10-Q
1
d84211d10q.htm
10-Q
10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2020
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 000-29253
BEASLEY BROADCAST GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
65-0960915
(State of Incorporation)
(I.R.S. Employer
Identification Number)
3033 Riviera Drive, Suite 200
Naples, Florida 34103
(Address of Principal Executive Offices and Zip Code)
(239) 263-5000
(Registrants Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading
Symbol
Name of Each Exchange
on which Registered
Class A Common Stock, par value $0.001 per share
BBGI
Nasdaq Global Market
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 ☐
Indicate by check mark whether the
registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting
company, and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☒
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes ☐ No ☒
Indicate the number of shares
outstanding of each of the issuers classes of common stock, as of the latest practicable date.
Class A Common
Stock, $0.001 par value, 12,627,099 Shares Outstanding as of November 5, 2020
Class B Common Stock, $0.001 par
value, 16,662,743 Shares Outstanding as of November 5, 2020
INDEX
Page
No.
PART I
FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Financial Statements.
3
Notes to Condensed Consolidated Financial Statements.
7
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations.
14
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.
23
Item 4.
Controls and Procedures.
23
PART II
OTHER INFORMATION
Item 1.
Legal Proceedings.
24
Item 1A.
Risk Factors.
24
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
25
Item 3.
Defaults Upon Senior Securities.
26
Item 4.
Mine Safety Disclosures.
26
Item 5.
Other Information.
26
Item 6.
Exhibits.
26
SIGNATURES
27
BEASLEY BROADCAST GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
December 31,
September 30,
2019
2020
ASSETS
Current assets:
Cash and cash equivalents
$
18,648,171
$
15,492,425
Accounts receivable, less allowance for doubtful accounts of $2,145,599 in 2019 and $3,524,070 in
2020
54,577,452
38,558,344
Prepaid expenses
3,516,766
5,495,367
Other current assets
2,915,654
9,198,088
Total current assets
79,658,043
68,744,224
Property and equipment, net
53,813,602
55,231,842
Operating lease
right-of-use assets
39,768,910
36,118,099
Finance lease
right-of-use assets
346,667
336,667
FCC licenses
517,529,167
510,724,755
Goodwill
28,596,547
28,596,547
Other intangibles, net
29,333,230
26,698,310
Other assets
11,014,063
9,485,566
Total assets
$
760,060,229
$
735,936,010
LIABILITIES AND EQUITY
Current liabilities:
Current installments of long-term debt
$
7,500,000
$
2,750,000
Accounts payable
10,323,408
13,223,537
Operating lease liabilities
7,234,492
7,086,118
Finance lease liabilities
70,192
68,835
Other current liabilities
28,064,367
25,227,673
Total current liabilities
53,192,459
48,356,163
Due to related parties
565,617
5,570,132
Long-term debt, net of current installments and unamortized debt issuance costs
248,712,452
257,371,712
Operating lease liabilities
34,837,804
31,268,630
Finance lease liabilities
75,020
19,487
Deferred tax liabilities
121,130,996
119,225,496
Other long-term liabilities
17,073,923
17,021,149
Total liabilities
475,588,271
478,832,769
Commitments and contingencies
Stockholders equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; none issued
Class A common stock, $0.001 par value; 150,000,000 shares authorized; 15,805,432 issued and
11,312,251 outstanding in 2019; 17,132,861 issued and 12,623,349 outstanding in 2020
15,804
17,132
Class B common stock, $0.001 par value; 75,000,000 shares authorized; 16,662,743 issued and
outstanding in 2019 and 2020
16,662
16,662
Additional paid-in capital
153,254,599
156,488,368
Treasury stock, Class A common stock; 4,493,181 shares in 2019; 4,509,512 shares in
2020
(30,662,332
)
(30,696,744
)
Retained earnings
162,350,145
132,113,215
Accumulated other comprehensive loss
(436,338
)
(436,338
)
Total stockholders equity
284,538,540
257,502,295
Noncontrolling interests
(66,582
)
(399,054
)
Total equity
284,471,958
257,103,241
Total liabilities and equity
$
760,060,229
$
735,936,010
3
BEASLEY BROADCAST GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three Months Ended September 30,
2019
2020
Net revenue
$
66,114,701
$
49,649,659
Operating expenses:
Operating expenses (including stock-based compensation of $138,704 in 2019 and $103,980 in 2020
and excluding depreciation and amortization shown separately below)
49,443,632
41,589,490
Corporate expenses (including stock-based compensation of $463,804 in 2019 and $124,988 in
2020)
5,326,660
3,712,816
Transaction expenses
65,423
Other operating expenses
600,000
Depreciation and amortization
1,867,234
2,912,681
Total operating expenses
56,702,949
48,814,987
Operating income
9,411,752
834,672
Non-operating income (expense):
Interest expense
(4,406,162
)
(4,544,235
)
Other income (expense), net
(86,333
)
(42,156
)
Income (loss) before income taxes
4,919,257
(3,751,719
)
Income tax expense (benefit)
1,733,980
(1,031,166
)
Income (loss) before equity in earnings of unconsolidated affiliates
3,185,277
(2,720,553
)
Equity in earnings of unconsolidated affiliates, net of tax
(141,378
)
(4,221
)
Net income (loss)
3,043,899
(2,724,774
)
Earnings attributable to noncontrolling interest
339,376
Net income (loss) attributable to BBGI stockholders
$
3,043,899
(2,385,398
)
Net income (loss) attributable to BBGI stockholders per Class A and B common share:
Basic and diluted
$
0.11
$
(0.08
)
Dividends declared per common share
$
0.05
$
Weighted average shares outstanding:
Basic
27,781,412
29,154,148
Diluted
27,882,474
29,154,148
4
BEASLEY BROADCAST GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Nine Months Ended September 30,
2019
2020
Net revenue
$
189,461,003
$
137,683,217
Operating expenses:
Operating expenses (including stock-based compensation of $346,853 in 2019 and $347,497 in 2020
and excluding depreciation and amortization shown separately below)
144,654,507
133,868,282
Corporate expenses (including stock-based compensation of $1,387,845 in 2019 and $347,174 in
2020)
15,712,635
11,950,672
Transaction expenses
361,935
Other operating expenses
600,000
Depreciation and amortization
5,378,708
8,375,227
Gain on dispositions
(3,545,755
)
Impairment losses
6,804,412
Total operating expenses
162,562,030
161,598,593
Operating income (loss)
26,898,973
(23,915,376
)
Non-operating income (expense):
Interest expense
(13,544,083
)
(12,580,706
)
Loss on modification of long-term debt
(2,798,789
)
Other income (expense), net
(280,722
)
55,960
Income (loss) before income taxes
13,074,168
(39,238,911
)
Income tax expense (benefit)
4,266,627
(9,490,892
)
Income (loss) before equity in earnings of unconsolidated affiliates
8,807,541
(29,748,019
)
Equity in earnings of unconsolidated affiliates, net of tax
(141,378
)
(90,715
)
Net income (loss)
8,666,163
(29,838,734
)
Earnings attributable to noncontrolling interest
881,814
Net income (loss) attributable to BBGI stockholders
$
8,666,163
(28,956,920
)
Net income (loss) attributable to BBGI stockholders per Class A and B common share:
Basic and diluted
$
0.31
$
(1.02
)
Dividends declared per common share
$
0.15
$
0.05
Weighted average shares outstanding:
Basic
27,706,759
28,362,512
Diluted
27,828,316
28,362,512
5
BEASLEY BROADCAST GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30,
2019
2020
Cash flows from operating activities:
Net income (loss)
$
8,666,163
$
(29,838,734
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation
1,734,698
694,671
Provision for bad debts
271,399
3,432,813
Depreciation and amortization
5,378,708
8,375,227
Gain on dispositions
(3,545,755
)
Impairment losses
6,804,412
Non-cash interest expense
290,426
Amortization of loan fees
1,451,949
1,441,634
Loss on modification of long-term debt
2,798,789
Deferred income taxes
1,537,291
(8,972,361
)
Equity in earnings of unconsolidated affiliates
141,378
90,715
Change in operating assets and liabilities:
Accounts receivable
3,087,481
12,586,295
Prepaid expenses
(3,512,932
)
(1,978,601
)
Other assets
(140,228
)
3,164,693
Accounts payable
4,159,569
2,900,129
Other liabilities
3,950,396
(1,295,347
)
Other operating activities
133,381
305,806
Net cash provided by operating activities
23,313,498
800,567
Cash flows from investing activities:
Payments for acquisitions
(13,500,000
)
Capital expenditures
(6,901,243
)
(6,996,619
)
Proceeds from dispositions
3,800,000
Payments for investments
(5,009,999
)
(1,000,000
)
Net cash used in investing activities
(21,611,242
)
(7,996,619
)
Cash flows from financing activities:
Issuance of debt
10,000,000
14,000,000
Payments on debt
(9,000,000
)
(4,500,000
)
Payment of debt issuance costs
(2,581,163
)
Reduction of finance lease liabilities
(50,326
)
(48,615
)
Dividends paid
(4,150,335
)
(2,795,504
)
Purchase of treasury stock
(36,672
)
(34,412
)
Net cash provided by (used in) financing activities
(3,237,333
)
4,040,306
Net decrease in cash and cash equivalents
(1,535,077
)
(3,155,746
)
Cash and cash equivalents at beginning of period
13,433,828
18,648,171
Cash and cash equivalents at end of period
$
11,898,751
$
15,492,425
Cash paid for interest
$
12,217,854
$
10,871,306
Cash paid for income taxes
$
3,438,550
$
115,400
Supplement disclosure of non-cash investing and financing
activities:
Class A common stock issued for debt repayment
$
$
2,250,000
Dividends declared but unpaid
$
1,389,273
$
Class A common stock issued for acquisition
$
198,500
$
Class A common stock issued for investment
$
974,125
$
Media advertising exchanged for investment
$
1,000,000
$
6
BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) Interim Financial Statements
The
accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of Beasley Broadcast Group, Inc. and its subsidiaries (the Company) included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2019. These financial statements have been prepared in accordance with U.S. generally accepted accounting principles
(GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by GAAP for complete financial statements. In the opinion of management, the financial statements reflect all adjustments necessary for a fair statement of the financial position and results of operations for the
interim periods presented and all such adjustments are of a normal and recurring nature. The Companys results are subject to seasonal fluctuations, therefore the results shown on an interim basis are not necessarily indicative of results for
the full year.
