Beasley Broadcast Group Inc 10-K for FY2021
Beasley Broadcast Group Inc (BBGI)
10-K
2022-02-23
For: 2021-12-31
View Original
Added on
April 12, 2026
About this 10-K
Beasley Broadcast Group Inc filed this 10-K on February 23, 2022, covering the fiscal year ended December 31, 2021 (FY2021).
Headline figures
Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $241.43M
- up 17.1% from $206.14M a year earlier
- Net loss
- $1.54M
- compared with a net loss of $18.87M a year earlier
- Diluted EPS
- -$0.05
- compared with -$0.63 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31 , 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 000-29253
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices and Zip Code)
(239 ) 263-5000
(Registrant’s 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 |
Securities Registered pursuant to Section 12(g) of the Act:
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 Yes ☒ No ☐
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). 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 | ☐ | |||
| ☒ | 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule ☒
12b-2
of the Act). Yes ☐ No As of June 30, 2021, the aggregate market value of the Class A Common Stock held by 27,017,644 based on the number of shares outstanding as of such date and the closing price of $2.89 on NASDAQ’s National Market System on such date, the last business day of our most recently completed second fiscal quarter.
non-affiliates
of the registrant was $Class A Common Stock, $.001 par value, 12,712,457 Shares Outstanding as of February
16
, 2022 Class B Common Stock, $.001 par value, 16,662,743 Shares Outstanding as of February
16
, 2022 Documents Incorporated by Reference
Certain information in the registrant’s Definitive Proxy Statement on Schedule 14A for its 2022 Annual Meeting of Stockholders, is incorporated by reference in Part III of this report.
BEASLEY BROADCAST GROUP, INC.
ANNUAL REPORT ON FORM
10-K
FOR THE YEAR ENDED DECEMBER 31, 2021
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CERTAIN DEFINITIONS
Unless the context requires otherwise, all references in this report to the “Company,” “we,” “us,” “our” and similar terms refer to Beasley Broadcast Group, Inc. and its consolidated subsidiaries.
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PART I
ITEM 1. BUSINESS |
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. Beasley Broadcast Group, Inc., a Delaware corporation, was formed in 1999. Unless the context otherwise requires, all references in this report to “the Company,” “we,” “us” or “our” are to Beasley Broadcast Group, Inc. and its subsidiaries.
Strategy
We seek to secure and maintain a leadership position in the markets we serve by developing high quality local content, through our audio, digital and esports platforms, including events and experiences in the communities we serve and, in turn, offer advertisers access to a highly effective marketing platform to reach large and targeted local audiences. We operate our radio stations in clusters to capture a variety of demographic listener groups, which we believe enhances our radio stations’ appeal to a wide range of advertisers. Current FCC rules and regulations do not permit us to add more AM or FM radio stations to our Augusta, GA and Philadelphia, PA market clusters, or more FM radio stations to our Boston, MA, Charlotte, NC, Fayetteville, NC, Fort Myers-Naples, FL, and Tampa-Saint Petersburg, FL radio market clusters.
The primary source of revenue for our radio stations is the sale of advertising time to local, regional and national advertisers and national network advertisers who purchase commercials in varying lengths. A growing source of revenue is from station-related digital product suites, which allow for enhanced audience interaction and participation, and integrated digital advertising solutions. A station’s local sales staff generates the majority of its local and regional advertising sales through direct solicitations of local advertising agencies and businesses. We retain a national representation firm to sell to advertisers outside of our local markets.
We own the Houston Outlaws, an esports team that competes in the Overwatch League and an esports team that competes in the Rocket League. Ownership of the Houston Outlaws partners us with Blizzard Entertainment and its parent company, Activision Blizzard, a leading global developer and publisher of interactive entertainment content and services.
Competition
The radio broadcasting industry is highly competitive. Our radio stations compete for listeners and advertising revenue with other radio stations within their respective markets. In addition, our radio stations compete for audiences and advertising revenues with other media, including digital audio streaming, satellite radio, broadcast television, digital, satellite and cable television, newspapers and magazines, outdoor advertising, direct mail, wireless media alternatives, cellular phones and other forms of audio entertainment and advertisement. Competition for advertising revenues also comes directly from competitors such as Amazon, Apple, Facebook and Google.
The following are some of the factors that we believe are important to a radio station’s competitive position: (i) audience ratings; (ii) program content; (iii) management experience; (iv) sales experience; (v) audience characteristics; and (vi) the number and characteristics of other radio stations and other advertising media in the market area. We attempt to improve our competitive position with promotional campaigns aimed at the demographic groups targeted by our radio stations and by sales efforts designed to attract advertisers. We conduct extensive market research in an effort to enhance our audience ratings and, in certain circumstances, to identify opportunities to reformat radio stations to reach underserved demographic groups and increase advertising revenue.
Federal Regulation of Radio Broadcasting
The radio broadcasting industry is subject to extensive and changing federal regulations administered by the FCC. Among other things, the FCC:
| • | determines the particular frequencies, locations, operating powers and other technical parameters of radio stations; |
| • | issues, renews, revokes, conditions and modifies radio station licenses; |
| • | determines whether to approve changes in ownership or control of radio station licenses; |
| • | regulates equipment used by radio stations; and |
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| • | adopts and implements regulations and policies that directly or indirectly affect the ownership, operation, program content and employment practices of radio stations. |
The FCC has the power to impose penalties for violations of its rules that are implemented pursuant to the Communications Act of 1934, as amended (the “Communications Act”), including the imposition of monetary forfeitures, the issuance of short-term licenses, the imposition of conditions on the renewal of a license, and, in egregious cases,
non-renewal
of licenses and the revocation of licenses. The following is a brief summary of some provisions of the Communications Act and of certain specific FCC rules and policies. The summary is not a comprehensive listing of all of the regulations and policies affecting radio stations. For further information concerning the nature and extent of federal regulation of radio stations, you should refer to the Communications Act, FCC rules and FCC public notices, reports, orders and rulings.
FCC Licenses.
non-renewal
of one or more of our licenses could have a material adverse effect on our business. The FCC classifies each AM and FM radio station. An AM radio station operates on either a clear channel, regional channel or local channel. A clear channel is one on which AM radio stations are assigned to serve wide areas, particularly at night. The minimum and maximum facilities requirements for an FM radio station are determined by its class. Possible FM class designations depend upon the geographic zone in which the transmitter of the FM radio station is located. In general, commercial FM radio stations are classified as follows, in order of increasing power and antenna height: Class A, B1, C3, B, C2, C1, C0 or C.
The FCC also permits AM and FM radio stations to operate FM translators and FM stations to operate FM booster stations. These are low power secondary stations that retransmit the programming of a radio station to portions of the station’s service area that the primary signal does not reach because of distance or terrain barriers. Boosters operate on the same frequency as the station being retransmitted and translators operate on a different frequency.
An Order adopted by the FCC to revitalize the AM band implemented several rule changes impacting the technical operations of AM stations, including relaxation of the daytime community coverage requirements and elimination of the nighttime community coverage requirements for existing AM stations. In addition, to increase the number of FM translators that are available for AM stations, the FCC authorized two specialized FM translator filing windows for AM stations. AM stations that received an FM translator station license pursuant to one of the windows are required to rebroadcast the paired AM station on the modified FM translator for four years. Several of our AM Stations filed applications during these windows and received licenses for translators. Since translators are secondary to full power stations, it is possible that translators we operate could be displaced by full power stations. In August 2019, new rules setting out specific procedures to be used to resolve complaints of interference between FM translators and full power stations became effective. Under these rules, full power stations may only bring an interference complaint if they experience interference in an area that is inside the station’s 45 dBu contour.
Rules to allow AM stations to voluntarily convert to
all-digital
operations became effective in 2021. The FCC has adopted rules establishing a low power radio service. Low power FM (“LPFM”) stations operate in the existing FM radio band with a maximum operating power of 100 watts. FCC regulations regarding eligibility for and licensing of low power FM radio stations have expanded licensing opportunities for low power FM radio stations. Implementation of a low power radio service provides an additional audio programming service that could compete with our radio stations for listeners. In April 2020, the FCC adopted an Order revising technical rules applicable to LPFM stations to provide LPFM licensees with more flexibility, including allowing the use of FM boosters.
Rules and Regulations Regarding Indecency, Sponsorship ID and EAS Signals.
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complaint, a licensee may not have knowledge of a complaint unless and until the complaint results in the issuance of a formal FCC letter of inquiry or notice of apparent liability for forfeiture. The FCC has advised that it will continue to pursue enforcement actions in egregious cases while it conducts its review of its indecency policies generally. In March 2015, the FCC issued a Notice of Apparent Liability for the then maximum forfeiture amount of $325,000 against a television station for violation of its indecency policy. We cannot predict whether Congress will consider or adopt further legislation in this area.
