Item 5. Market for Registrant’s Common Equity
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
We have two
authorized and outstanding classes of equity securities: Class A common stock, $.001 par value, and Class B common stock, $.001 par value. The only difference between the Class A and Class B common stock is that Class A is
entitled to one vote per share and Class B is entitled to ten votes per share. Class B is convertible into Class A shares on a one-for-one share basis
under certain circumstances. Our Class A common stock trades on the NASDAQ Global Market under the symbol BBGI. There is no established public trading market for our Class B common stock.
Holders
As of February 8, 2021,
there were approximately 133 holders of record of our Class A common stock and 21 holders of record of our Class B common stock. The number of holders of Class A common stock does not count separately the number of beneficial holders
whose shares are held of record by a broker or clearing agency.
Dividends
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, the Indenture governing our Notes limits our ability to pay dividends.
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 December 31, 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
That May
Yet Be
Purchased
Under the
Program
October 1 31, 2020
$
November 1 30, 2020
2,500
$
1.38
December 1 31, 2020
18,275
1.54
Total
20,775
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. All
shares purchased during the three months ended December 31, 2020 were purchased to fund withholding taxes in connection with the vesting of restricted stock units and shares of restricted stock.
ITEM 6. SELECTED FINANCIAL DATA
Not required for smaller reporting companies.
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
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.
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Recent Developments
On February 2, 2021, we issued $300.0 million aggregate principal amount of Notes. Interest on the Notes accrues at the rate of
8.625% per annum and is payable semiannually in arrears on February 1 and August 1 of each year, commencing on August 1, 2021. The Notes are secured on a first-lien priority basis by substantially all assets of the Company and its
majority owned subsidiaries and are guaranteed jointly and severally by the Company and its majority owned subsidiaries. We used the net proceeds from the Notes, to refinance the credit facility and the Amended Promissory Note (see Note 10 to the
accompanying financial statements) and to repay the loan from Mr. George Beasley (see Note 18 to the accompanying financial statements) and related accrued interest, fees and expenses. The Indenture contains restrictive covenants that limit the
ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, guarantee indebtedness or issue disqualified stock or, in the case of such subsidiaries, preferred stock; pay dividends on, repurchase or make
distributions in respect of our capital stock or make other restricted payments; make certain investments or acquisitions; sell, transfer or otherwise convey certain assets; create liens; enter into agreements restricting certain subsidiaries
ability to pay dividends or make other intercompany transfers; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; enter into transactions with affiliates; prepay certain kinds of indebtedness; and issue or sell
stock of our subsidiaries.
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 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. Advertising sales began to
recover near the end of the second quarter of 2020 and continued to recover during the remainder 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. These initiatives continued reducing our expenses throughout the remainder of 2020 and we expect expense reductions to continue into 2021. 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.
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, Las Vegas, NV, Middlesex-Monmouth-Morristown, NJ, West
Palm Beach-Boca Raton, FL, and Wilmington, DE radio 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. 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. We did not identify any triggering events for impairment during the fourth quarter of 2020.
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.
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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;
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;
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;
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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 Nielsen 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 radio 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.
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 radio market clusters.
Critical Accounting Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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
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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.
Accounts Receivable. We continually evaluate our ability to
collect our accounts receivable. Our ongoing evaluation includes review of specific accounts at our radio stations, the current financial condition of our customers and our historical write-off experience.
This ongoing evaluation requires management judgment and if we had made different assumptions about these factors, the allowance for doubtful accounts could have been materially different.
Property and Equipment. We are required to assess the recoverability of our property and equipment whenever an event has
occurred that may result in an impairment loss. If such an event occurs, we will compare estimates of related future undiscounted cash flows to the carrying amount of the asset. If the future undiscounted cash flow estimates are less than the
carrying amount of the asset, we will reduce the carrying amount to the estimated fair value. The determination of when an event has occurred and estimates of future cash flows and fair value all require management judgment. The use of different
assumptions or estimates may result in alternative assessments that could be materially different. We did not identify any triggering events that may have resulted in an impairment loss on our property and equipment in 2020. However, there can be no
assurance that impairments of our property and equipment will not occur in future periods.