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries and its investments in OutlawsXP, Inc. (Outlaws) and Renegades Holdings, Inc. (Renegades). The Company holds an approximately 90% economic interest in Outlaws and an approximately 51% economic interest in
Renegades. Net assets and results of operations for Outlaws and Renegades as of and for the three and nine months ended September 30, 2020 are not significant. All significant inter-company transactions and balances have been eliminated.
COVID-19
In March 2020, coronavirus disease 2019 (COVID-19) was recognized as a pandemic by the
World Health Organization. The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies, and financial markets worldwide, and has caused significant
volatility in U.S. and international debt and equity markets. The Company has been impacted by deteriorating general economic conditions, which have caused a downturn in the advertising industry. The decreased demand for advertising has negatively
impacted its net revenue, and many advertisers have reduced or ceased advertising spend due to the COVID-19 pandemic and its related economic impact. Specifically, the Company observed a rapid increase in
cancellations and a reduction of new sales beginning midway through the month of March 2020. The cancellations were broad-based but more severe in industries that were severely impacted by the COVID-19
pandemic. Sales began to recover during the second quarter of 2020 and have continued to recover during the third quarter of 2020. The Company is actively monitoring the COVID-19 pandemic. While this
disruption is currently expected to be temporary, there is considerable uncertainty around the duration. Thus, it is impossible to predict the total impact that it will have on the Company. If public and private entities continue to implement
restrictive measures, the material adverse effect on the Companys results of operations, financial condition and cash flows could persist.
Beginning in March 2020, the Company implemented certain expense control initiatives, such as reductions in compensation for management and
other employees, reductions in planned capital expenditures, negotiated vendor pricing reductions, furloughs and headcount reductions for certain employees and suspensions of new employee hiring and travel and entertainment expenses. The Company
expects these initiatives to continue reducing its expenses throughout the remainder of 2020. The board of directors also suspended future quarterly dividend payments until it is determined that resumption of dividend payments is in the best
interest of the Companys stockholders.
In addition, in June 2020, the Company entered into Amendment No. 2 to its credit
agreement (the Amendment) which limits the ability of the Company to pay dividends until certain leverage-based milestones have been achieved. In June 2020, the Company also entered into an amendment to the Promissory Note (as defined
below). See Note 4 for additional information.
The COVID-19 pandemic continues to create
significant uncertainty and disruption in the global economy and financial markets. It is reasonably possible that these uncertainties could materially impact the Companys significant accounting estimates related to, but not limited to,
allowance for doubtful accounts, impairment of FCC licenses and goodwill, and determination of right-of-use assets. As a result, many of the Companys estimates and
assumptions require increased judgment and carry a higher degree of variability and volatility. The Companys estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in its
consolidated financial statements.
(2) Acquisitions and Dispositions
On May 5, 2020, the Company entered into an agreement to sell certain land with an immaterial carrying amount in Charlotte, NC to a third
party for $4.7 million. The Company expects to close on the sale and record a gain during the fourth quarter of 2020.
7
BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
On August 31, 2019, the Company completed the acquisition of substantially all of the
assets used to operate WDMK-FM in Detroit from Urban One, Inc. for $13.5 million in cash. The purchase price was partially financed with $10.0 million in borrowings from the Companys credit
facility and partially funded with $3.5 million of cash from operations. The acquisition broadened and diversified the Companys local radio broadcasting platform and revenue base in the Detroit radio market. The acquisition was accounted
for as an asset acquisition. The Company incurred transaction costs of $0.2 million which were capitalized as a component of the assets acquired.
The assets acquired are summarized as follows:
Property and equipment
$
432,588
FCC licenses
12,891,117
Other intangibles
176,295
$
13,500,000
On March 28, 2019, the Company completed the sale of certain land and improvements in Augusta, GA to a
third party for $0.5 million. As a result of the sale, the Company recorded a gain of $0.4 million in the first quarter of 2019.
On March 15, 2019, the Company agreed to cancel a broadband radio service license in Chattanooga, TN in exchange for a fee of
$3.3 million received from Clearwire Spectrum Holdings LLC (Clearwire). The Company had previously leased the channels under the broadband radio service license to Clearwire under an agreement that ended on March 15, 2019. As a
result of the license cancelation, the Company recorded a gain of $3.1 million in the first quarter of 2019.
(3) FCC Licenses
Changes in the carrying amount of Federal Communications Commission (FCC) licenses for the nine months ended September 30,
2020 are as follows:
Balance as of January 1, 2020
$
517,529,167
Impairment losses
(6,804,412
)
Balance as of September 30, 2020
$
510,724,755
Licenses are tested for impairment on an annual basis, or more frequently if events or changes in
circumstances indicate that the Companys licenses might be impaired. The Company assesses qualitative factors to determine whether it is more likely than not that its licenses are impaired. If the Company determines it is more likely than not
that its licenses are impaired, then the Company is required to perform the quantitative impairment test. The quantitative impairment test compares the fair value of the Companys licenses with their carrying amounts. If the carrying amounts of
the licenses exceed their fair value, an impairment loss is recognized in an amount equal to that excess. For the purpose of testing its licenses for impairment, the Company combines its licenses into reporting units based on its market clusters.
Due to the impact of the COVID-19 pandemic on the U.S. economy, the Company tested its FCC
licenses for impairment during the first quarter of 2020. As a result of the quantitative impairment test, the Company recorded impairment losses of $6.8 million related to the FCC licenses in its Atlanta, GA, Middlesex, NJ, Monmouth, NJ,
Morristown, NJ, Las Vegas, NV, West Palm Beach-Boca Raton, FL, and Wilmington, DE market clusters. The impairment losses were primarily due to a decrease in projected revenue in these markets due to the impact of the
COVID-19 pandemic and an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of our FCC licenses due to certain risks specifically associated with the Company and
the radio broadcasting industry. The fair values were estimated using an income approach. The income approach is based upon discounted cash flow analyses incorporating variables such as projected radio market revenues, projected growth rate for
radio market revenues, projected radio market revenue shares, projected radio station operating income margins, and a discount rate appropriate for the radio broadcasting industry. The key assumptions used in the discounted cash flow analyses are as
follows:
Revenue growth rates
(14.1)% - 7.9%
Market revenue shares at maturity
0.6% - 39.0%
Operating income margins at maturity
26.5% - 35.4%
Discount rate
9.5%
8
BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The Company did not identify any triggering events for impairment during the second quarter
of 2020. Therefore, the Company did not test its FCC licenses for impairment during the second quarter of 2020.
The Company elected to
perform the quantitative impairment test for its FCC licenses in all markets during the third quarter of 2020. As a result of the quantitative impairment test performed as of September 30, 2020, the Company recorded no impairment losses related
to its FCC licenses in any of its reporting units. The fair values were estimated using an income approach. The income approach is based upon discounted cash flow analyses incorporating variables such as projected radio market revenues, projected
growth rate for radio market revenues, projected radio market revenue shares, projected radio station operating income margins, and a discount rate appropriate for the radio broadcasting industry. The key assumptions used in the discounted cash flow
analyses are as follows:
Revenue growth rates
0.5% - 18.8%
Market revenue shares at maturity
0.6% - 44.4%
Operating income margins at maturity
19.5% - 33.3%
Discount rate
9.0%
(4) Long-Term Debt
Long-term debt is comprised of the following:
December 31,
2019
September 30,
2020
Credit facilityterm loan facility
$
239,000,000
$
238,000,000
Credit facilityrevolving credit facility
11,000,000
20,000,000
Promissory note
13,500,000
7,750,000
263,500,000
265,750,000
Less unamortized debt issuance costs
(7,287,548
)
(5,628,288
)
256,212,452
260,121,712
Less current installments
(7,500,000
)
(2,750,000
)
$
248,712,452
$
257,371,712
As of September 30, 2020, the credit facility consisted of a term loan facility with a remaining balance
of $238.0 million and a revolving credit facility with an outstanding balance of $20.0 million and a maximum commitment of $20.0 million. As of September 30, 2020, the Company had no available commitments under its revolving
credit facility. Following the entry into the Amendment as described below, at the Companys option, the credit facility may bear interest at either (i) the London Interbank Offered Rate (LIBOR) plus a margin of 4.25% or
(ii) the base rate (as defined in the credit agreement) plus a margin of 3.25%. The LIBOR interest rate for the term loan is subject to a 1% floor and the base rate is subject to a 2% floor. Interest payments are, for loans based on LIBOR, due
at the end of each applicable interest period unless the interest period is longer than three months, in which case they are due at the end of each three-month period. Interest payments for loans based on the base rate are due quarterly. The
revolving credit facility carried interest, based on LIBOR, at 4.4% as of September 30, 2020 and matures on November 17, 2022. The term loan carried interest, based on LIBOR, at 5.25% as of September 30, 2020 and matures on
November 1, 2023.