FCC regulations require a radio station to include an
on-air
announcement that identifies the sponsor of all advertisements and other content broadcast by any radio station for which any money, service or other valuable consideration is received. Fines for such violations can be substantial as they are dependent on the number of times a particular advertisement is broadcast. In April 2021 the FCC adopted rules that would require radio stations to disclose when foreign governmental entities have paid a station, directly or indirectly, to broadcast programming under a lease time agreement. Radio stations will be required to take certain actions to determine if an entity leasing airtime from it is covered by the new rules. The National Association of Broadcasters has filed an appeal of the new rules and a request that they be stayed pending appeal. Unless the effectiveness of the new rules is stayed by the court considering the appeal, they will become effective upon approval by the Office of Management and Budget. Transfers or Assignment of License.
| • | compliance with the various rules limiting common ownership of media properties in a given market; |
| • | the character of the proposed licensee and those persons holding attributable interests in the licensee; and |
| • | compliance with the Communications Act’s limitations on alien ownership as well as compliance with other FCC regulations and policies. |
To obtain FCC consent to assign or transfer control of a broadcast license, appropriate applications must be filed with the FCC. Interested parties, including members of the public, have the opportunity to file objections against assignment and transfer of control applications.
Multiple Ownership Rules.
Local Radio Ownership Rule.
| • | in markets with 45 or more radio stations, ownership is limited to eight commercial radio stations, no more than five of which can be either AM or FM; |
| • | in markets with 30 to 44 radio stations, ownership is limited to seven commercial radio stations, no more than four of which can be either AM or FM; |
| • | in markets with 15 to 29 radio stations, ownership is limited to six commercial radio stations, no more than four of which can be either AM or FM; and |
| • | in markets with 14 or fewer radio stations, ownership is limited to five commercial radio stations or no more than 50% of the market’s total, whichever is lower, and no more than three of which can be either AM or FM. |
For stations located in a market in which the Nielsen Audio ratings service provides ratings, the definition of “radio market” is based on the radio market to which BIA Kelsey reports assign the affected radio stations. For stations that are not in a Nielsen Audio market, the market definition is based on technical service areas. The FCC’s rules also provide that parties which own groups of radio stations that comply with the previous (contour based) multiple ownership rules, but do not comply with the current limits, will be allowed to retain those groups on a “grandfathered” basis, but will not be allowed to transfer or assign those groups intact. Under these rules, our ability to transfer or assign our radio stations as a group to a single buyer in one of our current markets may be limited.
Ownership Attribution.
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includes: (i) equity and debt interests which combined exceed 33% of a licensee’s total assets, if the interest holder supplies more than 15% of the licensee’s total weekly programming, or has an attributable same-market media interest, whether television or radio; (ii) a 5% or greater direct or indirect voting stock interest, including certain interests held in trust, unless the holder is a qualified passive investor in which case the threshold is a 20% or greater voting stock interest; (iii) any equity interest in a limited liability company or a partnership, including a limited partnership, unless properly “insulated” from management activities; and (iv) any position as an officer or director of a licensee or its direct or indirect parent. In addition, the interests of minority shareholders in a corporation generally are not attributable if a single entity or individual controls 50% or more of that corporation’s voting stock.
Foreign Ownership Rules.
non-controlling
foreign investor identified in the petition to increase its equity and/or voting interest in a parent entity at a future time up to 49.9 percent. In October 2020, the FCC adopted rules to streamline the timeline for the required review of these requests by Executive Branch agencies and to require licensees to respond to a standardized set of national security and law enforcement questions. Our certificate of incorporation prohibits the ownership, voting and transfer of our capital stock in violation of the FCC restrictions, and prohibits the issuance of capital stock or the voting rights such capital stock represents to or for the account of aliens or corporations otherwise subject to domination or control by aliens in excess of the FCC limits. The certificate of incorporation authorizes our board of directors to enforce these prohibitions. Time Brokerage and Joint Sales Agreements.
The FCC’s rules provide that a radio station that brokers more than 15% of the weekly broadcast time on another radio station serving the same market or sells more than 15% of the other station’s advertising time per week will be considered to have an attributable ownership interest in the other radio station for purposes of the FCC’s local radio ownership limits.
FCC rules that had also prohibited a broadcast station from duplicating more than 25% of its programming on another radio station serving substantially the same area in the same broadcast service, that is
AM-AM
or FM-FM,
either through common ownership of the two radio stations or through a time brokerage agreement, were eliminated in October 2020. A Petition asking the FCC to reconsider the elimination of the rule for simulcasts of two commonly owned or operated FM stations serving substantially the same area is pending. Quadrennial Review of Ownership Rules
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changes to the local television ownership rule. In June 2021, the FCC’s Media Bureau issued an Order formally implementing the changes reflected in the November 2017 Reconsideration Order. In December 2018, the FCC released a Notice of Proposed Rulemaking to launch its 2018 quadrennial review of multiple ownership rules. Because of the rule changes implemented as a result of the Supreme Court decision, the Media Bureau asked parties to update the record in the currently pending 2018 quadrennial review.
Programming and Operations.
The FCC’s rules on equal employment opportunities prohibit employment discrimination by radio stations on the basis of race, religion, color, national origin, and gender; and require broadcasters to implement programs to promote equal employment opportunities at their radio stations. The rules generally require broadcasters to widely disseminate information about full-time job openings to all segments of the community to ensure that all qualified applicants have sufficient opportunity to apply for the job, to send job vacancy announcements to recruitment organizations and others in the community indicating an interest in all or some vacancies at the radio station, and to implement a number of specific longer-term recruitment outreach efforts, such as job fairs, internship programs, and interaction with educational and community groups from among a menu of approaches itemized by the FCC. In April 2017, the FCC issued a Declaratory Ruling permitting broadcast stations to use online job postings as their sole means of recruiting, as long as online postings reach all segments of a broadcaster’s community.
Content Licenses and Royalties.
To secure the rights to stream music content over the Internet, we also must obtain performance rights licenses and pay public performance royalties to copyright owners of sound recordings (typically, performing artists and record companies). Under Federal statutory licenses, we are permitted to stream any lawfully released sound recordings and to make ephemeral reproductions of these recordings on our computer servers without having to separately negotiate and obtain direct licenses with each individual copyright owner as long as we operate in compliance with the rules of those statutory licenses and pay the applicable royalty rates to Sound Exchange, the organization designated by the Copyright Royalty Board (“CRB”) to collect and distribute royalties under these statutory licenses. From time to time, Sound Exchange notifies us that certain calendar years are subject to routine audits of our royalty payments. The results of such audits could result in higher royalty payments for the subject years.
The rates at which we pay royalties to copyright owners are privately negotiated or set pursuant to a regulatory process. Increased royalty rates could significantly increase our expenses, which could adversely affect our business There is no guarantee that the licenses and associated royalty rates that currently are available to us will be available to us in the future. In addition, Congress may consider and adopt legislation that would require us to pay royalties to sound recording copyright owners for broadcasting those recordings on our terrestrial radio stations.
Proposed and Recent Changes.
| • | changes in the FCC’s multiple-ownership rules and attribution policies; |
| • | regulatory fees, spectrum use fees or other fees on FCC licenses; |
| • | changes in laws with respect to foreign ownership of broadcast licenses; |
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| • | revisions to the FCC’s rules relating to political broadcasting, including proposals to give free airtime to candidates and other changes regarding political advertising rates, sponsorship disclosure and political file recordkeeping obligations; |
| • | technical and frequency allocation matters; |
| • | proposals to restrict or prohibit the advertising of beer, wine and other alcoholic beverages on the radio; |
| • | proposals to restrict or prohibit the advertising of online casinos, online sports betting services and fantasy sports services; |
| • | proposals to require radio broadcasters to pay royalties to musicians and record labels for the performance of music played on the stations; |
| • | proposals to limit the tax deductibility of or impose sales tax on advertising expenses by advertisers; |
| • | proposals to regulate or prohibit payments to stations by independent record promoters, record labels and others for the inclusion of specific content in broadcast programming; and |
| • | proposals in legislation to strengthen protections against online infringement of intellectual property that would impose criminal penalties on content providers, including broadcasters, that fail to comply with legal requirements to file reports regarding internet streaming in a timely manner. |
The FCC has also adopted procedures for the auction of broadcast spectrum in circumstances where two or more parties have filed for new or major change applications that are mutually exclusive. Such procedures may limit our efforts to modify or expand the broadcast signals of our radio stations.
We cannot predict what other matters might be considered in the future by the FCC or Congress, nor can we judge in advance what impact, if any, the implementation of any of these proposals or changes might have on our business.
Federal Antitrust Laws.
For an acquisition meeting certain size thresholds, the Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires the parties to file Notification and Report Forms concerning antitrust issues with the FTC and the Department of Justice and to observe specified waiting period requirements before consummating the acquisition.