FCC Licenses. As of December 31,
2020, FCC licenses with an aggregate carrying amount of $508.6 million represented 69% of our total assets. We are required to test our licenses for impairment 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 a 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 radio 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, Las Vegas, NV, Middlesex-Monmouth-Morristown, NJ, West
Palm Beach-Boca Raton, FL, and Wilmington, DE radio 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.
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 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%
The carrying amount of our FCC licenses for each reporting unit and the percentage by which fair value
exceeded the carrying amount, in connection with the impairment test performed as of September 30, 2020, were as follows:
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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
56,418,151
13.0
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, FL
61,787,351
32.1
West Palm Beach-Boca Raton, FL
2,791,900
0.3
Wilmington, DE
17,990,800
2.2
We did not identify any triggering events for impairment during the fourth quarter of 2020.
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 radio 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 radio market clusters identified triggering events for impairment. As a
result of the impairment test performed on the radio 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 subsequent 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.
Leases. We are required to determine whether a contract is or contains a lease at inception. Our analysis includes whether
the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. This consideration involves judgment with respect to whether we have the right to obtain substantially all of the economic
benefits from the use of the identified asset and whether we have the right to direct the use of the identified asset. We calculate the term for each lease agreement to include the noncancellable period specified in the agreement together with
(1) the periods covered by options to extend the lease if we are reasonably certain to exercise that option, (2) periods covered by an option to terminate if we are reasonably certain not to exercise that option and (3) period covered
by an option to extend (or not terminate) if controlled by the lessor. The assessment of whether we are reasonably certain to exercise an option to extend a lease requires significant judgement surrounding contract-based factors, asset-based
factors, entity-based factors and market-based factors. These factors are evaluated based on the facts and circumstances at the time we enter a lease agreement. The lease liabilities and the related right-of-use assets are calculated based on the present value of the lease payments using (1) the rate implicit in the lease or (2) the lessees incremental borrowing rate (IBR).
IBR is defined as the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. See Note 11 to the accompanying financial
statements.
Supplemental Employee Retirement Plan. The costs and liabilities of the Supplemental Employee Retirement Plan
(SERP) are determined using actuarial valuations. An actuarial valuation involves making various assumptions that include the discount rate and mortality rates. The discount rate is based on matching the cash flows of the SERP to the
FTSE Pension Discount Curve. The mortality assumptions are based on the mortality tables and mortality improvement scales which are selected based on the most recent study of the Society of Actuaries. The SERP is frozen so future employment does not
change the benefit amounts. Actual results will differ from results which are estimated based on assumptions. See Note 12 to the accompanying financial statements.
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Recent Accounting Pronouncements
Recent accounting pronouncements are described in Note 2 to the accompanying financial statements.
Results of Operations
Year Ended December 31,
2020 Compared to the Year Ended December 31, 2019
The following summary table presents a comparison of our results of operations
for the years ended December 31, 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 8 of this report.
Year ended December 31,
Change
2019
2020
$
%
Net revenue
$
261,554,114
$
206,143,861
$
(55,410,253
)
(21.2
)%
Operating expenses
201,107,084
182,181,555
(18,925,529
)
(9.4
)
Corporate expenses
21,209,432
15,628,370
(5,581,062
)
(26.3
)
Impairment losses
13,657,941
8,970,812
(4,687,129
)
(34.3
)
Gain on dispositions
20,657,360
4,439,710
(16,217,650
)
(78.5
)
Loss on modification of long-term debt
2,798,789
2,798,789
Income tax expense (benefit)
6,597,751
(5,185,992
)
(11,783,743
)
(178.6
)
Net income (loss)
13,383,642
(18,874,156
)
(32,257,798
)
(241.0
)
Net Revenue. Net revenue decreased $55.4 million during the year ended December 31, 2020 as
compared to the year ended December 31, 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 revenue. Net revenue for the year ended December 31, 2020 also included additional revenue of $14.3 million from political advertising for the 2020
elections and the acquisition of WDMK-FM in Detroit on August 31, 2019.
Operating
Expenses. Operating expenses decreased $18.9 million during the year ended December 31, 2020 as compared to the year ended December 31, 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 increase in digital expenses and additional expenses from the acquisition of WDMK-FM in Detroit.