On June 30, 2020, the Company entered into the Amendment with certain of its lenders. The Amendment amended
and modified the credit agreement to, among other things, (i) increase the interest rate applicable to the term loans and revolving credit facility by 25 basis points per annum, (ii) add fees of 300 basis points payable on
December 31, 2021 and 150 basis points payable on December 31, 2022, if the credit agreement is not refinanced prior to such time, (iii) impose additional reporting requirements, (iv) revise the Excess Cash Flow prepayment
requirement such that when the Total Leverage Ratio is greater than 4.5x, 75% of Excess Cash Flow must be prepaid, with such prepayment amounts stepping down to 50%, 25% and 0% upon achievement of certain Total Leverage Ratio milestones, and
(v) reduce the flexibility to incur certain additional indebtedness, liens and investments and make certain restricted payments, subject to the achievement of certain leverage-based milestones. In connection with the Amendment, the Company
recorded a loss on modification of long-term debt of $2.8 million during the second quarter of 2020.
Additionally, the Amendment
modified the financial covenant to remove the maximum First Lien Leverage Ratio previously tested quarterly through the fiscal quarter ended March 31, 2020. In its place, the Amendment added (i) a minimum liquidity covenant of
$8.5 million (the Minimum Liquidity Amount), which will be tested every other week until the Total Leverage Ratio is less than
9
BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5.0x, (ii) a minimum EBITDA (as defined in the credit agreement, as amended by the Amendment) covenant, which will be tested monthly beginning October 31, 2020 through June 30,
2021 and (iii) a maximum First Lien Leverage Ratio covenant, which will be tested quarterly beginning with the fiscal quarter ending September 30, 2021. The Amendment also modifies the definition of Consolidated EBITDA to remove certain add-backs with respect to the calculation of Consolidated EBITDA and EBITDA for financial covenants and other similar calculations and reduces the amount of cash that can be netted for the calculation of the First
Lien Leverage Ratio for purposes of testing the First Lien Leverage Ratio financial covenant, when applicable.
As of December 31,
2019, the credit facility consisted of a term loan facility with a remaining balance of $239.0 million and a revolving credit facility with an outstanding balance of $11.0 million and a maximum commitment of $20.0 million. The term
loan facility and revolving credit facility carried interest, based on LIBOR, at 5.8% as of December 31, 2019.
The credit facility
is secured by substantially all assets of the Company and its subsidiaries and is guaranteed jointly and severally by the Company and its subsidiaries. If the Company defaults under the terms of the credit agreement, the Company and its subsidiaries
may be required to perform under their guarantees. As of September 30, 2020, the maximum amount of undiscounted payments the Company and its applicable subsidiaries would have been required to make in the event of default was
$258.0 million. The guarantees for the credit facility expire on November 17, 2022 for the revolving credit facility and on November 1, 2023 for the term loan facility.
Failure to comply with financial covenants, scheduled interest payments, scheduled principal repayments, or any other terms of the credit
agreement, as amended by the Amendment, could result in the acceleration of the maturity of the Companys outstanding debt, which could have a material adverse effect on the Companys business or results of operations. The Company projects
that it will be in compliance with all applicable financial covenants, as amended, for the next twelve months.
On November 14, 2019,
the Company acquired a majority interest in an esports team and issued a promissory note for $16.5 million to the seller (the Promissory Note). The Promissory Note had a remaining balance of $13.5 million as of
December 31, 2019. On June 30, 2020, the Company entered into an amendment to the Promissory Note (as amended, the Amended Promissory Note) applicable to the remaining balance of $10.0 million. The Amended Promissory Note
bears cash-pay interest at 5% per annum payable quarterly in arrears and additional payment-in-kind interest at 10% per annum and
provides for a cash principal payment of $2.25 million on December 31, 2020. For subsequent stock issuances, which begin on June 30, 2021, the principal reduction amount will be the lesser of (i) the value of the stock issued
based on 20-day moving average on the day prior to issuance or (ii) the principal reduction amount, which is 50% of the value of the stock based on a fixed price of $2.35 per share. The number
of shares to be issued was fixed at the time of the signing of the note and will not exceed 3,191,489 in the aggregate (including the issuance on July 8, 2020 noted below). All accrued but unpaid interest and the then outstanding principal
amount of the Amended Promissory Note will be paid in full in cash on December 31, 2023. The Amended Promissory Note will mature on December 31, 2023 and may be prepaid at any time at the option of the Company.
On July 8, 2020, the Company issued an initial stock payment of 1,276,596 shares of Class A common stock at a fixed price of $2.35
per share that reduced the principal amount of the Amended Promissory Note by $2.25 million. The shares were issued at $1.99 per share and the $0.3 million difference between the fair value of the shares and the principal reduction was
recorded as additional interest expense. As of September 30, 2020, the Amended Promissory Note had a balance of $7.75 million.
The aggregate scheduled principal repayments of the credit facility and Amended Promissory Note for the remainder of 2020 and the next three
years are as follows:
2020
$
2,250,000
2021
750,000
2022
21,250,000
2023
241,500,000
Total
$
265,750,000
10
BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(5) Stockholders Equity
The changes in stockholders equity for the three and nine months ended September 30, 2019 and 2020 are as follows:
Three months ended September 30,
Nine months ended September 30,
2019
2020
2019
2020
Beginning balance
$
279,217,346
$
257,061,115
$
275,034,091
$
284,471,958
Change in accounting principle
(935,916
)
Issuance of common stock
2,540,425
1,172,625
2,540,425
Stock-based compensation
602,508
228,968
1,734,698
694,671
Purchase of treasury stock
(5,588
)
(2,493
)
(36,672
)
(34,412
)
Net income (loss)
3,043,899
(2,724,774
)
8,666,163
(29,838,734
)
Cash dividends
(1,389,273
)
(4,166,097
)
(1,398,321
)
Noncontrolling interest created in consolidation
667,654
Ending balance
$
281,468,892
$
257,103,241
$
281,468,892
$
257,103,241
(6) Revenue
Revenue is comprised of the following:
Three months ended September 30,
Nine months ended September 30,
2019
2020
2019
2020
Commercial advertising
$
57,312,548
$
42,168,479
$
164,470,136
$
114,014,198
Digital advertising
4,908,072
4,994,487
13,162,700
14,344,768
Other
3,894,081
2,486,693
11,828,167
9,324,251
$
66,114,701
$
49,649,659
$
189,461,003
$
137,683,217
The Company recognizes revenue when it satisfies a performance obligation under a contract with an advertiser.
The transaction price is allocated to performance obligations based on executed contracts which represent relative standalone selling prices. Payment is generally due within 30 days although certain advertisers are required to pay in advance.
Revenues are reported at the amount the Company expects to be entitled to receive under the contract. The Company has elected to use the practical expedient to expense sales commissions as incurred. Payments received from advertisers before the
performance obligation is satisfied are recorded as deferred revenue in the balance sheet. Substantially all deferred revenue is recognized within twelve months of the payment date.
December 31,
2019
September 30,
2020
Deferred revenue
$
3,639,077
$
4,875,467
Three months ended September 30,
Nine months ended September 30,
2019
2020
2019
2020
Losses on receivables
$
107,224
$
965,864
$
465,620
$
2,054,342
Commercial advertising includes revenue from the sale or trade of aired commercial spots to advertisers
directly or through national, regional or local advertising agencies. Each commercial spot is considered a performance obligation. Revenue is recognized when the commercial spots have aired. Trade sales are recorded at the estimated fair value of
the goods or services received. If commercial spots are aired before the goods or services are received then a trade sales receivable is recorded. If goods or services are received before the commercial spots are aired then a trade sales payable is
recorded.
December 31,
2019
September 30,
2020
Trade sales receivable
$
1,691,295
$
1,131,332
Trade sales payable
2,180,783
974,333
Three months ended September 30,
Nine months ended September 30,
2019
2020
2019
2020
Trade sales revenue
$
2,005,613
$
1,211,223
$
6,513,855
$
3,755,119
11
BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Digital advertising includes revenue from the sale of streamed commercial spots,
station-owned assets and third-party products. Each streamed commercial spot, station-owned asset and third-party product is considered a performance obligation. Revenue is recognized when the commercial spots have streamed. Station-owned assets are
generally scheduled over a period of time and revenue is recognized over time as the digital items are used for advertising content except for streamed commercial spots. Third-party products are generally scheduled over a period of time with an
impression target each month. Revenue from the sale of third-party products is recognized over time as the digital items are used for advertising content and impression targets are met each month.