Regulation of the Internet
Our business is subject to privacy and data protection legislation and regulation. We obtain information from users of our technology platforms, including, without limitation, our websites, web pages, applications, social media pages, and mobile applications (“Platforms”), in accordance with the privacy policies and terms of use posted on the applicable Platform. We collect personally identifiable information directly from Platform users in several ways, including when a user registers to use our services, fills out a listener profile, posts comments, uses our social networking features, participates in polls and contests and signs up to receive email newsletters. We use and share this information for a variety of business purposes, including for analytics, attribution and to manage and execute digital advertising campaigns in a variety of ways.
We are subject to several laws and regulations relating to consumer protection, information security, data protection and privacy. Many of these laws and regulations are still evolving and could be interpreted in ways that could harm our business or limit the services we are able to offer. In the areas of information security and data protection, the laws in several states in the United States and most countries require companies to implement specific information security controls and legal protections to protect certain types of personally identifiable information. Likewise, most states in the United States and most countries have laws in place requiring companies to notify users if there is a security breach that compromises certain categories of their personally identifiable information. Any failure on our part to comply with these laws may subject us to significant liabilities. For example, the California Consumer Privacy Act (“CCPA”) establishes a new privacy framework that expands the definition of personal information, establishes new data privacy rights for consumers residing in the State of California, imposes special rules on the collection of consumer data from minors, creates new notice obligations and new limits on the sale of personal information, and creates a new and potentially severe statutory
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damages framework for (i) violations of the CCPA and (ii) businesses that fail to implement reasonable security procedures and practices to prevent data breaches. Our websites are also subject to regulation relating to acquisition of personal information from children under the age of 13, including the federal Child Online Privacy Protection Act (“COPPA”) and the federal Controlling the Assault of
Non-Solicited
Pornography and Marketing Act (“CAN-SPAM”). Additional
federal, state and, territorial laws and regulations may be adopted with respect to the Internet or other online services, covering such issues as user privacy, child safety, data security, advertising, pricing, content, copyrights and trademarks, access by persons with disabilities, distribution, taxation and characteristics and quality of products and services. HD Radio
The FCC selected
In-Band
On-Channel
technology as the exclusive technology for the introduction of terrestrial digital operations by AM and FM radio stations. The technology is also known as “HD Radio.” The advantages of digital audio broadcasting over traditional analog broadcasting technology include improved sound quality, the ability to broadcast additional channels, and the ability to offer a greater variety of auxiliary services. We currently utilize HD Radio digital technology on most of our stations. Seasonality
Seasonal revenue fluctuations are common in the radio broadcasting industry and are due primarily to fluctuations in advertising expenditures. Our net 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.
Human Capital Resources
As of February 16, 2022, we had a staff of 811 full-time employees and 349 part-time employees. We are a party to two separate collective bargaining agreements with the American Federation of Television and Radio Artists. Both agreements automatically renew for successive
one-year
one-year
Environmental
As the owner, lessee or operator of various real properties and facilities, we are subject to federal, state and local environmental laws and regulations. Historically, compliance with these laws and regulations has not had a material adverse effect on our business. There can be no assurance, however, that compliance with existing or new environmental laws and regulations will not require us to make significant expenditures in the future.
Available Information
Our internet address is www.bbgi.com. You may obtain through our website, free of charge, copies of our annual reports on Form
10-K,
quarterly reports on Form 10-Q,
current reports on Form 8-K,
and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These reports will be available as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission (the “SEC”). The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, www.sec.gov.
ITEM 1A. |
RISK FACTORS |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Our disclosure and analysis in this annual report on Form
10-K
concerning our operations, cash flows and financial position, including, in particular, the likelihood of our success in developing and expanding our business, includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates” and similar expressions are forward-looking statements. Although these statements are based upon assumptions we consider reasonable, they are subject to risks and uncertainties that are described more fully below. Accordingly, we can give no assurance that we will achieve the results anticipated or implied by our forward-looking statements. 9
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.
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. In 2020, we were impacted by deteriorating general economic conditions resulting from the COVID-19
pandemic that caused a downturn in the advertising industry. The decreased demand for advertising materially negatively impacted our results of operations, liquidity and financial condition. The extent to which the COVID-19
pandemic will continue to impact our business and financial results going forward will be dependent on future developments such as: the length and severity of the pandemic; any potential resurgence of the pandemic, including from the more transmissible variant strains and the emergence of any new variants of concern; future government regulations and actions in response to the pandemic; the timing, availability, effectiveness and adoption rates of vaccines and treatments; and the overall impact of the COVID-19
pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable. The radio broadcasting industry faces many unpredictable business risks and is sensitive to external economic forces that could have a material adverse effect on our advertising revenues and results of operations.
Our future operations are subject to many business risks, including those risks that specifically influence the radio broadcasting industry, which could have a material adverse effect on our business. These risks include, but are not limited to:
| • | shifts in population, demographics or audience preferences; |
| • | increased competition for advertising revenues with other radio stations, broadcast and cable television, newspapers and magazines, outdoor advertising, direct mail, internet radio, satellite radio, smart phones, tablets, and other wireless media, the internet, social media, smart speakers and other forms of advertising; |
| • | increased competition for advertising revenues from Amazon, Apple, Facebook and Google; and |
| • | changes in government regulations and policies and actions of federal regulatory bodies, including the FCC, Internal Revenue Service, United States Department of Justice, and the Federal Trade Commission. |
The main source of our revenue is the sale of advertising. Our ability to sell advertising can be affected by, among other things:
| • | economic conditions in the areas where our stations are located and in the nation as a whole; |
| • | the popularity of the programming offered by our stations; |
| • | changes in population, demographics or audience preferences in the areas where our stations are located; |
| • | local and national advertising price fluctuations, which can be affected by the availability of programming, the popularity of programming, and the relative supply of and demand for commercial advertising; |
| • | our competitors’ activities, including increased competition from other advertising-based mediums and new technologies; |
| • | decisions by advertisers to withdraw or delay planned advertising expenditures for any reason; and |
| • | other factors beyond our control. |
In addition, we believe that, for most businesses, advertising is a discretionary business expense, meaning that spending on advertising tends to decline disproportionately during an economic recession or downturn, as compared to other types of business spending.
Further, our operations and revenues also tend to be seasonal in nature, with generally lower revenue generated in the first quarter of the year and generally higher revenue generated in the second and fourth quarters of the year. The seasonality of our business reflects the adult orientation of our formats and relationship between advertising purchases on these formats and the retail cycle. This seasonality causes, and will likely continue to cause, a variation in our quarterly operating results. Such variations could have a material effect on the timing of our cash flows. 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.
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Additionally, unfavorable changes in economic conditions as well as declining consumer confidence, recession and other factors could lead to decreased demand for advertising and negatively impact our advertising revenues and our results of operations. We cannot predict with accuracy the timing or duration of any economic downturn generally, or in the markets in which our advertisers operate. If the economic environment does worsen, there can be no assurance that we will not experience a decline in revenues, which may negatively impact our financial condition and results of operations.
Our radio stations may not be able to compete effectively in their respective markets for advertising revenues, which could adversely affect our revenue and cash flows.
We operate in a highly competitive business. A decline in our audience share or advertising rates in a particular market may cause a decline in the revenue and cash flows of our stations located in that market. Our radio stations compete for audiences and advertising revenues within their respective markets directly with other radio stations, as well as with other media platforms and companies selling digital advertising. These other media platforms include broadcast and cable television, streaming services, newspapers and magazines, outdoor advertising, direct mail, internet radio, satellite radio, smart phones, tablets, and other wireless media, the internet, social media, smart speakers, podcasts and other forms of advertising. Our radio stations also compete for audiences and advertising revenues within their respective markets directly with Amazon, Apple, Facebook and Google.
over-the-top
Our radio stations could suffer a reduction in audience ratings or advertising revenue and could incur increased promotional and other expenses if:
| • | another radio station in a market was to convert its programming to a format similar to, and thereby compete more directly with, one of our radio stations; |
| • | a new radio station was to adopt a comparable format or if an existing competitor were to improve its audience share; or |
| • | a current or new advertising alternative increased its share of local or national advertising revenue. |
Other radio broadcasting companies may enter into markets in which we operate or may operate in the future. These companies may be larger and have more financial resources than we have. As a result, our radio stations may not be able to maintain or increase their current audience ratings and advertising revenues.
Further, advertising revenue may vary from even- to basis. In addition, political advertising revenue is dependent on the level of political advertising expenditures and competitiveness of particular races within each local market.
odd-numbered
years based on the volatility and unpredictability of political advertising revenue. Political advertising revenue from elections, which is generally greater in even-numbered years when deferral elections occur, has the potential to create fluctuations in our operating results on a year-to-year
If we are unable to develop compelling and differentiated digital content, products and services, our advertising revenues could be adversely affected.