Corporate Expenses. Corporate expenses decreased $5.6 million during
the year ended December 31, 2020 as compared to the year ended December 31, 2019. The primary factors affecting corporate expenses was a decrease in compensation and travel expenses due to the
COVID-19 pandemic and an allocation of digital expenses from corporate expenses to operating expenses.
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, Las Vegas, NV,
Middlesex-Monmouth-Morristown, NJ, West Palm Beach-Boca Raton, FL, and Wilmington, DE radio 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. On December 31, 2020, we completed the sale of certain land in our Charlotte, NC market cluster to a third party. As a result of the sale, we no longer utilize one FCC license in that market. Therefore, the carrying
amount of $2.2 million was recorded in impairment losses during the fourth quarter of 2020. As a result of our annual quantitative impairment test performed as of November 30, 2019, we recorded impairment losses of $12.4 million
related to the FCC licenses in our Atlanta, GA and West Palm Beach-Boca Raton, FL radio market clusters. The impairment losses were primarily due to a reduced share of projected revenue in these markets. We also recorded an impairment loss of
$1.3 million related to our investment in LN2 DB, LLC. The impairment loss was based on a study of LN2 DBs patents, which concluded that none of them had any significant remaining market value.
Gain on Dispositions. On December 31, 2020, we completed the sale of certain land in our Charlotte, NC market cluster for
$4.65 million. As a result of the sale, we recorded a gain of $4.4 million in the year ended December 31, 2020. On December 23, 2019, we completed the sale of certain land in our Las Vegas, NV market cluster for
$13.5 million. As a result of the sale, we recorded a gain of $7.9 million in the year ended December 31, 2019. On December 2, 2019, we completed the sale of certain land in our West Palm Beach-Boca Raton, FL market cluster for
$7.1 million. As a result of the sale, we recorded a gain of $6.5 million in the year ended December 31, 2019. On October 25, 2019, we completed the sale of a radio tower in our Tampa-Saint Petersburg, FL market cluster and a
radio tower in our Middlesex-Monmouth-Morristown, NJ market cluster for $2.4 million. As a result of the sale, we recorded a gain of $2.0 million in the year ended December 31, 2019. 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 year ended December 31, 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 year ended December 31, 2019.
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Loss on Modification of Long-Term Debt. We recorded a loss on modification of
long-term debt of $2.8 million during the year ended December 31, 2020, resulting from the Amendment to our credit agreement (as discussed in Credit Facility below).
Income Tax Expense (Benefit). Our effective tax rate was approximately 33% and (22)% for the years ended
December 31, 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 year ended December 31, 2020 was $18.9 million compared to net income of
$13.4 million for the year ended December 31, 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.
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 Secured Notes below, the
Indenture governing our Notes limits our ability to pay dividends.
Secured Notes. On February 2, 2021, we issued
$300.0 million aggregate principal amount of Notes. Interest on the Notes accrues at the rate of 8.625% per annum and is payable semiannually in arrears on February 1 and August 1 of each year, commencing on August 1, 2021. The
Notes are secured on a first-lien priority basis by substantially all assets of the Company and its majority owned subsidiaries and are guaranteed jointly and severally by the Company and its majority owned subsidiaries. We used the net proceeds
from the Notes, to refinance the credit facility and the Amended Promissory Note (see Note 10 to the accompanying financial statements) and to repay the loan from Mr. George Beasley (see Note 18 to the accompanying financial statements) and
related accrued interest, fees and expenses. The Indenture contains restrictive covenants that limit the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, guarantee indebtedness or issue disqualified
stock or, in the case of such subsidiaries, preferred stock; pay dividends on, repurchase or make distributions in respect of our capital stock or make other restricted payments; make certain investments or acquisitions; sell, transfer or otherwise
convey certain assets; create liens; enter into agreements restricting certain subsidiaries ability to pay dividends or make other intercompany transfers; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
enter into transactions with affiliates; prepay certain kinds of indebtedness; and issue or sell stock of our subsidiaries.
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.
On June 30, 2020, we entered into Amendment No. 2 to our credit agreement (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, (provided the credit agreement was not repaid prior to such time), (iii) impose additional reporting requirements, (iv) revise the Excess Cash Flow prepayment requirement such that when the Total
Leverage Ratio was 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.