Other revenue includes revenue from esports, concerts, promotional events, talent fees and other miscellaneous items. Revenue is generally
recognized when the event is completed, as the promotional events are completed, or as the talent services are completed.
(7)
Stock-Based Compensation
The Beasley Broadcast Group, Inc. 2007 Equity Incentive Award Plan (the 2007 Plan) permits the Company to issue up to
7.5 million shares of Class A common stock. The 2007 Plan allows for eligible employees, directors and certain consultants of the Company to receive restricted stock units, shares of restricted stock, stock options or other stock-based
awards. The restricted stock units and restricted stock awards that have been granted under the 2007 Plan generally vest over one to five years of service.
A summary of restricted stock unit activity is presented below:
Restricted
Stock
Units
Weighted-
Average
Grant-Date
Fair Value
Unvested as of July 1, 2020
589,334
$
4.27
Granted
15,000
1.52
Vested
Forfeited
(1,000
)
10.83
Unvested as of September 30, 2020
603,334
$
4.19
A summary of restricted stock activity is presented below:
Shares
Weighted-
Average
Grant-Date
Fair Value
Unvested as of July 1, 2020
27,000
$
5.00
Granted
Vested
(7,500
)
4.90
Forfeited
(2,000
)
7.00
Unvested as of September 30, 2020
17,500
$
4.81
As of September 30, 2020, there was $1.7 million of total unrecognized compensation cost for
restricted stock units and shares of restricted stock granted under the 2007 Plan. That cost is expected to be recognized over a weighted-average period of 2.6 years.
(8)
Income Taxes
The Companys effective tax rate was 35% and (27)% for the three months ended September 30, 2019 and 2020, respectively, and 33% and
(24)% for the nine months ended September 30, 2019 and 2020, respectively. These rates differ from the federal statutory rate of 21% due to the effect of state income taxes and certain expenses that are not deductible for tax purposes.
12
BEASLEY BROADCAST GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(9)
Earnings Per Share
The following table presents the computation of net income (loss) attributable to BBGI stockholders per Class A and B common share:
Three months ended September 30,
Nine months ended September 30,
2019
2020
2019
2020
Basic income (loss) per share
Numerator
Net income (loss)
$
3,043,899
$
(2,385,398
)
$
8,666,163
$
(28,956,920
)
Denominator
Basic weighted shares outstanding
27,781,412
29,154,148
27,706,759
28,362,512
Net income (loss) per sharebasic
$
0.11
$
(0.08
)
$
0.31
$
(1.02
)
Diluted income (loss) per share
Numerator
Net income (loss)
$
3,043,899
$
(2,385,398
)
$
8,666,163
$
(28,956,920
)
Denominator
Basic weighted shares outstanding
27,781,412
29,154,148
27,706,759
28,362,512
Effect of restricted stock and restricted stock units under the treasury stock method
101,062
121,557
Diluted weighted shares outstanding
27,882,474
29,154,148
27,828,316
28,362,512
Net income (loss) per sharediluted
$
0.11
$
(0.08
)
$
0.31
$
(1.02
)
The Company excluded the effect of restrictive stock and restricted stock units under the treasury stock
method as the addition of shares were anti-dilutive when reporting a net loss. The number of shares excluded were 44,490 and 70,245 for the three and nine months ended September 30, 2020, respectively.
(10)
Related Party Transactions
As a condition to entering into the Amendment, George Beasley, the Companys Chairman, provided a $5.0 million loan to the Company
that accrues payment-in-kind interest at 6% per annum with no cash payments due until the loans maturity in December 2023. Mr. Beasley and GGB Family Limited
Partnership also each entered into standby letters of credit in combined aggregate face amount of $5.0 million in favor of U.S. Bank, National Association for the benefit of the Company as a source of backup liquidity that may be drawn by U.S.
Bank, National Association in the event that the Company fails to maintain the Minimum Liquidity Amount.
(11)
Financial Instruments
The carrying amount of the Companys financial instruments including cash and cash equivalents, accounts receivable and accounts payable
approximate fair value due to the short-term nature of these financial instruments.
The carrying amount of the Companys long-term
debt, including the term loan facility and the revolving credit facility as of September 30, 2020, was $265.7 million, which approximated fair value based on current market interest rates. The carrying amount of the Companys
long-term debt as of December 31, 2019 was $263.5 million, which approximated fair value based on current market interest rates.
13
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
General
We are a multi-platform media company whose primary business is operating radio stations throughout the United States. We offer local and
national advertisers integrated marketing solutions across audio, digital and event platforms. We own and operate radio stations in the following radio markets: Atlanta, GA, Augusta, GA, Boston, MA, Charlotte, NC, Detroit, MI, Fayetteville, NC, Fort
Myers-Naples, FL, Las Vegas, NV, Middlesex, NJ, Monmouth, NJ, Morristown, NJ, Philadelphia, PA, Tampa-Saint Petersburg, FL, West Palm Beach-Boca Raton, FL, and Wilmington, DE. We refer to each group of radio stations in each radio market as a market
cluster.
Recent Developments
In
March 2020, coronavirus disease 2019 (COVID-19) was recognized as a pandemic by the World Health Organization. The COVID-19 pandemic has resulted in a
widespread health crisis that has adversely affected businesses, economies, and financial markets worldwide, and has caused significant volatility in U.S. and international debt and equity markets. We have been impacted by deteriorating general
economic conditions, which have caused a downturn in the advertising industry. The decreased demand for advertising has negatively impacted our net revenue, and many advertisers have reduced or ceased advertising spend due to the COVID-19 pandemic and its related economic impact. Specifically, we observed a rapid increase in cancellations and a reduction of new sales beginning midway through the month of March 2020. The cancellations were
broad-based but more severe in industries that were severely impacted by the COVID-19 pandemic. Sales began to recover during the second quarter of 2020 and have continued to recover during the third quarter
of 2020. We are actively monitoring the COVID-19 pandemic. While this disruption is currently expected to be temporary, there is considerable uncertainty around the duration. Thus, it is impossible to predict
the total impact that it will have on the Company. If public and private entities continue to implement restrictive measures, the material adverse effect on our results of operations, financial condition and cash flows could persist.
Beginning in March 2020, we implemented certain expense control initiatives, such as reductions in compensation for management and other
employees, reductions in planned capital expenditures, negotiated vendor pricing reductions, furloughs and headcount reductions for certain employees and suspensions of new employee hiring and travel and entertainment expenses. We expect these
initiatives to continue reducing our expenses throughout the remainder of 2020. Our board of directors also suspended future quarterly dividend payments until it is determined that resumption of dividend payments is in the best interest of the
Companys stockholders. In addition, the Amendment (as defined below) limits our ability to pay dividends until certain leverage-based milestones have been achieved.
Due to the impact of the COVID-19 pandemic on the U.S. economy, we tested our FCC licenses for
impairment during the first quarter of 2020. As a result of the quantitative impairment test, we recorded impairment losses of $6.8 million related to the FCC licenses in our Atlanta, GA, Middlesex, NJ, Monmouth, NJ, Morristown, NJ, Las Vegas,
NV, West Palm Beach-Boca Raton, FL, and Wilmington, DE market clusters. The impairment losses were primarily due to a decrease in projected revenue in these markets due to the impact of the COVID-19 pandemic
and an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of our FCC licenses due to certain risks specifically associated with the Company and the radio broadcasting industry. We did not identify any
triggering events for impairment during the second quarter of 2020. Therefore, we did not test our FCC licenses for impairment during the second quarter of 2020. We elected to perform the quantitative impairment test for our FCC licenses in all
markets during the third quarter of 2020. As a result of the quantitative impairment test performed as of September 30, 2020, we recorded no impairment losses related to our FCC licenses in any of our reporting units.
In June 2020, we entered into Amendment No. 2 to our credit agreement (the Amendment) and into an amendment to the Promissory
Note (as defined below). See Liquidity and Capital Resources for additional information.
The
COVID-19 pandemic continues to create significant uncertainty and disruption in the global economy and financial markets. It is reasonably possible that these uncertainties could materially impact the
Companys significant accounting estimates related to, but not limited to, allowance for doubtful accounts, impairment of FCC licenses and goodwill, and determination of
right-of-use assets. As a result, many of the Companys estimates and assumptions require increased judgment and carry a higher degree of variability and
volatility. The Companys estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in its consolidated financial statements.
14
Cautionary Note Regarding Forward-Looking Statements
This report contains forward-looking statements about the Company within the meaning of the Private Securities Litigation Reform
Act of 1995, which relate to future, not past, events. All statements other than statements of historical fact included in this document are forward-looking statements. These forward-looking statements are based on the current beliefs and
expectations of the Companys management and are subject to known and unknown risks and uncertainties. Forward-looking statements, which address the Companys expected business and financial performance and financial condition, among other
matters, contain words such as: expects, anticipates, intends, plans, believes, estimates, may, will, plans, projects,
could, should, would, seek, forecast, or other similar expressions.