In order to attract consumers and generate increased activity on our digital properties, we believe that we must offer compelling and differentiated content, products and services. However, acquiring, developing, and offering such content, products and services may require significant costs and time to develop, while consumer tastes may be difficult to predict and are subject to rapid change. If we are unable to provide content, products and services that are sufficiently attractive to our digital users, we may not be able to generate the increases in activity necessary to generate increased advertising revenues. In addition, although we have access to certain content provided by our other businesses, we may be required to make substantial payments to license such content. Many of our content arrangements with third parties are
non-exclusive,
so competitors may be able to offer similar or identical content. If we are not able to acquire or develop compelling content and do so at reasonable prices, or if other companies offer content that is similar to that provided by our digital department, we may not be able to attract and increase the engagement of digital consumers on our digital properties. Continued growth in our digital business also depends on our ability to continue offering a competitive and distinctive range of advertising products and services for advertisers and publishers and our ability to maintain or increase prices for our advertising products and services. Continuing to develop and improve these products and services requires significant time and costs. If we cannot continue to develop and improve our advertising products and services, or if prices for our advertising products and services decrease, our digital advertising revenues could be adversely affected.
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Our success is dependent upon audience acceptance of our content, particularly our radio programs, which is difficult to predict.
Media and radio content production and distribution are inherently risky businesses because the revenues derived from the production and distribution of media content or a radio program, and the licensing of rights to the intellectual property associated with the content or program, depend primarily upon their acceptance and perceptions by the public, which are difficult to predict. The commercial success of content or a program also depends upon the quality and acceptance of other competing programs released into the marketplace at or near the same time, the availability of alternative forms of entertainment and leisure time activities, general economic conditions, and other tangible and intangible factors, all of which are difficult to predict.
Ratings for broadcast stations and the amount of traffic on a particular website are also factors that are weighed when advertisers determine which outlets to use and in determining the advertising rates that the outlet receives. Poor ratings or traffic levels can lead to a reduction in pricing and advertising revenues. For example, if there is an event causing a change of programming at one of our stations, there could be no assurance that any replacement programming would generate the same level of ratings, revenues, or profitability as the previous programming. In addition, changes in ratings methodology and technology could adversely impact our ratings and negatively affect our advertising revenues.
Finally, the costs of developing and distributing content and programming most popular with the public may change significantly if new performance royalties (such as those that have been proposed by members of Congress from time to time) are imposed upon radio broadcasters or internet operators, and such changes could have a material impact upon our business.
We may not remain competitive if we do not respond to changes in technology, standards and services that affect our industry.
The radio broadcasting industry is subject to technological change, evolving industry standards and the emergence of alternate media platforms, technologies and services. We may not have the resources to acquire and deploy other technologies or to introduce new services that could compete with these other technologies. Competition arising from other technologies or regulatory changes may have an adverse effect on the radio broadcasting industry or on our Company. Various other audio technologies and services that have been developed and introduced include:
| • | home and personal digital audio devices (e.g., smart phones, tablets, smart speakers); |
| • | satellite delivered digital audio radio services that offer numerous programming channels; |
| • | internet-based audio music services; |
| • | audio programming by internet content providers, internet radio stations, cable systems, direct broadcast satellite systems, personal communications services and other digital audio broadcast formats; |
| • | HD Radio, which provides multi-channel, multi-format digital radio services in the same bandwidth currently occupied by traditional AM and FM radio services; |
| • | low power FM radio stations, which are non-commercial FM radio broadcast outlets that serve small, localized areas; |
| • | portable digital devices and systems that permit users to listen to programming on a time-delayed basis and to fast-forward through programming and/or advertisements; and |
| • | vehicles equipped with internet connectivity that increase the number of audio and video platforms available in vehicles (e.g., ATSC 3.0 technology). |
These and other new technologies have the potential to change the means by which advertisers can reach target audiences most effectively. We cannot predict the effect, if any, that competition arising from other technologies or regulatory change may have on the radio broadcasting industry or on our financial condition and results of operations.
Such new media and technology has resulted in increased fragmentation in the advertising market, and we cannot predict the effect, if any, that additional competition arising from new technologies may have across our business or our financial condition and results of operations, which may be adversely affected if we are not able to adapt successfully to these new media technologies or distribution platforms. The continuing growth and evolution of channels and platforms has increased our challenges in differentiating ourselves from other media platforms. We continually seek to develop and enhance our content offerings and distribution platforms/methodologies. Failure to effectively execute these efforts, actions by our competitors, or other failures to deliver content effectively could hurt our ability to differentiate ourselves from our competitors and, as a result, have adverse effects across our business.
We are dependent on federally issued licenses to operate our radio stations and are subject to extensive federal regulation.
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The radio broadcasting industry is subject to extensive regulation by the FCC under the Communications Act. We are required to obtain licenses from the FCC to operate our radio stations. Our business depends upon maintaining our broadcast licenses, which are issued by the FCC for a term of eight years and are renewable. Although the vast majority of FCC radio station licenses are routinely renewed, we cannot assure you that the FCC will approve our future renewal applications or that the renewals will be for full eight-year terms or will not include conditions or qualifications that could adversely affect our operations. The
non-renewal,
or renewal with substantial conditions or modifications, of one or more of our licenses could have a material adverse effect on us. A renewal cycle for radio station licenses began in June 2019 and will conclude in April 2022. We must comply with extensive FCC regulations and policies regarding the ownership and operation of our radio stations. FCC regulations limit the number of radio stations that a licensee can own in a market, which could restrict our ability to consummate any future transactions, and in certain circumstances, could require us to divest one or more radio stations. Online music services such as Amazon Music Unlimited, Apple Music, Pandora and Spotify are not regulated by the FCC; therefore, they are not subject to any ownership restrictions or FCC regulations governing their operations. Our ability to compete with online music services may be impeded because of the extensive FCC regulations to which we are subject. The FCC also requires radio stations to comply with certain technical requirements to limit interference between two or more radio stations. Possible changes in interference protections, creation of additional classes of FM stations, spectrum allocations and other technical rules may negatively affect the operation of our stations. If the FCC relaxes certain technical requirements, it could impair the signals transmitted by our radio stations and could have a material adverse effect on us. In addition, the FCC has recently increased its enforcement of certain regulations, including regulations requiring a radio station to include an
on-air
announcement which identifies the sponsor of all advertisements and other content broadcast by any radio station for which any money, service or other valuable consideration is received, requiring all radio stations to maintain online public inspection files hosted on an FCC database that is easily accessible by members of the public and the FCC, and prohibiting the transmission of EAS codes or simulations thereof in the absence of an actual emergency or authorized test. Moreover, these FCC regulations and others may change over time, and we cannot assure you that those changes would not have a material adverse effect on us. The FCC regulates FM translator stations as a secondary service, and in the event that an FM translator station causes actual interference to the signal of a radio or television station, FCC rules require the FM translator station to eliminate the interference and to suspend operations if the interference cannot be eliminated. If the FCC requires any FM translator station that we operate to modify its facilities to eliminate interference caused to another station or to cease broadcasting, it could materially impair the operations of the station that the FM translator rebroadcasts which could have a material adverse effect on us.
Vigorous enforcement of the FCC’s indecency rules could have a material adverse effect on our business.
The FCC’s rules prohibit the broadcast of obscene material at any time and indecent material between the hours of 6 a.m. and 10 p.m. The risk of violating the prohibition on the broadcast of indecent material is increased by the vagueness of the FCC’s definition of indecent material, coupled with the spontaneity of live programming. The FCC has expanded the breadth of indecency regulation to include material that could be considered “blasphemy,” “personally reviling epithets,” “profanity” and vulgar or coarse words amounting to a nuisance. As a result, in the event that we broadcast material falling within the expanded breadth of the FCC’s regulation, we could be subject to license revocation, renewal or qualifications proceedings, which would put the licenses that we depend on for our operations in jeopardy. In 2007, the monetary penalties for broadcasting indecent programming increased substantially. The current maximum permitted fines are $445,445 per incident and $4,111,796 for any continuing violation arising from a single act or failure to act. In a decision issued in June 2012, the Supreme Court did not find that the FCC’s indecency standards were inconsistent with the First Amendment, which means the FCC may continue to enforce the standards. The FCC has advised that it will continue to pursue enforcement actions in egregious cases while it conducts its review of its indecency policy generally, and in March 2015, the FCC issued a Notice of Apparent Liability for the then maximum forfeiture amount of $325,000 against a television station. Because the FCC may investigate indecency complaints prior to notifying a licensee of the existence of a complaint, a licensee may not have knowledge of a complaint unless and until the complaint results in the issuance of a formal FCC letter of inquiry or notice of apparent liability for forfeiture.
We may in the future become subject to additional inquiries or proceedings related to our radio stations’ broadcast of indecent or obscene material. To the extent that these pending inquiries or other proceedings result in the imposition of fines, revocation of any of our radio station licenses or denials of license renewal applications, our business and results of operations could be materially adversely affected.
The royalties we pay to copyright owners could increase significantly, and proposed legislation could require radio broadcasters to pay royalties to record labels and recording artists.
