Acquisition Of Greater Media Stations Has Beasley Broadcast Group Fourth Quarter Net Revenue Up 89.1% To $53.7 Million
March 21, 2017 at 4:39 AM (PT)
BEASLEY BROADCAST GROUP has released operating results for the three month period and year ended DECEMBER 31, 2016. On NOVEMBER 1, 2016, BEASLEY acquired 17 radio stations from GREATER MEDIA. These results reflect the Company’s legacy BEASLEY BROADCAST GROUP broadcasting and digital operations and two months of results from the GREATER MEDIA stations.
Operating income, net income and net income per diluted share for the three month period and year ended DECEMBER 31, 2016 reflect merger expenses of $5.2 million and $6.4 million, respectively and both periods include an approximate $45.5 million gain on acquisition of the GREATER MEDIA stations, "resulting from the difference in the fair value of the assets acquired and liabilities assumed and the purchase price paid." Operating income, net income and net income per diluted share for the year ended December 31, 2015 include a $3.5 million impairment loss.
The $25.3 million, or 89.1%, year-over-year increase in net revenue during the three months ended DECEMBER 31, 2016, reflects the operation of stations in BOSTON, PHILADELPHIA, DETROIT and NEW JERSEY acquired from GREATER MEDIA on NOVEMBER 1, 2016 as well as higher revenue from the Company’s legacy-owned TAMPA-ST. PETERSBURG, CHARLOTTE and LAS VEGAS market clusters.
Station Operating Income rose 80.3% year-over-year in the fourth quarter of 2016. The increase in SOI reflects two months of operations of the GREATER MEDIA stations, the increase in quarterly net revenues at BEASLEY’s existing stations and station operating expenses in the 2016 and 2015 fourth quarters that amounted to 69.8% and 68.3% of net revenue, respectively.
Operating income of $49.9 million in the fourth quarter of 2016, an increase of approximately $43.8 million over the comparable 2015 period, is primarily attributable to the rise in station operating income and an approximate $45.5 million gain on the acquisition of the GREATER MEDIA stations resulting from the net difference in the valuation of the assets and the purchase price paid. The Company also incurred approximately $5.2 million of pre-tax merger expenses in the fourth quarter, while fourth quarter interest expense increased approximately $2.8 million due related to the financing of the acquisition of the GREATER MEDIA stations transaction. As a result of these factors, net income per diluted share increased to $1.57 per diluted share in the three months ended December 31, 2016 compared to $0.14 per diluted share in the three months ended December 31, 2015.
Net income for the 2016 fourth quarter of $41.5 million compared to net income of $3.3 million a year ago, with the rise primarily attributable to the gain on acquisition and other growth in operating income described above. Net income included a $0.8 million and $0.6 million loss on modification of long-term debt in the three months ended DECEMBER 31, 2016 and DECEMBER 31, 2015, respectively.
Commenting on the financial results, CEO CAROLINE BEASLEY said, “The fourth quarter was both productive and transitional as our revenue, SOI and net income growth reflects two months of operations of the GREATER MEDIA stations, solid industry fundamentals, including the benefit of political advertising, strength across our platform of legacy Beasley stations and high levels of operating discipline.
“On a stand-alone basis, BEASLEY legacy station revenue increased approximately 7.6%. Immediately following the close of the GREATER MEDIA transaction we began the integration process including the implementation of sales and cost initiatives, the elimination of redundant overhead and other strategies to derive synergies and value from the expanded scale and diversity of our portfolio. Partially reflecting, the change of ownership and related transitional concerns, on a stand-alone basis, the GREATER MEDIA stations’ revenue decreased 6.1% or approximately $2.3 million in the fourth quarter with about 60% of the decline attributable to PHILADELPHIA. Overall, we are making continued progress with the integration of the new stations as we implement best practices, processes, and talent from both companies to optimize audience engagement and drive results. We believe we are on track to complete the integration and realize the synergies expected from this transaction within 12 to 18 months.
“In the fourth quarter, including the GREATER MEDIA stations, we again outperformed our markets in terms of revenue growth based on markets that report to MILLER KAPLAN. Our clusters rose approximately 2.0% compared with the overall markets, which increased 0.5%. Our outperformance was driven by our recently acquired DETROIT cluster, which generated an impressive year-over-year revenue increase of over 6.9%, compared with the DETROIT market, which was down 3.2%. Beyond DETROIT, our outperformance was broad-based and included our clusters in AUGUSTA, BOSTON, CHARLOTTE, FAYETTEVILLE, LAS VEGAS, GREENVILLE-NEW BERN-JACKSONVILLE and TAMPA-ST. PETERSBURG.
“The 80.3% year-over-year increase in fourth quarter station operating income to $16.2 million is at this time perhaps the best measure of the value of our expanded scale and our fundamental performance during the quarter. Notably, we believe that as we effect our operating disciplines we will achieve station operating income margins at levels we previously achieved, though reflecting the transitional nature of the fourth quarter, station operating income margins declined approximately 150 basis points compared to the same period a year ago when we operated just the BEASLEY legacy stations.
“With the financing of the GREATER MEDIA acquisition, our total outstanding debt as of DECEMBER 31, was approximately $268 million. With our focus on actively and conservatively managing our capital structure to provide the financial flexibility to support our near- and long-term growth, we made voluntary debt repayments of $2.3 million in the fourth quarter. In JANUARY, we closed on the previously announced divestiture of four stations in CHARLOTTE for $24 million and in FEBRUARY, we entered into an agreement to divest our GREENVILLE-NEW BERN cluster for $11 million. We applied the net proceeds from the CHARLOTTE transaction to debt reduction in the 2017 first quarter and intend to further reduce debt and leverage with the majority of the net proceeds from the GREENVILLE-NEW BERN transaction when it closes, which is expected in the second quarter of 2017.
“In addition, with our strong operating cash flows and commitment to return capital to shareholders, we declared our thirteenth consecutive quarterly cash dividend during the fourth quarter. Reflecting the issuance of shares in the GREATER MEDIA transaction, the annual capital allocated to dividend payments at this time of approximately $5.2 million relative to the total free cash flow that BEASLEY now generates, provides us with ample liquidity to reduce leverage and evaluate other initiatives to enhance long-term shareholder value.
“Our strategic priorities in 2017 are focused on three key areas. First, we plan to continue to deliver strong core programming and targeted localism across our station platform as these strategies support ratings and market leadership. Second, we remain focused on improving SOI margins across our station platform through efficiencies without impacting the listener experience. Third, our capital structure allows us to allocate free cash flow from operations to reducing leverage while returning capital to shareholders through dividends which, together, we believe supports our goal of enhancing shareholder value."