Forward-looking statements by their nature address matters that are, to different degrees, uncertain. Although the Company believes the
expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that the expectations will be attained or that any deviation will not be material. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date on which they are made. The Company undertakes no obligation to update or revise any forward-looking statements.
Forward-looking statements involve a number of risks and uncertainties, and actual results or events may differ materially from those
projected or implied in those statements. Factors that could cause actual results or events to differ materially from these forward-looking statements include, but are not limited to:
the effects of the COVID-19 pandemic, including its potential effects on
the economic environment and the Companys results of operations, liquidity and financial condition, and the increased risk of impairments of the Companys FCC licenses and/or goodwill, as well as any changes to federal, state or local
government laws, regulations or orders in connection with the pandemic;
external economic forces that could have a material adverse impact on the Companys advertising revenues and
results of operations;
the ability of the Companys radio stations to compete effectively in their respective markets for
advertising revenues;
the ability of the Company to develop compelling and differentiated digital content, products and services;
audience acceptance of the Companys content, particularly its radio programs;
the ability of the Company to respond to changes in technology, standards and services that affect the radio
industry;
the Companys dependence on federally issued licenses subject to extensive federal regulation;
actions by the FCC or new legislation affecting the radio industry;
the Companys dependence on selected market clusters of radio stations for a material portion of its net
revenue;
credit risk on the Companys accounts receivable;
the risk that the Companys FCC licenses and/or goodwill could become impaired;
the Companys substantial debt levels and the potential effect of restrictive debt covenants on the
Companys operational flexibility and ability to pay dividends, including restrictions on the ability to pay dividends in the near term as a result of the Amendment to the Companys credit agreement;
the potential effects of hurricanes on the Companys corporate offices and radio stations;
the failure or destruction of the internet, satellite systems and transmitter facilities that the Company depends
upon to distribute its programming;
15
disruptions or security breaches of the Companys information technology infrastructure;
the loss of key personnel;
the Companys ability to integrate acquired businesses and achieve fully the strategic and financial
objectives related thereto and their impact on the Companys financial condition and results of operations;
the fact that the Company is controlled by the Beasley family, which creates difficulties for any attempt to gain
control of the Company; and
other economic, business, competitive, and regulatory factors affecting the businesses of the Company, including
those set forth in the Companys filings with the SEC.
Although we believe that the expectations reflected in any
of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. We do not intend, and undertake no obligation, to update any forward-looking
statement.
Financial Statement Presentation
The following discussion provides a brief description of certain key items that appear in our financial statements and general factors that
impact these items.
Net Revenue. Our net revenue is primarily derived from the sale of commercial spots to
advertisers directly or through national, regional or local advertising agencies. Revenues are reported at the amount we expect to be entitled to receive under the contract. Local revenue generally consists of commercial advertising sales, digital
advertising sales and other sales to advertisers in a radio stations local market either directly to the advertiser or through the advertisers agency. National revenue generally consists of commercial advertising sales through advertiser
agencies. National advertiser agencies generally purchase advertising for multiple markets. National sales are generally facilitated by our national representation firm, which serves as our agent in these transactions.
Our net revenue is generally determined by the advertising rates that we are able to charge and the number of advertisements that we can
broadcast without jeopardizing listener levels. Advertising rates are primarily based on the following factors:
a radio stations audience share in the demographic groups targeted by advertisers as measured principally
by periodic reports issued by Nielson Audio;
the number of radio stations, as well as other forms of media, in the market competing for the attention of the
same demographic groups;
the supply of, and demand for, radio advertising time; and
the size of the market.
Our net revenue is affected by general economic conditions, competition and our ability to improve operations at our market clusters. Seasonal
revenue fluctuations are also common in the radio broadcasting industry and are primarily due to variations in advertising expenditures by local and national advertisers. Our revenues are typically lowest in the first calendar quarter of the year.
In addition, our revenues tend to fluctuate between years, consistent with, among other things, increased advertising expenditures in even-numbered years by political candidates, political parties and special interest groups. This political spending
typically is heaviest during the fourth quarter of such years.
We use trade sales agreements to reduce cash paid for operating costs and
expenses by exchanging advertising airtime for goods or services; however, we endeavor to minimize trade revenue in order to maximize cash revenue from our available airtime.
We also continue to invest in digital support services to develop and promote our radio station websites, applications, and other distribution
platforms. We derive revenue from our websites through the sale of advertiser promotions and advertising on our websites and the sale of advertising airtime during audio streaming of our radio stations over the internet. We also generate revenue
from selling third-party digital products and services.
16
Operating Expenses. Our operating expenses consist primarily of
programming, engineering, sales, advertising and promotion, and general and administrative expenses incurred at our radio stations. We strive to control our operating expenses by centralizing certain functions at our corporate offices and
consolidating certain functions in each of our market clusters.
Critical Accounting Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and
assumptions that affect reported amounts and related disclosures. We consider an accounting estimate to be critical if:
it requires assumptions to be made that were uncertain at the time the estimate was made; and
changes in the estimate or different estimates that could have been selected could have a material impact on our
results of operations or financial condition.
FCC Licenses. We are required to test our licenses on an annual
basis, or more frequently if events or changes in circumstances indicate that our licenses might be impaired. We assess qualitative factors to determine whether it is more likely than not that our licenses are impaired. If we determine it is more
likely than not that our licenses are impaired then we are required to perform the quantitative impairment test. The quantitative impairment test compares the fair value of our licenses with their carrying amounts. If the carrying amounts of the
licenses exceed their fair value, an impairment loss is recognized in an amount equal to that excess. For the purpose of testing our licenses for impairment, we combine our licenses into reporting units based on our market clusters.
Due to the impact of the COVID-19 pandemic on the U.S. economy, we tested our FCC licenses for
impairment during the first quarter of 2020. As a result of the quantitative impairment test, we recorded impairment losses of $6.8 million related to the FCC licenses in our Atlanta, GA, Middlesex, NJ, Monmouth, NJ, Morristown, NJ, Las Vegas,
NV, West Palm Beach-Boca Raton, FL, and Wilmington, DE market clusters. The impairment losses were primarily due to a decrease in projected revenue in these markets due to the impact of the COVID-19 pandemic
and an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of our FCC licenses due to certain risks specifically associated with our Company and the radio broadcasting industry. The fair values were
estimated using an income approach. The income approach is based upon discounted cash flow analyses incorporating variables such as projected radio market revenues, projected growth rate for radio market revenues, projected radio market revenue
shares, projected radio station operating income margins, and a discount rate appropriate for the radio broadcasting industry. The key assumptions used in the discounted cash flow analyses are as follows:
Revenue growth rates
(14.1)% - 7.9%
Market revenue shares at maturity
0.6% - 39.0%
Operating income margins at maturity
26.5% - 35.4%
Discount rate
9.5%
We did not identify any triggering events for impairment during the second quarter of 2020. Therefore, we did
not test our FCC licenses for impairment during the second quarter of 2020.
We elected to perform the quantitative impairment test for
our FCC licenses in all markets during the third quarter of 2020. As a result of the quantitative impairment test performed as of September 30, 2020, we recorded no impairment losses related to our FCC licenses in any of our reporting units.
The fair values were estimated using an income approach. The income approach is based upon discounted cash flow analyses incorporating variables such as projected radio market revenues, projected growth rate for radio market revenues, projected
radio market revenue shares, projected radio station operating income margins, and a discount rate appropriate for the radio broadcasting industry. The key assumptions used in the discounted cash flow analyses are as follows:
Revenue growth rates
0.5% - 18.8%
Market revenue shares at maturity
0.6% - 44.4%
Operating income margins at maturity
19.5% - 33.3%
Discount rate
9.0%
17
The carrying amount of our FCC licenses for each reporting unit and the percentage by which
fair value exceeded the carrying amount are as follows:
Market cluster
FCC
broadcasting
licenses
Excess
Atlanta, GA
$
832,300
35.9
%
Augusta, GA
6,113,075
86.2
Boston, MA
137,856,160
7.5
Charlotte, NC
58,584,551
12.5
Detroit, MI
29,978,201
16.1
Fayetteville, NC
8,974,679
36.2
Fort Myers-Naples, FL
9,555,146
12.1
Las Vegas, NV
34,689,500
0.9
Middlesex, Monmouth, Morristown, NJ
21,896,900
4.7
Philadelphia, PA
119,674,192
18.1
Tampa-Saint Petersburg, PA
61,787,351
32.1
West Palm Beach-Boca Raton, FL
2,791,900
0.3
Wilmington, DE
17,990,800
2.2
Goodwill. We are required to test our goodwill for impairment on an annual basis, or more frequently if
events or changes in circumstances indicate that our goodwill might be impaired. We assess qualitative factors to determine whether it is necessary to perform a quantitative assessment for each reporting unit. If the quantitative assessment is
necessary, we will determine the fair value of each reporting unit. If the fair value of any reporting unit is less than the carrying amount, we will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting
units fair value. The loss recognized will not exceed the total amount of goodwill allocated to the reporting unit. For the purpose of testing our goodwill for impairment, we have identified our market clusters and esports as our reporting
units.