We pay royalties to copyright owners of musical compositions (typically song composers and publishers) whenever we broadcast or stream musical compositions. These royalties are paid through ASCAP, BMI, SESAC, GMR, and Sound Exchange. The rates at which we pay royalties to copyright owners are privately negotiated or set pursuant to a regulatory process. Increased royalty rates could significantly increase our expenses, which could adversely affect our business. There is no guarantee that the licenses and
13
associated royalty rates that currently are available to us will be available to us in the future. In addition, legislation has been previously introduced in Congress that would require radio broadcasters to pay a royalty to record labels and performing artists for use of their recorded songs. The proposed legislation would add an additional layer of royalties to be paid directly to the record labels and artists. It is currently unknown what proposed legislation, if any, will become law, whether industry groups will enter into an agreement with respect to fees, and what significance this royalty would have on our results from operations, cash flows or financial position.
We depend on selected market clusters of radio stations for a material portion of our net revenue.
The radio stations located in Boston, MA, Detroit, MI and Philadelphia, PA contributed 59.2% of our net revenue in 2021. Accordingly, we have greater exposure to adverse events or conditions in any of these markets, such as changes in the economy, shifts in population or demographics, or changes in audience tastes, which could adversely impact our results from operations, cash flows or financial position.
We are exposed to credit risk on our accounts receivable. This risk is heightened during periods of uncertain economic conditions.
Our outstanding accounts receivable are not covered by collateral or credit insurance. Credit risk on our receivables is heightened during periods of uncertain economic conditions, and there can be no assurance that our procedures to monitor and limit exposure to credit risk will be effective and enable us to avoid losses, which could have a material adverse effect on our results from operations, cash flows or financial position. We also maintain reserves to cover the uncollectibility of a portion of our accounts receivable however the estimate which is based on current information may differ from actual results.
A future impairment of our FCC licenses and/or goodwill could adversely affect our operating results.
As of December 31, 2021, our FCC licenses and goodwill represented 70% of our total assets. We are required to test our FCC licenses and goodwill for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that our FCC licenses and/or goodwill might be impaired, and we have, from time to time, recorded impairment charges as a result of such tests. We assess qualitative factors to determine whether it is more likely than not that our FCC licenses and/or goodwill might be impaired. If we determine it is more likely than not that our FCC licenses and/or goodwill are impaired, then we are required to perform a quantitative impairment test. 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. For further discussion, see “Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates” of this report.
We have substantial debt that could have important consequences to you
.
We have debt that is substantial in relation to our equity. As of December 31, 2021, we had long-term debt of $300.0 million and equity of $263.1 million. Our long-term debt is substantial in amount and could have an impact on you. For example, it could:
| • | require us to dedicate a substantial portion of our cash flows from operations to debt service, thereby reducing the availability of cash flows for other purposes, including ongoing capital expenditures and future acquisitions; |
| • | impair our ability to obtain additional financing for working capital, capital expenditures, acquisitions and general corporate or other purposes; |
| • | limit our ability to compete, expand and make capital improvements; |
| • | increase our vulnerability to economic downturns, limit our ability to withstand competitive pressures and reduce our flexibility in responding to changing business and economic conditions; and |
| • | limit or prohibit our ability to pay dividends and make other distributions. |
Any additional borrowings or note offerings would further increase the amount of our debt and the associated risks. In addition, there can be no assurances that additional financing will be available or on terms that will be acceptable to us, or at all.
Our ability to pay regular dividends on our common stock is subject to the discretion of our Board of Directors and may be limited by our structure, statutory restrictions and restrictions imposed by the Indenture governing our Notes as well as any future agreements.
14
Due to the impact of 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 Company’s stockholders. While we intend to pay a regular quarterly cash dividend, future payments, if any, will be at the discretion of our Board of Directors. Future quarterly dividend payments can also be changed or discontinued at any time and will be subject to limitations under the terms of the Indenture governing our Notes, as well as any future agreements. The payment and timing of any future quarterly dividends will also depend upon, among other things, our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors deemed relevant by our Board of Directors. Our corporate offices and several of our radio stations are located in areas that could be affected by hurricanes.
Florida is susceptible to hurricanes, and we have our corporate offices located in Naples, and radio stations located in Boca Raton, Fort Myers, and Tampa. These radio stations contributed 13.0% of our net revenue in 2021. Although the 2021 hurricane season did not have a material impact on our operations, our corporate offices and our radio stations located in Florida and other radio stations located along the east coast of the United States have been materially affected by hurricanes in the past and may be materially affected in the future, which could have an adverse impact on our business, financial condition and results of operations. We carry property damage insurance on all of our properties and business interruption insurance on some of our properties, but there can be no assurance that such insurance would be adequate to cover all of our hurricane-related losses.
The failure or destruction of the internet, satellite systems and transmitter facilities that we depend upon to distribute our programming could adversely affect our operating results.
We use studios, satellite systems, transmitter facilities and the internet to originate and/or distribute our station programs and commercials. We rely on third-party contracts and services to operate our origination and distribution facilities. These third-party contracts and services include, but are not limited to, electrical power, satellite transponders, uplinks and downlinks and telecom circuits. Distribution may be disrupted due to one or more third parties losing their ability to provide particular services to us, which could adversely affect our distribution capabilities. A disruption can be caused as a result of any number of events, such as local disasters (accidental or environmental), various acts of terrorism, power outages, cyber-attacks, major telecom connectivity failures or satellite failures. Our ability to distribute programming to station audiences may be disrupted for an undetermined period of time until alternate facilities are engaged and put online. Furthermore, until third-party services resume, the inability to originate or distribute programming could have a material adverse effect on our business and results of operations.
Disruptions or security breaches of our information technology infrastructure could interfere with our operations, compromise client information and expose us to liability, possibly causing our business and reputation to suffer.
Any internal technology error or failure impacting systems hosted internally or externally, or any large-scale external interruption in technology infrastructure we depend on, such as power, telecommunications or the internet, may disrupt our technology network. Any individual, sustained or repeated failure of technology could impact our customer service and result in increased costs or reduced revenues. Our technology systems and related data also may be vulnerable to a variety of sources of interruption due to events beyond our control, including natural disasters, terrorist attacks, telecommunications failures, cyber-attacks, computer viruses, hackers and other security issues. Our technology security initiatives, disaster recovery plans and other measures may not be adequate or implemented properly to prevent a business disruption and its adverse financial consequences to our reputation.
In addition, as a part of our ordinary business operations, we may collect and store sensitive data, including the personal information of our clients, listeners and employees. The secure operation of the networks and systems on which this type of information is stored, processed and maintained is critical to our business operations and strategy. Any compromise of our technology systems resulting from attacks by hackers or breaches due to employee error or malfeasance could result in the loss, disclosure, misappropriation of or access to clients’, listeners’, employees’ or business partners’ information. Any such loss, disclosure, misappropriation or access could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disruption of our operations and damage to our reputation, any or all of which could adversely affect our business.
Our business is dependent upon the proper functioning of our internal business processes and information systems and modification or interruption of such systems may disrupt our business, processes and internal controls.
We increasingly rely on technology to operate our business, including our own information technology systems and the information technology systems and technology of our third-party providers. The proper functioning of our internal business processes and information systems is critical to the efficient operation and management of our business. If these information technology systems fail or are interrupted, our operations may be adversely affected and operating results could be harmed.
15
Our information technology systems, and those of third-party providers, may also be vulnerable to damage or disruption caused by circumstances beyond our control. These include catastrophic events, power anomalies or outages and natural disasters, and, increasingly, technological risks associated with computer system or network failures, viruses or malware, physical or electronic intrusions, and unauthorized access associated with cyber-attacks. We and certain of our third-party vendors have been the target of cyber-attacks, including phishing attacks, ransomware attacks, and attempted denial of service attacks, and future attacks are likely to occur. While no cyber-attack has had a material impact thus far, if successful, these types of attacks could have a material adverse effect on our financial condition, results of operations and cash flows, due to, among other things, the loss of customer data, interruptions to our operations, and damage to our reputation.
In addition, our business processes and information systems need to be sufficiently scalable to support the future growth of our business and may require modifications or upgrades that expose us to similar risks of damage or disruption. Any material disruption, malfunction or similar challenges with our business processes or information systems, or disruptions or challenges relating to the transition to new processes, systems or providers, could have a material adverse effect on our financial condition, results of operations and cash flows.
We may lose key executives and other key employees, including
on-air
talent, to competing radio stations or other types of media competitors. Our business depends upon the continued efforts, abilities and expertise of our executive officers and other key employees. The unique combination of skills and experience possessed by our key executives would be difficult to replace, and the loss of a key executive could impair our ability to execute our operating and acquisition strategies.
