of North
Carolina at Chapel Hill. Ms. Beasley is the daughter of George G. Beasley and
the sister of Bruce G. Beasley and Brian E. Beasley.
Brian E. Beasley has served as our Vice President of Operations since 1997
and as one of our directors since 1982. He began his career in broadcasting
during high school in 1977. He joined Beasley full-time in 1982 as General
Manager of the previously-owned cable TV division. In 1985, he became Senior
Account Executive to a radio station. Since that time, Mr. Beasley has served as
General Manager to three different radio stations and most recently has been
named Vice President of Operations. Mr. Beasley has a B.S. from East Carolina
University. Mr. Beasley is the son of George G. Beasley and the brother of Bruce
G. Beasley and B. Caroline Beasley.
Joe B. Cox has been elected to serve as director of Beasley Broadcast
Group. Mr. Cox is a partner at the law firm of Cummings and Lockwood. Mr. Cox
has practiced law for 33 years, primarily in the tax, corporate and estate law
areas. Mr. Cox is a director of Citizens National Bank.
53
<PAGE> 56
Mark S. Fowler has been elected to serve as director of Beasley Broadcast
Group. Mr. Fowler currently is counsel at the law firm of Latham & Watkins,
where he has been employed since 1987. Mr. Fowler has served as Chairman of
UniSite, Inc. since 1994 and Chairman of Assure Sat, Inc. since 1997. Mr. Fowler
is also a director of Pac-West Telecomm, Inc. and Talk.com, Inc. Mr. Fowler
served as Chairman of the FCC from 1981 until 1987.
COMMITTEES OF THE BOARD OF DIRECTORS
Our board of directors has established an audit committee and a
compensation committee.
Audit Committee. On February 11, 2000, we established an audit committee
consisting of Joe B. Cox and Mark S. Fowler. The responsibilities of the audit
committee include:
- recommending to the board of directors independent public accountants to
conduct the annual audit of our financial statements;
- reviewing the proposed scope of the audit and approving the audit fees to
be paid;
- reviewing our accounting and financial controls with the independent
public accountants and our financial and accounting staff; and
- reviewing and approving transactions, other than compensation matters,
between us and our directors, officers and affiliates.
Compensation Committee. On February 11, 2000, we established a
compensation committee consisting of Joe B. Cox and Mark S. Fowler. The
compensation committee provides a general review of our compensation plans to
ensure that they meet corporate objectives. The responsibilities of the
compensation committee also include administering and interpreting our 2000
equity plan.
ITEM 11. EXECUTIVE COMPENSATION
In fiscal year 1999, all executive officers of Beasley Broadcast Group were
compensated by Beasley Broadcasting Management Corp. and received no
compensation from Beasley Broadcast Group. The following table provides summary
information concerning compensation paid to or earned by our Chief Executive
Officer and our other most highly compensated executive officers for services
rendered during the year ended December 31, 1999. No stock options or stock
appreciation rights were granted to our Chief Executive Officer or the other
executive officers listed in the table below for the year ended December 31,
1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION ALL
--------------- OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION
--------------------------- ---- -------- ------------
<S> <C> <C> <C>
George G. Beasley
Chairman and Chief Executive Officer......... 1999 $434,094 $399,840*
Bruce G. Beasley
President and Chief Operating Officer........ 1999 $300,365 --
B. Caroline Beasley
Chief Financial Officer...................... 1999 $222,599 --
Brian E. Beasley
Vice President of Operations................. 1999 $266,259 --
</TABLE>
- ---------------
* Amounts attributable to the term portion of split-dollar life insurance
policies.
54
<PAGE> 57
DIRECTOR COMPENSATION
Directors are not paid any cash fees or additional compensation for
services as members of the board of directors or any committee of the board. All
directors will be reimbursed any expenses incurred, where appropriate.
Independent directors, including our director nominees, will automatically
receive grants of options to purchase Class A common stock under our 2000 equity
plan.
EMPLOYMENT AGREEMENTS
George G. Beasley Employment Agreement. We have entered into a three year
employment agreement with George G. Beasley pursuant to which he will serve as
our Chief Executive Officer and Chairman of our board of directors. Mr. Beasley
will receive an annual base salary of $500,000, subject to an annual increase of
not less than 5%, and an annual cash bonus at the discretion of the board of
directors. Mr. Beasley also received an option to purchase 487,500 shares of our
Class A common stock on February 11, 2000 under our 2000 equity plan at an
exercise price equal to the initial public offering price. This option vests
over the term of the employment agreement. We could incur severance obligations
under the expected terms of the employment agreement in the event that Mr.
Beasley's employment is terminated without cause or if he resigns for good
reason.