Due to the impact of the COVID-19 pandemic, we tested our goodwill for impairment during
the first quarter of 2020. We assessed qualitative factors for the esports reporting unit and did not identify any triggering events, however our assessment of qualitative factors for the market clusters identified triggering events for impairment.
As a result of the impairment test performed on the market clusters during the first quarter of 2020, we determined that the estimated fair value of each market cluster exceeded the carrying amount by at least five percent at each market cluster as
of March 31, 2020. We did not identify any triggering events for impairment during the second and third quarters of 2020. Therefore, we did not test our goodwill for impairment during the second and third quarters of 2020.
We believe we have made reasonable estimates and assumptions to calculate the estimated fair value of our FCC licenses and goodwill, however,
these estimates and assumptions are highly judgmental in nature. Actual results can be materially different from estimates and assumptions. If actual market conditions are less favorable than those projected by the industry or by us, or if events
occur or circumstances change that would reduce the estimated fair value of our indefinite-lived intangible assets below the amounts reflected on our balance sheet, we may recognize future impairment charges, the amount of which may be material.
Our remaining critical accounting estimates are described in Item 7 of our Annual Report on Form
10-K for the year ended December 31, 2019. There have been no additional material changes to our critical accounting estimates during the third quarter of 2020.
Recent Accounting Pronouncements
There
were no recent accounting pronouncements that have or will have a material effect on our financial condition or results of operations.
Three Months
Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019
The following summary table presents a
comparison of our results of operations for the three months ended September 30, 2019 and 2020 with respect to certain of our key financial measures. These changes illustrated in the table are discussed in greater detail below. This section
should be read in conjunction with the financial statements and notes to financial statements included in Item 1 of this report.
18
Three Months ended September 30,
Change
2019
2020
$
%
Net revenue
$
66,114,701
$
49,649,659
$
(16,465,042
)
(24.9
)%
Operating expenses
49,443,632
41,589,490
(7,854,142
)
(15.9
)
Corporate expenses
5,326,660
3,712,816
(1,613,844
)
(30.3
)
Income tax expense (benefit)
1,733,980
(1,031,166
)
(2,765,146
)
(159.5
)
Net income (loss)
3,043,899
(2,724,774
)
(5,768,673
)
(189.5
)
Net Revenue . Net revenue decreased $16.5 million during the three months ended September 30, 2020 as
compared to the three months ended September 30, 2019. Significant factors affecting net revenue included a decrease in commercial advertising, digital advertising, and other revenue primarily due to the impact of the COVID-19 pandemic, partially
offset by an increase in esports revenue. Net revenue for the three months ended September 30, 2020 also included additional revenue from political advertising for the 2020 elections and the acquisition of WDMK-FM in Detroit on August 31, 2019.
Operating Expenses. Operating expenses decreased $7.9 million during the three months ended September 30, 2020 as compared to
the three months ended September 30, 2019. The decrease in operating expenses was due to the expense control initiatives we implemented in response to the COVID-19 pandemic, including employee furloughs
and headcount reductions, partially offset by an increased allocation of digital expenses from corporate to the radio market clusters and additional expenses from the acquisition of WDMK-FM in Detroit.
Corporate Expenses. Corporate expenses decreased $1.6 million during the three months ended September 30, 2020 as compared to
the three months ended September 30, 2019. The primary factor affecting corporate expenses was an increased allocation of digital expenses from corporate to the radio market clusters.
Income Tax Expense (Benefit). Our effective tax rate was approximately 35% and (27)% for the three months ended
September 30, 2019 and 2020, respectively. These rates differ from the federal statutory rate of 21% due to the effect of state income taxes and certain expenses that are not deductible for tax purposes.
Net Income (Loss). Net loss for the three months ended September 30, 2020 was $2.7 million compared to net income of
$3.0 million for the three months ended September 30, 2019 as a result of the factors described above.
Nine Months Ended September 30,
2020 Compared to the Nine Months Ended September 30, 2019
The following summary table presents a comparison of our results of
operations for the nine months ended September 30, 2019 and 2020 with respect to certain of our key financial measures. These changes illustrated in the table are discussed in greater detail below. This section should be read in conjunction
with the financial statements and notes to financial statements included in Item 1 of this report.
Nine Months ended September 30,
Change
2019
2020
$
%
Net revenue
$
189,461,003
$
137,683,217
$
(51,777,786
)
(27.3
)%
Operating expenses
144,654,507
133,868,282
(10,786,225
)
(7.5
)
Corporate expenses
15,712,635
11,950,672
(3,761,963
)
(23.9
)
Gain on dispositions
3,545,755
(3,545,755
)
(100.0
)
Impairment losses
6,804,412
6,804,412
Loss on modification of long-term debt
2,798,789
2,798,789
Income tax expense (benefit)
4,266,627
(9,490,892
)
(13,757,519
)
(322.4
)
Net income (loss)
8,666,163
(29,838,734
)
(38,504,897
)
(444.3
)
19
Net Revenue. Net revenue decreased $51.8 million during the nine months ended
September 30, 2020 as compared to the nine months ended September 30, 2019. Significant factors affecting net revenue included a decrease in commercial advertising and other revenue primarily due to the impact of the COVID-19 pandemic, partially offset by an increase in esports revenue and digital advertising. Net revenue for the nine months ended September 30, 2020 also included additional revenue from political
advertising for the 2020 elections and the acquisition of WDMK-FM in Detroit on August 31, 2019.
Operating Expenses. Operating expenses decreased $10.8 million during the nine months ended September 30, 2020 as compared to
the nine months ended September 30, 2019. The decrease in operating expenses was due to the expense control initiatives we implemented in response to the COVID-19 pandemic, including employee furloughs
and headcount reductions, partially offset by an increased allocation of digital expenses from corporate to the radio market clusters and additional expenses from the acquisition of WDMK-FM in Detroit.
Corporate Expenses. Corporate expenses decreased $3.8 million during the nine months ended September 30, 2020 as compared to
the nine months ended September 30, 2019. The primary factor affecting corporate expenses was an increased allocation of digital expenses from corporate to the radio market clusters.
Gain on Dispositions. On March 28, 2019, we completed the sale of certain land and improvements in our Augusta, GA market cluster
for $0.5 million. As a result of the sale, we recorded a gain of $0.4 million in the first quarter of 2019. On March 15, 2019, we agreed to cancel a broadband radio service license in Chattanooga, TN in exchange for a fee of
$3.3 million. As a result of the license cancelation, we recorded a gain of $3.1 million in the first quarter of 2019.
Impairment Losses. Due to the impact of the COVID-19 pandemic on the U.S. economy, we tested
our FCC licenses for impairment during the first quarter of 2020. As a result of the quantitative impairment test, we recorded impairment losses of $6.8 million related to the FCC licenses in our Atlanta, GA, Middlesex, NJ, Monmouth, NJ,
Morristown, NJ, Las Vegas, NV, West Palm Beach-Boca Raton, FL, and Wilmington, DE market clusters. The impairment losses were primarily due to a decrease in projected revenue in these markets due to the impact of the
COVID-19 pandemic and an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of our FCC licenses due to certain risks specifically associated with the Company and
the radio broadcasting industry.
Loss on Modification of Long-Term Debt. We recorded a loss on modification of long-term debt of
$2.8 million during the nine months ended September 30, 2020, resulting from the Amendment to our credit agreement.
Income
Tax Expense (Benefit). Our effective tax rate was approximately 33% and (24)% for the nine months ended September 30, 2019 and 2020, respectively. These rates differ from the federal statutory rate of 21% due to the effect of
state income taxes and certain expenses that are not deductible for tax purposes.
Net Income (Loss). Net loss for the nine months
ended September 30, 2020 was $29.8 million compared to net income of $8.7 million for the nine months ended September 30, 2019 as a result of the factors described above.
Liquidity and Capital Resources
Overview. Our primary sources of liquidity are internally generated cash flow and our revolving credit facility (as defined below).
Our primary liquidity needs have been, and for the next twelve months and thereafter, are expected to continue to be, for working capital, debt service, and other general corporate purposes, including capital expenditures and radio station
acquisitions. Historically, our capital expenditures have not been significant. In addition to property and equipment associated with radio station acquisitions, our capital expenditures have generally been, and are expected to continue to be,
related to the maintenance of our office and studio space, the maintenance of our radio towers and equipment, and digital products and information technology. We have also purchased or constructed office and studio space in some of our markets to
facilitate the consolidation of our operations.
20
In response to the COVID-19 pandemic, our board of
directors has suspended future quarterly dividend payments until it is determined that resumption of dividend payments is in the best interest of the Companys stockholders. In addition, as discussed in Credit Facility below, the
Amendment to our credit agreement limits us from paying dividends until certain leverage-based milestones have been achieved.