In addition, we compete for creative and performing
on-air
talent with other radio stations and radio station groups, radio networks, and other providers of syndicated content and other media such as broadcast television, cable television, satellite television, the internet, podcast producers and satellite radio. Our ability to attract and retain key personnel is an important aspect of our competitiveness. Our employees and other on-air
talent are subject to change and may be lost to competitors or for other reasons. Any adverse changes in particular programs, formats or on-air
talent could have a material adverse effect on our ratings and our ability to attract advertisers, which would negatively impact our business, financial condition or results of operations. Our success depends on our ability to identify, consummate and integrate acquired radio stations.
As part of our strategy, we have pursued, and may continue to pursue, acquisitions of additional radio stations. Radio broadcasting is a rapidly consolidating industry with many companies seeking to consummate acquisitions and increase their market share. In this environment, we compete with many other buyers for the acquisition of radio stations. Some of those competitors may be able to outbid us for acquisitions because they have greater financial resources. FCC ownership rules limit the number of stations that an entity can own in specific local markets, and in certain markets, we do not have room to acquire additional stations. As a result, our ability to identify and consummate future acquisitions is uncertain.
In addition, our consummation of all future acquisitions is subject to various conditions, including FCC and other regulatory approvals. The FCC must approve any transfer of control or assignment of broadcast licenses. In addition, acquisitions may encounter intense scrutiny under federal and state antitrust laws. Any delays, injunctions, conditions or modifications by any government agencies could have a negative effect on us and result in the abandonment of all or part of attractive acquisition opportunities.
Our success also depends on our ability to integrate acquired businesses and achieve fully the strategic and financial objectives related thereto. The process of integrating acquired radio stations may involve numerous risks, including:
| • | integrating two unique business cultures, which may prove to be incompatible; |
| • | consolidating corporate and administrative infrastructures and eliminating duplicative operations; |
| • | the diversion of management’s attention from ongoing business concerns; |
| • | unanticipated issues in integrating information technology, communications and other systems; |
| • | costs or inefficiencies associated with integrating the operations of the combined company; and |
| • | unforeseen expenses, liabilities or delays. |
We cannot predict whether we will be successful in identifying future acquisition opportunities or what the consequences will be of any acquisitions. The failure to identify, consummate and integrate acquired radio stations could have a material adverse effect on our financial condition, results of operations and cash flows.
16
The Beasley family controls Beasley Broadcast Group, Inc. and members of the Beasley family own a substantial equity interest in Beasley Broadcast Group, Inc. Their interests may conflict with yours.
The Beasley family, which includes Caroline Beasley, our Chief Executive Officer and a member of our board of directors, Bruce Beasley, our President and a member of our board of directors, and Brian Beasley, our Chief Operating Officer and a member of our board of directors, is generally able to control the vote on all matters submitted to a vote of stockholders. Without the approval of the Beasley family, we will be unable to consummate transactions involving an actual or potential change in control, including transactions in which you might otherwise receive a premium for your shares over then current market prices. Shares of Class B and Class A common stock that members of the Beasley family beneficially own represent 94.3% of the total voting power of all classes of our common stock. The Beasley family will be able to direct our management and policies, except with respect to those matters requiring a class vote under the provisions of our amended certificate of incorporation, fourth amended and restated bylaws or applicable law.
Historically, we have entered into certain transactions with members of the Beasley family and affiliated entities that may conflict with the interests of our stockholders now or in the future. See “Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operation – Related Party Transactions” and Note 17 to the accompanying financial statements.
Future sales by the Beasley family of our Class A common stock could adversely affect its market price.
Members of the Beasley family beneficially own the majority of all outstanding shares of Class B common stock, which is convertible to Class A common stock on a basis. The market for our Class A common stock could change substantially if members of the Beasley family convert their shares of Class B common stock to shares of Class A common stock and then sell large amounts of shares of Class A common stock in the public market.
one-for-one
These sales, or the possibility that these sales may occur, could make it more difficult for us to raise capital by selling equity or equity-related securities in the future.
The difficulties associated with any attempt to gain control of our Company may adversely affect the price of our Class A common stock.
Due to their large beneficial ownership of our Class B and Class A common stock, members of the Beasley family control the decision whether any change of control of the Company will occur. Moreover, some provisions of our amended certificate of incorporation, fourth amended and restated bylaws and Delaware law could make it more difficult for a third party to acquire control of us, even if a change of control could be beneficial to you. In addition, the Communications Act and FCC rules and policies limit the number of stations that one individual or entity can own, directly or by attribution, in a market. The FCC’s media ownership rules remain in flux and subject to further agency and court proceedings. The FCC is required to review its media ownership rules quadrennially and to modify, repeal or retain any rules as it determines to be in the public interest. FCC approval for transfers of control of FCC licensees and assignments of FCC licenses are also required. Because of the limitations and restrictions imposed on us by these provisions and regulations, the trading price of our Class A common stock may be adversely affected.
There may not be an active market for our Class A common stock, making it difficult for you to sell your stock.
Our stock may not be actively traded in the future. An illiquid market for our stock may result in price volatility and poor execution of buy and sell orders for investors. Our stock price and trading volume have fluctuated widely for a number of reasons, including some reasons that may be unrelated to our business or results of operations. This market volatility could depress the price of our Class A common stock without regard to our operating performance. In addition, our operating results may be below expectations of public market analysts and investors. If this were to occur, the market price of our Class A common stock could decrease, perhaps significantly.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
As of February 16, 2022, we own or lease property in the following locations:
| Location |
Description |
Owned/Leased | ||
| Atlanta, GA | Office space for radio stations | Third-party lease | ||
| Augusta, GA | Office space for radio stations | Owned | ||
| Land for office space | Related party lease | |||
| Boca Raton, FL | Office space for radio station | Third-party lease |
17
| Boston, MA | Office space for radio stations | Third-party lease | ||
| Camden, NJ | Office space for radio station | Owned | ||
| Land for office space | Related party lease | |||
| Charlotte, NC | Office space for radio stations | Third-party lease | ||
| Detroit, MI | Office space for radio stations | Owned | ||
| Estero, FL | Office space for radio stations | Related party lease | ||
| Fayetteville, NC | Office space for radio stations | Related party lease | ||
| Las Vegas, NV | Office space for radio stations | Related party lease | ||
| Middlesex, NJ | Office space for radio stations | Owned | ||
| Monmouth, NJ | Office space for radio stations | Owned | ||
| Morristown, NJ | Office space for radio stations | Owned | ||
| Philadelphia, PA | Office space for radio stations | Third-party lease | ||
| Tampa, FL | Office space for radio stations | Third-party lease | ||
| Wilmington, DE | Office space for radio station | Third party lease |
The land for office space in Augusta, GA is leased from GGB Augusta, LLC, which is held by a trust for the benefit of Caroline Beasley, our Chief Executive Officer and a member of our board of directors, Bruce Beasley, our President and a member of our board of directors, Brian Beasley, our Chief Operating Officer and a member of our board of directors, and other members of the Beasley family.
The land for office space in Camden, NJ and office space in Fayetteville, NC are leased from Beasley Family Towers, LLC, which is partially held by a trust for the benefit of Caroline Beasley, Bruce G. Beasley, Brian E. Beasley and other members of the Beasley family and partially owned directly by Caroline Beasley, Bruce G. Beasley, Brian E. Beasley and other members of the Beasley family.
The office space in Estero, FL is leased from Beasley Family Properties, LLC, which is held by a trust for the benefit of Caroline Beasley, Bruce G. Beasley, Brian E. Beasley and other members of the Beasley family.
The office space in Las Vegas, NV is leased from GGB Las Vegas, LLC, which is controlled by members of the Beasley family.
In addition, 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 the Beasley family.
No one property is material to us. We believe that our properties are generally in good condition and suitable for our operations. However, we continually look for opportunities to upgrade our properties and may do so in the future.
ITEM 3. LEGAL PROCEEDINGS
We currently and from time to time are involved in ordinary routine litigation incidental to the conduct of our business including indecency claims and related proceedings at the FCC, but we are not a party to any lawsuit or other proceedings that, in the opinion of management, is likely to have a material adverse effect on our financial condition or results of operations.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
18
PART II
ITEM 5. MARKET FOR REGISTRANT’S 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 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.
one-for-one
Holders
As of February 16, 2022, there were approximately 136 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 Company’s 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, 2021.
| 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, 2021 |
— | — | — | $ | — | |||||||||||
| November 1 – 30, 2021 |
1,250 | $ 2.38 | — | — | ||||||||||||
| December 1 – 31, 2021 |
9,460 | 1.94 | — | — | ||||||||||||
| |
|
|||||||||||||||
| Total |
10,710 | |||||||||||||||
| |
|
|||||||||||||||
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, 2021 were purchased to fund withholding taxes in connection with the vesting of restricted stock units and shares of restricted stock. ITEM 7. MANAGEMENT’S 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. Unless the context otherwise requires, all references in this report to “the Company,” “we,” “us” or “our” are to Beasley Broadcast Group, Inc. and its subsidiaries.