Bruce G. Beasley Employment Agreement. We have entered into a three year
employment agreement with Bruce G. Beasley pursuant to which he will serve as
our President and Chief Operating Officer. Mr. Beasley will receive an annual
base salary of $325,000, subject to an annual increase of not less than 5%, and
an annual cash bonus at the discretion of the board of directors. Mr. Beasley
also received an option to purchase 487,500 shares of our Class A common stock
on February 11, 2000 under our 2000 equity plan at an exercise price equal to
the initial public offering price. This option vests over the term of the
employment agreement. We could incur severance obligations under the expected
terms of the employment agreement in the event that Mr. Beasley's employment is
terminated without cause or if he resigns for good reason.
B. Caroline Beasley Employment Agreement. We have entered into a three
year employment agreement with B. Caroline Beasley pursuant to which she will
serve as our Chief Financial Officer. Ms. Beasley will receive an annual base
salary of $275,000, subject to an annual increase of not less than 5%, and an
annual cash bonus at the discretion of the board of directors. Ms. Beasley also
received an option to purchase 487,500 shares of our Class A common stock under
our 2000 equity plan at an exercise price equal to the initial public offering
price. This option vests over the term of the employment agreement. We could
incur severance obligations under the expected terms of the employment agreement
in the event that Ms. Beasley's employment is terminated without cause or if she
resigns for good reason. Ms. Beasley also received a $50,000 cash bonus upon the
completion of our initial public offering.
Brian E. Beasley Employment Agreement. We have entered into a three year
employment agreement with Brian E. Beasley pursuant to which he will serve as
our President of Operations. Mr. Beasley will receive an annual base salary of
$300,000 effective upon the completion of the corporate reorganization
contemplated by this offering, subject to an annual increase of not less than
5%, and an annual cash bonus at the discretion of the board of directors. Mr.
Beasley also received an option to purchase 487,500 shares of our Class A common
stock under our 2000 equity plan at an exercise price equal to the initial
public offering price. This option vests over the term of the employment
agreement. We could incur severance obligations under the expected terms of the
employment agreement in the event that Mr. Beasley's employment is terminated
without cause or if he resigns for good reason.
2000 EQUITY PLAN
On February 11, 2000, we adopted The 2000 Equity Plan of Beasley Broadcast
Group. This equity plan is our first plan under which employee stock options
have been granted. The principal purpose of the equity plan is to attract,
retain and motivate selected officers, employees, consultants and directors
through the granting of stock-based compensation awards. The equity plan
provides for a variety of compensation awards, including non-qualified stock
options, incentive stock options that are within the meaning of Section 422 of
the Internal Revenue Code, stock appreciation rights, restricted stock, deferred
stock, dividend equivalents,
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<PAGE> 58
performance awards, stock payments and other stock-related benefits. 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 shares were granted on February 11, 2000. These
options have an exercise price of $15.50 per share.
The equity plan provides that a committee of independent directors has the
authority to select the employees and consultants to whom awards are to be made,
to determine the number of shares to be subject to those awards and their terms
and conditions, and to make all other determinations and to take all other
actions necessary or advisable for the administration of the equity plan with
respect to employees or consultants.
The equity plan also provides that, each of our independent director
nominees will automatically be granted options to purchase 20,000 shares of our
Class A common stock upon election to our board of directors. These options will
have an exercise price per share equal to the fair market value per share of our
Class A common stock as of the date of grant, and will be exercisable with
respect to 10,000 shares as of the date of grant and will become exercisable
with respect to an additional 5,000 shares on each of the first two
anniversaries of the date of grant. The board may make additional option grants
to our independent directors from time to time, in its discretion, on such terms
as the board determines consistent with the equity plan.
The committee and the board is authorized to adopt, amend and rescind rules
relating to the administration of the equity plan, and to amend, suspend and
terminate the equity plan. We have attempted to structure the equity plan in a
manner such that remuneration attributable to stock options and other awards
will not be subject to the deduction limitation contained in Section 162(m) of
the Internal Revenue Code.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information as of March 20, 2000
regarding the beneficial ownership of our common stock by:
- each person known by us to beneficially own more than 5% percent of any
class of our common stock;
- each of our directors and our four executive officers; and
- all of our directors and executive officers as a group.