Credit
Facility. On November 17, 2017 we and our wholly owned subsidiary, Beasley Mezzanine Holdings, LLC, entered into a credit agreement (the credit agreement) with U.S. Bank, National Association, as administrative agent and
collateral agent, providing for a term loan B facility in the amount of $225.0 million (the term loan facility) and a revolving credit facility of $20.0 million (the revolving credit facility, and together with the
term loan facility, the credit facility). On September 27, 2018, we borrowed an additional $35.0 million from the term loan facility. The proceeds were used for the acquisition of WXTU-FM
in Philadelphia. On August 31, 2019, we borrowed $10.0 million from our revolving credit facility. The proceeds were used for the acquisition of substantially all of the assets used to operate
WDMK-FM in Detroit. On March 26, 2020 and April 7, 2020, we borrowed $7.5 million and $1.5 million, respectively, from our revolving credit facility as a precautionary measure to increase
our cash position and preserve financial flexibility due to the uncertainty of economic conditions in the U.S. resulting from the COVID-19 pandemic.
As of September 30, 2020, the credit facility consisted of the term loan facility with a remaining balance of $238.0 million and a
revolving credit facility with an outstanding balance of $20.0 million and a maximum commitment of $20.0 million. As of September 30, 2020, we had no available commitments under the revolving credit facility. Following the entry into
the Amendment as described below, at our option, the credit facility bore interest at either (i) the London Interbank Offered Rate (LIBOR) plus a margin of 4.25% or (ii) the base rate (as defined in the credit agreement) plus a
margin of 3.25%. The LIBOR interest rate for the term loan is subject to a 1% floor and the base rate is subject to a 2% floor. Interest payments are, for loans based on LIBOR, due at the end of each applicable interest period unless the interest
period is longer than three months, in which case they are due at the end of each three month period. Interest payments for loans based on the base rate are due quarterly. The revolving credit facility carried interest, based on LIBOR, at 4.4% as of
September 30, 2020 and matures on November 17, 2022. The term loan carried interest, based on LIBOR, at 5.25% as of September 30, 2020 and matures on November 1, 2023.
On June 30, 2020, we entered into the Amendment that amended and modified the credit agreement to, among other things, (i) increase
the interest rate applicable to the term loans and revolving credit facility by 25 basis points per annum, (ii) add fees of 300 basis points payable on December 31, 2021 and 150 basis points payable on December 31, 2022, if the credit
agreement is not refinanced prior to such time, (iii) impose additional reporting requirements, (iv) revise the Excess Cash Flow prepayment requirement such that when the Total Leverage Ratio is greater than 4.5x, 75% of Excess Cash Flow
must be prepaid, with such prepayment amounts stepping down to 50%, 25% and 0% upon achievement of certain Total Leverage Ratio milestones, and (v) reduce the flexibility to incur certain additional indebtedness, liens and investments and make
certain restricted payments, subject to the achievement of certain leverage-based milestones.
Additionally, the Amendment modified the
financial covenant to remove the maximum First Lien Leverage Ratio previously tested quarterly through the fiscal quarter ended March 31, 2020. In its place, the Amendment added (i) a minimum liquidity covenant of $8.5 million (the
Minimum Liquidity Amount), which will be tested every other week until the Total Leverage Ratio is less than 5.0x, (ii) a minimum EBITDA (as defined in the credit agreement, as amended by the Amendment) covenant, which will be
tested monthly beginning October 31, 2020 through June 30, 2021 and (iii) a maximum First Lien Leverage Ratio covenant, which will be tested quarterly beginning with the fiscal quarter ending September 30, 2021. The Amendment
also modifies the definition of Consolidated EBITDA to remove certain add-backs with respect to the calculation of Consolidated EBITDA and EBITDA for financial covenants and other similar calculations and
reduces the amount of cash that can be netted for the calculation of the First Lien Leverage Ratio for purposes of testing the First Lien Leverage Ratio financial covenant, when applicable.
Also, as a condition to entering into the Amendment, George Beasley, the Companys Chairman, provided a $5.0 million loan to the
Company that accrues payment-in-kind interest at 6% per annum with no cash payments due until the loans maturity in December 2023. Mr. Beasley and GGB Family
Limited Partnership also each entered into standby letters of credit in combined aggregate face amount of $5.0 million in favor of U.S. Bank, National Association for the benefit of the Company as a source of backup liquidity that may be drawn
by U.S. Bank, National Association in the event that the Company fails to maintain the Minimum Liquidity Amount.
The credit facility is
secured by substantially all assets of the Company and its subsidiaries and is guaranteed jointly and severally by the Company and its subsidiaries. If we default under the terms of the credit agreement, the Company and its subsidiaries may be
required to perform under their guarantees. As of September 30, 2020, the maximum amount of undiscounted payments the Company
21
and its applicable subsidiaries would have been required to make in the event of default was $258.0 million. The guarantees for the credit facility expire on November 17, 2022 for the
revolving credit facility and on November 1, 2023 for the term loan facility.
Failure to comply with financial covenants, scheduled
interest payments, scheduled principal repayments, or any other terms of our credit agreement, as amended by the Amendment, could result in the acceleration of the maturity of our outstanding debt, which could have a material adverse effect on our
business or results of operations.
On November 14, 2019, we acquired a majority interest in an esports team and issued a promissory
note for $16.5 million to the seller (the Promissory Note). The Promissory Note had a remaining balance of $13.5 million as of December 31, 2019. On June 30, 2020, the Company entered into an amendment to the
Promissory Note (as amended, the Amended Promissory Note) applicable to the remaining balance of $10.0 million. The Amended Promissory Note bears cash-pay interest at 5% per annum payable
quarterly in arrears and additional payment-in-kind interest at 10% per annum and provides for a cash principal payment of $2.25 million on December 31, 2020.
For subsequent stock issuances, which begin on June 30, 2021, the principal reduction amount will be the lesser of (i) the value of the stock issued based on 20-day moving average on the day prior to
issuance or (ii) the principal reduction amount, which is 50% of the value of the stock based on a fixed price of $2.35 per share. The number of shares to be issued was fixed at the time of the signing of the note and will not
exceed 3,191,489 in the aggregate (including the issuance on July 8, 2020 noted below). All accrued but unpaid interest and the then outstanding principal amount of the Amended Promissory Note will be paid in full in cash on December 31,
2023. The Amended Promissory Note will mature on December 31, 2023 and may be prepaid at any time at the option of the Company.
On
July 8, 2020, we issued an initial stock payment of 1,276,596 Class A common stock at a fixed price of $2.35 per share that reduced the principal amount of the Amended Promissory Note by $2.25 million. The shares were issued at $1.99
per share and the $0.3 million difference between the fair value of the shares and the principal reduction was recorded as additional interest expense. As of September 30, 2020, the Amended Promissory Note has a balance of
$7.75 million.
The aggregate scheduled principal repayments of the credit facility and Amended Promissory Note for the remainder of
2020 and the next three years are as follows:
2020
$
2,250,000
2021
750,000
2022
21,250,000
2023
241,500,000
Total
$
265,750,000
The Amendment permits us to repurchase sufficient shares of our common stock to fund withholding taxes in
connection with the vesting of restricted stock units and shares of restricted stock up to an aggregate amount of $1.0 million per year. We paid approximately $34,000 to repurchase 16,331 shares during the nine months ended September 30,
2020.
We expect to provide for future liquidity needs through one or a combination of the following sources of liquidity:
internally generated cash flow;
our revolving credit facility when commitments are available;
additional borrowings, other than under our revolving credit facility, to the extent permitted under our credit
facility; and
additional equity offerings.
We believe that we will have sufficient liquidity and capital resources to permit us to provide for our liquidity requirements and meet our
financial obligations for the next twelve months. However, poor financial results or unanticipated expenses could give rise to defaults under our credit facility, additional debt servicing requirements or other additional financing or liquidity
requirements sooner than we expect, and we may not secure financing when needed or on acceptable terms.
22
Our ability to reduce our Total Leverage Ratio by increasing operating cash flow and/or
decreasing long-term debt will determine how much, if any, of the commitments under our revolving credit facility will be available to us in the future. Poor financial results or unanticipated expenses could result in our failure to maintain or
lower our Total Leverage Ratio and we may not be permitted to make any additional borrowings under our revolving credit facility. We have no available commitments under our revolving credit facility.
Cash Flows . The following summary table presents a comparison of our capital resources for the nine months ended September 30,
2019 and 2020 with respect to certain of our key measures affecting our liquidity. The changes set forth in the table are discussed in greater detail below. This section should be read in conjunction with the financial statements and notes to
financial statements included in Item 1 of this report.
Nine Months ended September 30,
2019
2020
Net cash provided by operating activities
$
23,313,498
$
800,567
Net cash used in investing activities
(21,611,242
)
(7,996,619
)
Net cash provided by (used in) financing activities
(3,237,333
)
4,040,306
Net decrease in cash and cash equivalents
$
(1,535,077
)
$
(3,155,746
)
Net Cash Provided By Operating Activities. Net cash provided by operating activities decreased
$22.5 million during the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019. Significant factors affecting the decrease in net cash provided by operating activities included a
$39.5 million decrease in cash receipts from revenue, partially offset by a $9.5 million decrease in cash paid for operating expenses, a $3.3 million decrease in income tax payments, a $2.7 million decrease in cash paid for
corporate expenses, and a $1.3 million decrease in interest payments.
Net Cash Used In Investing Activities. Net cash
used in investing activities during the nine months ended September 30, 2020 included payments of $7.0 million for capital expenditures and payments of $1.0 million for investments. Net cash used in investing activities for the same
period in 2019 included a payment of $13.5 million for the acquisition of substantially all of the assets used to operate WDMK-FM in Detroit, payments of $6.9 million for capital expenditures, and
payments of $5.0 million for investments, partially offset by proceeds of $3.8 million from dispositions.