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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 was to be
tested every other week until the Total Leverage Ratio was less than 5.0x, (ii) a minimum EBITDA (as defined in the credit agreement, as amended by the Amendment) covenant, which was to be tested monthly through June 30, 2021 and
(iii) a maximum First Lien Leverage Ratio covenant, which was to be tested quarterly beginning with the fiscal quarter ending September 30, 2021. The Amendment also modified 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 reduced the amount of cash that could 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,
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
December 31, 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 was subject to a 1% floor and the base rate was subject to a 2% floor
for the term loan facility and 0% floor for the revolving credit facility. Interest payments were, for loans based on LIBOR, due at the end of each applicable interest period unless the interest period was longer than three months, in which case
they were due at the end of each three month period. Interest payments for loans based on the base rate were due quarterly. The revolving credit facility carried interest, based on LIBOR, at 4.4% as of December 31, 2020. The term loan carried
interest, based on LIBOR, at 5.25% as of December 31, 2020.
The credit facility was secured by substantially all assets of the
Company and its subsidiaries and was guaranteed jointly and severally by the Company and its subsidiaries. As of December 31, 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. As noted in Secured Notes above, the credit facility was repaid on February 2, 2021, using a portion of the proceeds from the Notes offering.
Also, as a condition to entering into the Amendment, George Beasley, the Companys Chairman, provided a $5.0 million loan to the
Company that accrued 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 in the event that
the Company failed to maintain the Minimum Liquidity Amount. As noted in Secured Notes above, the loan was repaid on February 2, 2021, using a portion of the proceeds from the Notes offering.
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 bore cash-pay interest at 5% per annum payable quarterly in arrears and additional payment-in-kind interest at 10% per annum. 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. For subsequent stock issuances, which were scheduled to begin on June 30, 2021, the principal reduction amount would have been 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 was 50% of the value of the stock based on a fixed price of $2.35 per share. As noted in
Secured Notes above, the Amended Promissory Note was repaid on February 2, 2021, using a portion of the proceeds from the Notes offering.
From time to time, we 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. We paid approximately $0.1 million to repurchase 37,106 shares during the year ended December 31, 2020.
We expect to provide for future liquidity needs through one or a combination of the following sources of liquidity:
internally generated cash flow;
additional borrowings or notes offerings, to the extent permitted under the Indenture governing our Notes; 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 default under the Notes, 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.
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Cash Flows . The following summary table presents a comparison of our capital
resources for the years ended December 31, 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 8 of this report.
Year ended December 31,
2019
2020
Net cash provided by operating activities
$
20,991,224
$
4,214,316
Net cash used in investing activities
(4,955,046
)
(3,845,616
)
Net cash provided by (used in) financing activities
(10,821,835
)
1,742,561
Net increase in cash and cash equivalents
$
5,214,343
$
2,111,261
Net Cash Provided By Operating Activities. Net cash provided by operating activities decreased
$16.8 million during the year ended December 31, 2020 as compared to the year ended December 31, 2019. Significant factors affecting the decrease in net cash provided by operating activities included a $46.9 million decrease in
cash receipts from revenue, partially offset by a $20.5 million decrease in cash paid for operating expenses, a $4.2 million decrease in cash paid for corporate expenses, a $3.3 million decrease in income tax payments, and a
$1.9 million decrease in interest payments.
Net Cash Used In Investing Activities. Net cash used in investing activities
during the year ended December 31, 2020 included payments of $7.5 million for capital expenditures and payments of $1.0 million for investments, partially offset by proceeds of $4.6 million from dispositions. 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
$9.0 million for capital expenditures, payments of $5.0 million for investments, and payments of $3.5 million for other acquisitions, partially offset by proceeds of $26.3 million from dispositions.
Net Cash Provided By (Used In) Financing Activities. Net cash provided by financing activities during the year ended
December 31, 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 $6.75 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 credit facility and Promissory Note repayments of $16.0 million and payments of $5.5 million for cash dividends, partially offset by proceeds of $11.0 million from the issuance of indebtedness used primarily for the
acquisition of substantially all of the assets used to operate WDMK-FM in Detroit.