19
COVID-19
Pandemic 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. In 2020, we were impacted by deteriorating general economic conditions resulting from the COVID-19
pandemic that caused a downturn in the advertising industry. The decreased demand for advertising materially negatively impacted our results of operations, liquidity and financial condition. In 2021, we benefited from a general economic recovery from the COVID-19
pandemic however the continuing impact of subsequent COVID-19
variants may result in general economic conditions deteriorating again in the future. 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, to a lesser extent, during 2021, and we expect expense reductions to continue into 2022. 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 our stockholders.
The extent to which the
COVID-19
pandemic will continue to impact our business and financial results going forward will be dependent on future developments which are uncertain and unpredictable. Accordingly, it is reasonably possible that these uncertainties could materially impact the Company’s significant accounting estimates related to, but not limited to, allowance for doubtful accounts and impairment of Federal Communications Commission (“FCC”) licenses and goodwill. As a result, many of the Company’s estimates and assumptions require increased judgment and carry a higher degree of variability and volatility. The Company’s estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in its consolidated financial statements. 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 Company’s management and are subject to known and unknown risks and uncertainties. Forward-looking statements, which address the Company’s 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 Company’s results of operations, liquidity and financial condition, and the increased risk of impairments of the Company’s FCC licenses and/or goodwill; |
| • | external economic forces that could have a material adverse impact on the Company’s advertising revenues and results of operations; |
| • | the ability of the Company’s 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 Company’s 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 Company’s dependence on federally issued licenses subject to extensive federal regulation; |
20
| • | actions by the FCC or new legislation affecting the radio industry; |
| • | increases to royalties the Company pays to copyright owners or the adoption of legislation requiring royalties to be paid to record labels and recording artists; |
| • | the Company’s dependence on selected market clusters of radio stations for a material portion of its net revenue; |
| • | credit risk on the Company’s accounts receivable; |
| • | the risk that the Company’s FCC licenses and/or goodwill could become impaired; |
| • | the Company’s substantial debt levels and the potential effect of restrictive debt covenants on the Company’s operational flexibility and ability to pay dividends; |
| • | the potential effects of hurricanes on the Company’s 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 Company’s information technology infrastructure; |
| • | the loss of key personnel; |
| • | the Company’s ability to integrate acquired businesses and achieve fully the strategic and financial objectives related thereto and their impact on the Company’s 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 Company’s filings with the SEC. |
Although we believe 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 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 station’s 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. |
21
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 typically are 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.
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 involves a significant level of estimation uncertainty; and |
| • | changes in the estimate or different estimates that could have been selected have had or are reasonably likely to have a material impact on our results of operations or financial condition. |
Accounts Receivable.
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.
FCC Licenses.
22
The key assumptions used in the discounted cash flow analyses are as follows:
| Revenue growth rates |
0.3% - 13.0% | |
| Market revenue shares at maturity |
0.6% - 44.0% | |
| Operating income margins at maturity |
19.2% - 32.6% | |
| Discount rate |
8.5% |
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 | 65.2 | % | ||||
| Augusta, GA |
6,113,075 | 98.9 | ||||||
| Boston, MA |
137,856,160 | 17.6 | ||||||
| Charlotte, NC |
56,418,151 | 31.8 | ||||||
| Detroit, MI |
29,978,201 | 27.1 | ||||||
| Fayetteville, NC |
8,974,679 | 43.7 | ||||||
| Fort Myers-Naples, FL |
9,555,146 | 15.0 | ||||||
| Las Vegas, NV |
34,689,500 | 10.3 | ||||||
| Middlesex, Monmouth, Morristown, NJ |
21,896,900 | 23.6 | ||||||
| Philadelphia, PA |
119,674,192 | 32.6 | ||||||
| Tampa-Saint Petersburg, PA |
61,787,351 | 39.2 | ||||||
| West Palm Beach-Boca Raton, FL |
2,647,458 | 20.7 | ||||||
| Wilmington, DE |
17,990,800 | 7.9 | ||||||
As a result of the quantitative impairment test performed as of November 30, 2021, we did not record any impairment losses related to the FCC license in each of our reporting units. We believe we have made reasonable estimates and assumptions to calculate the estimated fair value of our FCC licenses, 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.
Goodwill.
Leases.
right-of-use
Supplemental Employee Retirement Plan.
23
Recent Accounting Pronouncements
Recent accounting pronouncements are described in Note 2 to the accompanying financial statements.
Results of Operations
Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020
Effective January 1, 2021, we created a digital division that generates revenue primarily from the sale of digital advertising to customers of our radio stations and other advertisers throughout the United States. As a result, we now operate three operating segments (Audio, Digital, esports) and two reportable segments (Audio, Digital). The following summary table presents a comparison of our results of operations for the years ended December 31, 2020 and 2021 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 |
|||||||||||||||
2020 |
2021 |
$ |
% |
|||||||||||||
| Net revenue |
$ | 206,143,861 | $ | 241,426,308 | $ | 35,282,447 | 17.1 | % | ||||||||
| Operating expenses |
182,181,555 | 199,470,185 | 17,288,630 | 9.5 | ||||||||||||
| Corporate expenses |
15,628,370 | 16,578,046 | 949,676 | 6.1 | ||||||||||||
| Impairment losses |
8,970,812 | — | (8,970,812 | ) | (100.0 | ) | ||||||||||
| Gain on dispositions |
4,439,710 | 191,988 | (4,247,722 | ) | (95.7 | ) | ||||||||||
| Other operating income, net |
3,000,000 | 400,000 | (2,600,000 | ) | (86.7 | ) | ||||||||||
| Interest expense |
16,894,407 | 26,456,236 | 9,561,829 | 56.6 | ||||||||||||
| Loss on extinguishment of long-term debt |
2,798,789 | 4,996,731 | 2,197,942 | 78.5 | ||||||||||||
| Gain on forgiveness of long-term debt |
— | 10,000,000 | 10,000,000 | — | ||||||||||||
| Income tax benefit |
5,185,992 | 5,321,630 | 135,638 | 2.6 | ||||||||||||
| Net loss |
18,874,156 | 1,535,094 | (17,339,062 | ) | (91.9 | ) | ||||||||||
Net Revenue.
COVID-19
pandemic, partially offset by a decrease in political advertising and other revenue. Operating Expenses.
COVID-19
pandemic. Corporate Expenses.
Impairment Losses.
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. Gain on Dispositions.
Other Operating Income, Net.
COVID-19
pandemic and expenses of $0.5 million related to the early termination of a programming 24
contract. Other operating income, net for the year ended December 31, 2020 includes a legal reduction of $4.0 million in the franchise fee payable to the esports league, partially offset by payments of $1.0 million for consulting services related to the
COVID-19
pandemic. Interest Expense.
Loss on Extinguishment of Long-Term Debt.
Gain on Forgiveness of Long-Term Debt.
Income Tax Benefit.
non-taxable
income, and certain expenses that are not deductible for tax purposes. Net Loss.
Liquidity and Capital Resources
Overview.
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 Company’s stockholders. In addition, as discussed in “Secured Notes” below, the Indenture governing our Notes limits our ability to pay dividends. Secured Notes.
PPP Loan
Credit Facility.
25
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. On June 30, 2020, we entered into an amendment to the promissory note applicable to the remaining balance. As amended, the promissory note bore interest at 10% per annum. The promissory note had a remaining balance of $5.5 million as of December 31, 2020. As noted above, the promissory note was repaid on February 2, 2021, using a portion of the proceeds from the Notes offering.
cash-pay
interest at 5% per annum payable quarterly in arrears and additional payment-in-kind
In June 2020, George Beasley, our former Chairman, provided a $5.0 million loan to the Company that accrued interest at 6% per annum with no cash payments due until the loan’s 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 we failed to maintain a minimum liquidity amount under the then-existing credit facility. As noted above, the loan from Mr. Beasley was repaid on February 2, 2021, using a portion of the proceeds from the Notes offering.
payment-in-kind
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 $0.2 million to repurchase 63,468 shares during the year ended December 31, 2021.
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 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 and thereafter. 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.
Off-Balance
Sheet Arrangements. off-balance
sheet arrangements as of December 31, 2021. Cash Flows
Year ended December 31, |
||||||||
2020 |
2021 |
|||||||
| Net cash provided by (used in) operating activities |
$ | 4,214,316 | $ | (1,907,227 | ) | |||
| Net cash used in investing activities |
(3,845,616 | ) | (1,136,268 | ) | ||||
| Net cash provided by financing activities |
1,742,561 | 33,662,705 | ||||||
| |
|
|
|
|||||
| Net increase in cash and cash equivalents |
$ | 2,111,261 | $ | 30,619,210 | ||||
| |
|
|
|
|||||
Net Cash Provided By (Used In) Operating Activities.
Net Cash Used In Investing Activities.
Net Cash Provided By Financing Activities.