Each stockholder possesses sole voting and investment power with respect to
the shares listed, unless otherwise noted. Shares of Class B common stock are
convertible into shares of Class A common stock on a one-for-one basis. The
number of Class B shares owned by George G. Beasley consists of 10,564,413
shares owned individually by him, 3,205,677 shares owned by the George Beasley
Grantor Retained Annuity Trust dated November 16, 1999 and 39,835 shares owned
by Shirley W. Beasley, Mr. Beasley's spouse. The number of Class B shares owned
by Bruce G. Beasley and B. Caroline Beasley each include 356,736 owned
individually by each of them and 979,513 shares owned by the George Beasley
Estate Reduction Trust dated June 7, 1999 as to which they share voting and
dispositive power as trustees. Messrs. Cox and Fowler's ownership includes
10,000 immediately exercisable options to purchase Class A shares. Unless
otherwise
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<PAGE> 59
indicated, the address of the beneficial owner is c/o Beasley Broadcasting
Group, Inc., 3033 Riviera Drive, Suite 200, Naples, Florida 34103.
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------------------------------------------------
CLASS A CLASS B PERCENT OF PERCENT OF
---------------------- -------------------------- TOTAL TOTAL
NUMBER PERCENT NUMBER PERCENT ECONOMIC VOTING
NAME OF OF OF CLASS OF OF CLASS INTEREST POWER
BENEFICIAL OWNER SHARES POST OFFERING SHARES POST OFFERING POST OFFERING POST OFFERING
---------------- ------ ------------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
George G. Beasley........... -- -- 13,809,925 81.1% 56.8% 77.8%
Bruce G. Beasley............ -- -- 1,336,249 7.9 5.5 7.5
B. Caroline Beasley......... -- -- 1,336,249 7.9 5.5 7.5
Brian E. Beasley............ -- -- 420,265 2.5 1.7 2.4
Joe B. Cox.................. 20,000 * -- -- -- --
Mark S. Fowler.............. 11,000 * -- -- -- --
All directors and executive
officers as a group....... 31,000 * 15,923,175 93.5% 65.5% 89.7%
</TABLE>
- ------------
* Less than 1%.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INDEBTEDNESS TO AFFILIATES
From time to time we have incurred indebtedness to related parties and
affiliated entities. As of December 31, 1999, our aggregate outstanding
indebtedness to all George G. Beasley and his immediate family and affiliated
entities owned by them was $51,103,052, including $4,116,428 of accrued and
unpaid interest. We used a portion of the net proceeds from our initial public
offering to repay all outstanding indebtedness to related parties and affiliated
entities.
INDEBTEDNESS FROM AFFILIATES
From time to time George G. Beasley, members of his immediate family or
entities affiliated with them have borrowed funds from us. As of December 31,
1999, the aggregate indebtedness to us was $9,420,093, including $1,175,065 of
accrued and unpaid interest. These notes yielded interest at a rate of 9.25% per
year, with the exception of two loans totaling approximately $550,000, which
were non-interest bearing. The amounts owed to us by affiliates were repaid at
the closing of our initial public offering.
DISTRIBUTION TO AFFILIATES
Distributions to Mr. Beasley and members of his immediate family in their
capacity as equity holders in the various entities comprising Beasley Broadcast
Group during 1999 were approximately $4.3 million. An additional distribution of
approximately $3.0 million was made before our initial public offering to
members of the Beasley family for taxes payable by them on the income of the
entities comprising Beasley Broadcast Group for the 1999 tax year.
CORPORATE REORGANIZATION
Before our reorganization and our initial public offering, we existed as
several separate subchapter S corporations and partnerships. In connection with
our initial public offering, our subchapter S corporation status was terminated
and all former subchapter S corporations and partnerships became indirect,
wholly-owned subsidiaries of Beasley Broadcast Group, Inc., through the exchange
by our equity holders of their interests in the subchapter S corporations and
partnerships for interests in Beasley Broadcast Group. Beasley Broadcast Group
in turn contributed those interests to Beasley Mezzanine Holdings. For a more
detailed description of this transaction, see "Business--Initial Public Offering
and Corporate Reorganization."
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<PAGE> 60
RADIO TOWERS SALE AND LEASEBACK
We are selling all of the radio towers and related real estate assets owned
by Beasley Broadcast Group to Beasley Family Towers, Inc., which is owned by
George G. Beasley, B. Caroline Beasley, Bruce G. Beasley, Brian E. Beasley,
Bradley C. Beasley and Robert E. Beasley for approximately $5.1 million. The
agreements provide for the payment of the purchase price by issuance of an
unsecured note payable to us from Beasley Family Towers bearing interest at the
applicable federal rate in effect for the month in which the transaction occurs,
although not less than 6%. The agreements provide for twenty-year leases of the
towers from BFT to us with an annual rent of $466,000. We believe that the
sale/leaseback transaction, taken as a whole, reflect terms at least as
favorable to us as could have been obtained from an unaffiliated party. We may
not own or operate radio towers as part of our business in the future and, to
the extent we do not, we will not realize revenues from leasing towers to third
parties. To the extent that we make future acquisitions, these transactions may
be structured so that the radio towers, if any, and related real estate are
acquired by Beasley Family Towers and the other station operating assets and FCC
licenses are acquired by us. In this event, we would lease the towers back under
lease arrangements similar to the current lease.