Related Party Transactions
Beasley Family Towers, LLC
We lease towers for two radio stations in Tampa, FL from Beasley Family Towers, LLC (BFT), which is partially held by a trust for
the benefit of Caroline Beasley, Bruce G. Beasley, Brian E. Beasley and other family members of George G. Beasley and partially owned directly by Caroline Beasley, Bruce G. Beasley, Brian E. Beasley and other family members. The lease agreements
expire on various dates through December 31, 2038. Rental expense was $0.1 million for the year ended December 31, 2020.
We lease several towers for one radio station in Boca Raton, FL from BFT. The lease agreement expires on April 30, 2021. Rental expense
was $0.1 million for the year ended December 31, 2020. Lease payments are currently offset by the partial recognition of a deferred gain on sale from the sale of these towers to BFT in 2006, therefore no rental expense was reported for
these towers for the year ended December 31, 2020.
GGB Augusta, LLC
We lease land for our radio stations in Augusta, GA from GGB Augusta, LLC which is held by a trust for the benefit of Caroline Beasley, Bruce
G. Beasley, Brian E. Beasley, and other family members of George G. Beasley. The lease agreement expires on November 1, 2023. Rental expense was approximately $41,000 for the year ended December 31, 2020.
GGB Las Vegas, LLC
We
lease property for our radio stations in Las Vegas, NV from GGB Las Vegas, LLC which is controlled by George G. Beasley. The lease agreement expires on December 31, 2023. Rental expense was $0.2 million for the year ended December 31,
2020.
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Wintersrun Communications, LLC
We sold a tower for one radio station in Charlotte, NC to Wintersrun Communications, LLC, which is partially held by a trust for the benefit of
Caroline Beasley, Bruce G. Beasley, Brian E. Beasley and other family members of George G. Beasley and partially owned directly by Bruce G. Beasley and Brian E. Beasley, for $0.4 million then leased back the tower under an agreement which
expires on December 31, 2025. The lease met the criteria to be recorded as a finance lease, however based on the terms of the lease agreement the $0.3 million gain on sale was deferred and will be recognized as the finance lease right-of-use asset is depreciated. Rental expense was $0.1 million for the year ended December 31, 2020.
The following related party transactions are based on agreements entered into prior to our initial public offering in 2000 at which time our
board of directors did not have an audit committee. However, these agreements were evaluated by our board of directors at the time of entering the agreements and we believe that they are on terms at least as favorable to us as could have been
obtained from a third party.
Beasley Broadcasting Management, LLC
We lease our principal executive offices in Naples, FL from Beasley Broadcasting Management, LLC, which is held by a trust for the benefit of
Caroline Beasley, Bruce G. Beasley, Brian E. Beasley, and other family members of George G. Beasley. Rental expense was $0.2 million for the year ended December 31, 2020.
Beasley Family Towers, LLC
We lease towers for 19 radio stations in various markets from BFT. As of December 28, 2020, all lease agreements had expired. Rental
expense was $0.4 million for the year ended December 31, 2020.
GGB Estero, LLC
We lease property for our radio stations in Ft. Myers, FL from GGB Estero, LLC, which is held by a trust for the benefit of Caroline Beasley,
Bruce G. Beasley, Brian E. Beasley, and other family members of George G. Beasley. The lease agreement expires on August 31, 2024. Rental expense was $0.2 million for the year ended December 31, 2020.
Wintersrun Communications, LLC
We lease a tower for one radio station in Augusta, GA from Wintersrun. The lease agreement expires on October 16, 2025. Rental expense was
approximately $31,000 for the year ended December 31, 2020.
Mr. George Beasley
As a condition to entering into the Amendment (see Note 10), George Beasley, the Companys Chairman, provided a $5.0 million loan to
the Company that accrued 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 in the
event that the Company failed to maintain the Minimum Liquidity Amount (as defined in the Amendment). As noted in Secured Notes above, the loan was repaid on February 2, 2021, using a portion of the proceeds from the Notes offering.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2020.
Inflation
For the years ended
December 31, 2019 and 2020, inflation has affected our performance in terms of higher costs for operating expenses, however the exact impact cannot be reasonably determined.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Not required for smaller reporting companies.
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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.