Net Cash Provided
By (Used In) Financing Activities. Net cash provided by financing activities during the nine months ended September 30, 2020 included proceeds of $9.0 million from the issuance of indebtedness under our revolving credit facility
and proceeds from the $5.0 million loan provided by George Beasley, partially offset by credit facility and promissory note repayments of $4.5 million, payments of $2.8 million for cash dividends, and payments of $2.6 million for
debt issuance costs related to the Amendment. Net cash used in financing activities for the same period in 2019 included repayments of $9.0 million under our credit facility and payments of $4.2 million for cash dividends, partially offset
by proceeds of $10.0 million from the issuance of indebtedness used for the acquisition of substantially all of the assets used to operate WDMK-FM in Detroit.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have
evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that these disclosure controls and procedures are effective as of the end of the period covered by this report.
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2020 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
23
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We currently and from time to time are involved in litigation and are the subject of threats of litigation that are incidental to the conduct
of our business. These include indecency claims and related proceedings at the FCC as well as claims and threatened claims by private third parties. However, we are not a party to any lawsuit or other proceedings, or the subject of any threatened
lawsuit or other proceedings, which, in the opinion of management, is likely to have a material adverse effect on our financial condition or results of operations.
ITEM 1A. RISK FACTORS.
There have been no material changes to our risk factors as disclosed in Item 1A, Risk Factors of our annual report on Form 10-K for the year ended December 31, 2019, other than the updates noted below.
We face risks related to health
epidemics, natural disasters and other catastrophes, which have materially and adversely affected our results of operations, liquidity and financial condition.
We are subject to social and natural catastrophic events that are beyond our control, such as health epidemics, natural disasters and other
catastrophes, which have materially and adversely affected our business and may continue to materially and adversely affect our results of operations, liquidity and financial condition.
In March 2020, COVID-19 was recognized as a pandemic by the World Health Organization. The COVID-19 pandemic has resulted in a widespread health crisis that has adversely affected businesses, economies, and financial markets worldwide, and has caused significant volatility in U.S. and international debt
and equity markets. We have been, and continue to be, impacted by deteriorating general economic conditions, which have caused a downturn in the advertising industry. The decreased demand for advertising has materially negatively impacted our
results of operations, liquidity and financial condition. We expect the current environment to continue for some time and for our results of operations, liquidity and financial condition to be materially adversely impacted during that time.
Impairments of our FCC licenses and/or goodwill related to the impact of the COVID-19 pandemic will adversely
affect our operating results and we may be required to record further impairment losses in the future.
As of September 30, 2020,
our FCC licenses and goodwill represented 73% of our total assets. Due to the impact of the COVID-19 pandemic on the U.S. economy, we tested our FCC licenses and goodwill for impairment during the first
quarter of 2020. As a result of the quantitative impairment test performed on our FCC licenses, we recorded impairment losses of $6.8 million related to the FCC licenses in our Atlanta, GA, Middlesex, NJ, Monmouth, NJ, Morristown, NJ, Las
Vegas, NV, West Palm Beach-Boca Raton, FL, and Wilmington, DE market clusters. As a result of the impairment test performed on our goodwill during the first quarter of 2020, we determined that the estimated fair value of each market cluster exceeded
the carrying amount by at least five percent at each market cluster.
We did not identify any triggering events for impairment during the
second quarter of 2020. Therefore, we did not test our FCC licenses and goodwill for impairment during the second quarter of 2020.
We
elected to perform the quantitative impairment test for our FCC licenses in all markets during the third quarter of 2020. As a result of the quantitative impairment test performed on our FCC licenses, we recorded no impairment losses related to our
FCC licenses in any of our reporting units. However, as a result of the testing performed during the third quarter of 2020, we identified four market clusters, Middlesex, NJ, Monmouth, NJ, Morristown, NJ, Las Vegas, NV, West Palm Beach-Boca Raton,
FL, and Wilmington, DE where the estimated fair value of the FCC licenses exceeded the carrying amount by 4.7%, 0.9%, 0.3%, and 2.2%, respectively. Therefore, the FCC licenses in these four markets may carry an increased risk of impairment losses in
the future.
24
We did not identify any triggering events for impairment during the third quarter of 2020.
Therefore, we did not test our goodwill for impairment during the third quarter of 2020.
The impairment losses in the first quarter of
2020 were primarily due to a decrease in projected revenue in these markets due to the impact of the COVID-19 pandemic and an increase in the discount rate used in the discounted cash flow analyses to estimate
the fair value of our licenses due to certain risks specifically associated with the Company and the radio broadcasting industry. To the extent the COVID-19 pandemic and the related economic downturn continues
or worsens, we may be required to record further impairment losses in the future.
The valuation of our FCC licenses and goodwill is based
on estimates rather than precise calculations. The fair value measurements for both our FCC licenses and goodwill use significant unobservable inputs which reflect our own assumptions about the estimates that market participants would use in
measuring fair value including assumptions about risk. If actual future results are not consistent with the assumptions and estimates used, we may be exposed to impairment charges in the future, which could be material and could adversely affect our
results of operations and financial condition.
A decrease in projected revenue due to the COVID-19 pandemic
may hinder our ability to meet certain financial ratios and financial condition tests under our credit facility and could lead to an event of default.
Our credit facility requires us to maintain specified financial ratios and to satisfy certain financial condition tests. The decreased demand
for advertising as a result of the COVID-19 pandemic has materially negatively impacted our revenues. We expect the current adverse economic environment to continue through at least the end of this year and
for our results of operations to be materially adversely impacted during that time. As a result, it may become increasingly difficult for us to meet these financial covenants.
A breach of any of the covenants, ratios, tests or restrictions under our credit facility, could result in an event of default thereunder. If
an event of default exists under our credit facility, the lenders could elect to declare all amounts outstanding thereunder to be immediately due and payable. If the lenders accelerate the payment of the indebtedness, we cannot assure you that our
assets would be sufficient to repay that indebtedness in full. Such conditions could force us to seek protection under federal bankruptcy laws and could significantly or entirely reduce the value of our equity.
We entered into the Amendment to our credit agreement on June 30, 2020 to modify certain financial covenants, among other provisions.
However, there can be no assurance that we will be successful in obtaining additional amendments or waivers, if needed. Further, the terms of the amended credit agreement subject us to additional and different restrictive covenants that could
further limit our operational flexibility or subject us to other events of default.
ITEM 2. UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS.
Repurchases of Equity Securities
The following table presents information with respect to purchases we made of our Class A common stock during the three months ended
September 30, 2020.
Period
Total Number
of Shares
Purchased
Average Price
Paid per
Share
Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Program
Approximate
Dollar Value
of Shares
That May
Yet Be
Purchased
Under the
Program
July 1 31, 2020
August 1 31, 2020
September 1 30, 2020
1,875
$
1.33
Total
1,875
25
On March 27, 2007, our board of directors approved the Beasley Broadcast Group, Inc.
2007 Equity Incentive Award Plan (the 2007 Plan). The original ten year term of the 2007 Plan ended on March 27, 2017. Our stockholders approved an amendment to the 2007 Plan at the Annual Meeting of Stockholders on June 8,
2017 to, among other things, extend the term of the 2007 Plan until March 27, 2027. The 2007 Plan permits us to purchase sufficient shares to fund withholding taxes in connection with the vesting of restricted stock units and shares of
restricted stock. Our credit agreement, as amended by the Amendment, permits us to repurchase sufficient shares of our common stock to fund withholding taxes in connection with the vesting of restricted stock units and shares of restricted stock,
subject to compliance with financial covenants, up to an aggregate amount of $1.0 million per year. All shares purchased during the three months ended September 30, 2020, were purchased to fund withholding taxes in connection with the
vesting of restricted stock units and shares of restricted stock.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4.
MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5.
OTHER INFORMATION.
None.
ITEM 6.
EXHIBITS.
Exhibit
Number
Description
10.1
Amendment to executive employment agreement by and between Beasley Mezzanine Holdings, LLC and Marie Tedesco dated as of August
31, 2020 (incorporated by reference to Exhibit 10.1 to Beasley Broadcast Group, Inc.s Current Report on Form 8-K filed September 3, 2020).
31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) (17 CFR 240.15d-14(a)).
31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) (17 CFR 240.15d-14(a)).
32.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(b)/15d-14(b) (17 CFR 240.15d-14(b))
and 18 U.S.C. Section 1350.
32.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(b)/15d-14(b) (17 CFR 240.15d-14(b))
and 18 U.S.C. Section 1350.
101.INS
XBRL Instance Document.
101.SCH
XBRL Taxonomy Extension Schema Document.
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB
XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document.
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
BEASLEY BROADCAST GROUP, INC.
Dated: November 12, 2020
/s/ Caroline Beasley
Name: Caroline Beasley
Title: Chief Executive Officer (principal executive officer)
Dated: November 12, 2020
/s/ Marie Tedesco
Name: Marie Tedesco
Title: Chief Financial Officer ( principal financial and accounting officer)
27
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.