OFFICE AND STUDIO LEASES
We lease office and studio broadcasting space for radio stations WRXK-FM
and WXKB-FM in Ft. Myers, Florida from George G. Beasley. The current annual
rent for this space is approximately $95,000. We believe that these lease
agreements are on terms at least as favorable to us as could have been obtained
from an unaffiliated party.
We lease office space in Naples, Florida from Beasley Broadcasting
Management Corp., which is wholly-owned by George G. Beasley. The current annual
rent for the office space is approximately $90,000. We believe that the lease
agreement are on terms at least as favorable to us as could have been obtained
from an unaffiliated party.
AUGUSTA RADIO TOWER LEASE
Our Augusta radio station, WCHZ-FM, leases its radio tower from Wintersrun
Communications, Inc., which is owned by George G. Beasley and Brian E. Beasley.
The current annual rent for the tower is approximately $21,000. We believe that
the lease agreement is on terms at least as favorable to us as could have been
obtained from an unaffiliated party.
MANAGEMENT AGREEMENT
Beasley Broadcasting Management Corp. provided management services to
Beasley Broadcast Group pursuant to a management services arrangement. The fees
were reallocated annually based on prior year station revenues and were paid to
BBMC on a monthly basis. The aggregate management fee paid to BBMC in 1999 was
$2,764,216. The management arrangement terminated in connection with the closing
of our initial public offering. Because the relationship between BBMC and
Beasley Broadcast Group is not comparable to relationships that those entities
could have obtained from an unaffiliated party, we are uncertain whether the
management services agreement was on terms as favorable as could have been
obtained with an unaffiliated party.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following financial statements and financial schedules are filed as
part of this report:
(b) There were no reports on Form 8-K filed by us during the fourth quarter
of the fiscal year covered by this report.
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<PAGE> 61
(c) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
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.
Amended and Restated Bylaws of the Registrant.
3.2* Form of Certificate of Class A Common Stock of the
Registrant.
4.1* George G. Beasley Executive Employment Agreement with
Beasley Mezzanine Holdings, LLC, dated January 31, 2000.
10.1* Bruce G. Beasley Executive Employment Agreement with Beasley
Mezzanine Holdings, LLC, dated January 31, 2000.
10.2* B. Caroline Beasley Executive Employment Agreement Beasley
Mezzanine Holdings, LLC, dated January 31, 2000.
10.3* B. Caroline Beasley Executive Employment Agreement with
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.
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.
</TABLE>
59
<PAGE> 62
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
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).
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<PAGE> 63
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BEASLEY BROADCAST GROUP, INC.
Date: March 24, 2000
/s/ GEORGE G. BEASLEY
--------------------------------------------
Name: George G. Beasley
Title: Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
Date: March 24, 2000 /s/ GEORGE G. BEASLEY
-----------------------------------------------------
Name: George G. Beasley
Title: Chairman of the Board and Chief Executive
Officer
Date: March 24, 2000 /s/ BRUCE G. BEASLEY
-----------------------------------------------------
Name: Bruce G. Beasley
Title: President, Chief Operating Officer and
Director
Date: March 24, 2000 /s/ CAROLINE BEASLEY
-----------------------------------------------------
Name: Caroline Beasley
Title: Vice President, Chief Financial Officer,
Secretary, Treasurer and Director
Date: March 24, 2000 /s/ BRIAN E. BEASLEY
-----------------------------------------------------
Name: Brian E. Beasley
Title: Vice President of Operations and Director
</TABLE>
61
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) BEASLEY
FM ACQUISITION CORP. AND RELATED COMPANIES AS FILED IN THE BEASLEY BROADCAST
GROUP, INC. 10-K #0-29253 DATED MARCH 27, 2000 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH (B) BEASLEY BROADCAST GROUP, INC. 10-K #0-29253 DATED MARCH
27, 2000
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 7,002
<SECURITIES> 0
<RECEIVABLES> 20,475
<ALLOWANCES> 560
<INVENTORY> 0
<CURRENT-ASSETS> 30,248
<PP&E> 30,815
<DEPRECIATION> 15,042
<TOTAL-ASSETS> 185,861
<CURRENT-LIABILITIES> 25,824
<BONDS> 0
0
0
<COMMON> 4,530
<OTHER-SE> (7,449)
<TOTAL-LIABILITY-AND-EQUITY> 185,861
<SALES> 0
<TOTAL-REVENUES> 93,621
<CGS> 0
<TOTAL-COSTS> 86,441
<OTHER-EXPENSES> 107
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,008
<INCOME-PRETAX> (6,052)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,052)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