26
2020 included proceeds of $9.0 million from borrowings 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 to our credit agreement.
Related Party Transactions
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 members of the Beasley family. The lease agreement expires on May 31, 2023. Rental expense was $0.2 million for the year ended December 31, 2021.
Beasley Family Properties, LLC
On September 30, 2021, the office space leased from GGB Estero, LLC for our radio stations in Fort Myers, FL was transferred to Beasley Family Properties, LLC, which is held by a trust for the benefit of Caroline Beasley, Bruce G. Beasley, Brian E. Beasley, and other members of the Beasley family. The lease agreement expires on August 31, 2024. Rental expense was $0.1 million for the year ended December 31, 2021.
Beasley Family Towers, LLC
We lease towers for 17 radio stations in various markets 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 members of the Beasley family and partially owned directly by Caroline Beasley, Bruce G. Beasley, Brian E. Beasley and other members of the Beasley family. The lease agreements expire on various dates through December 31, 2038. Rental expense was $0.8 million for the year ended December 31, 2021.
We lease office space for our radio stations in Fayetteville, NC from BFT. The lease agreement expires on August 31, 2030. Rental expense was $0.1 million for the year ended December 31, 2021.
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 members of the Beasley family. The lease agreement expires on November 1, 2023. Rental expense was approximately $45,000 for the year ended December 31, 2021.
GGB Estero, LLC
We leased office space for our radio stations in Fort 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 members of the Beasley family. The office space was transferred to Beasley Family Properties, LLC on September 30, 2021. Rental expense was $0.2 million for the year ended December 31, 2021.
GGB Las Vegas, LLC
We lease office space for our radio stations in Las Vegas, NV from GGB Las Vegas, LLC, which is controlled by members of the Beasley family. The lease agreement expires on December 31, 2023. Rental expense was $0.2 million for the year ended December 31, 2021.
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 members of the Beasley family 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, 2045. 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 asset is depreciated. Rental expense was $0.1 million for the year ended December 31, 2021.
right-of-use
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, 2021.
Loan from George Beasley
In June 2020, George Beasley, our former Chairman, provided a $5.0 million loan to the Company that accrued interest at 6% per annum with no cash payments due until the loan’s maturity in December 2023. Mr. Beasley and GGB Family
payment-in-kind
27
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 could have been drawn by U.S. Bank, National Association in the event that the Company failed to maintain a minimum liquidity amount under the then-existing credit facility. The loan was repaid on February 2, 2021, using a portion of the proceeds from the Notes offering (see Note 9 to the accompanying financial statements).
Inflation
For the years ended December 31, 2020 and 2021, 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.
28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BEASLEY BROADCAST GROUP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
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| Financial Statements |
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32 |
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33 |
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34 |
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35 |
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36 |
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29
 |
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| Crowe LLP Independent Member Crowe Global |
Report of Independent Registered Public Accounting Firm
Shareholders and the Board of Directors of Beasley Broadcast Group, Inc.
Naples, Florida
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Beasley Broadcast Group, Inc. (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of comprehensive loss, equity, and cash flows for the years then ended, and the related notes and consolidated financial statement schedule (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
30
FCC Licenses Impairment Assessment – Radio Reporting Units
As disclosed in Note 5 to the consolidated financial statements, the Company’s consolidated FCC licenses balance was $508.4 million as of December 31, 2021. Management performs an annual impairment test during the fourth quarter of each year which includes a qualitative assessment as to whether it is more likely than not that an FCC license is impaired. In addition, management prepares a qualitative assessment at each quarter end throughout the year. This qualitative assessment requires significant judgment when considering the events and circumstances that may affect the estimated fair value of the FCC licenses. During the fourth quarter of 2021, management elected to bypass the qualitative assessment and perform a quantitative assessment for all reporting units. If there are changes in market conditions, events, or other circumstances that occur during the interim periods that indicate the carrying value of its FCC licenses may be impaired, management determines whether an interim test is necessary. FCC licenses are assessed for recoverability at the market cluster level. Potential impairment is identified by comparing the fair value of a market’s FCC licenses to its carrying value. Fair value is estimated by management using the Greenfield method, which is a form of the income approach, assuming a
start-up
scenario in which the only assets held by an investor are FCC licenses. Management’s cash flow projections for its FCC licenses included significant judgments and assumptions relating to the market share and profit margin of an average station within a market based upon market size and station type, the forecasted growth rate of each radio market (including long-term growth rate), and the discount rate. We considered auditing the impairment of FCC licenses to be a critical audit matter because it involved a high degree of subjectivity in evaluating management’s estimates, judgments and assumptions, as well as significant audit effort due to complexity in the aggregation and evaluation of significant amounts of data and the use of valuation specialists.
Our audit procedures related to impairment of FCC licenses included the following:
| a. | Evaluated management’s judgements in their assessment of identifying changes in market conditions, events or other changes in circumstances that indicate an impairment of FCC licenses may be present. |
| b. | Tested the completeness, accuracy, appropriateness of aggregation and relevance of underlying data used in the valuation model based on the Greenfield method. |
| c. | Evaluated the appropriateness of valuation model used, evaluating certain assumptions applied in the valuation model, and recalculations of the discounted cash flow schedules. |
| d. | Evaluated the significant assumptions used by management, including normalized market share and profit margin of an average station within a market based upon market size and station type, the forecasted growth rate of each radio market (including long-term growth rate), and the discount rate. This involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance in the market being evaluated, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. |
| e. | Utilized valuation specialists to assist in evaluating certain assumptions applied in the valuation model. |
/s/ Crowe LLP
We have served as the Company’s auditor since 2006.
February
23
, 202231
BEASLEY BROADCAST GROUP, INC.
CONSOLIDATED BALANCE SHEETS
December 31, |
December 31, |
|||||||
2020 |
2021 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, less allowance for doubtful accounts of $ |
||||||||
Prepaid expenses |
||||||||
Other current assets |
||||||||
Total current assets |
||||||||
Property and equipment, net |
||||||||
Operating lease right-of-use |
||||||||
Finance lease right-of-use |
||||||||
FCC licenses |
||||||||
Goodwill |
||||||||
Other intangibles, net |
||||||||
Other assets |
||||||||
Total assets |
$ | |
$ | |
||||
LIABILITIES AND EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | $ | ||||||
Operating lease liabilities |
||||||||
Finance lease liabilities |
||||||||
Other current liabilities |
||||||||
Total current liabilities |
||||||||
Due to related parties |
||||||||
Long-term debt, net of current installments and unamortized debt issuance costs |
||||||||
Operating lease liabilities |
||||||||
Finance lease liabilities |
— | |||||||
Deferred tax liabilities |
||||||||
Other long-term liabilities |
||||||||
Total liabilities |
||||||||
Commitments and contingencies |
||||||||
Stockholders’ equity: |
||||||||
Preferred stock, $ |
||||||||
Class A common stock, $ |
||||||||
Class B common stock, $ |
||||||||
Additional paid-in capital |
||||||||
Treasury stock, Class A common stock; |
( |
) | ( |
) | ||||
Retained earnings |
||||||||
Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
Total stockholders’ equity |
||||||||
Noncontrolling interests |
( |
) | — | |||||
Total equity |
||||||||
Total liabilities and equity |
$ | $ | ||||||
See accompanying notes to consolidated financial statements
32
BEASLEY BROADCAST GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Year Ended |
Year Ended |
|||||||
December 31, |
December 31, |
|||||||
2020 |
2021 |
|||||||
Net revenue |
$ | |
$ | |
||||
Operating expenses: |
||||||||
Operating expenses (including stock-based compensation of $ |
||||||||
Corporate expenses (including stock-based compensation of $ |
||||||||
Depreciation and amortization |
||||||||
Impairment losses |
— | |||||||
Gain on dispositions |
( |
) | ( |
) | ||||
Other operating income, net |
( |
) | ( |
) | ||||
Total operating expenses |
||||||||
Operating income (loss) |
( |
) | ||||||
Non-operating income (expense): |
||||||||
Interest expense |
( |
) | ( |
) | ||||
Loss on extinguishment of long-term debt |
( |
) | ( |
) | ||||
Gain on forgiveness of long-term debt |
— | |||||||
Other income, net |
||||||||
Loss before income taxes |
( |
) | ( |
) | ||||
Income tax benefit |
( |
) | ( |
) | ||||
Loss before equity in earnings of unconsolidated affiliates |
( |
) | ( |
) | ||||
Equity in earnings of unconsolidated affiliates, net of tax |
( |
) | ( |
) | ||||
Net loss |
( |
) | ( |
) | ||||
Earnings attributable to noncontrolling interest |
||||||||
Net loss attributable to BBGI stockholders |
( |
) | ( |
) | ||||
Other comprehensive loss: |
||||||||
Unrecognized actuarial gain (loss) on postretirement plan (net of income tax benefit of $ |
( |
) | ||||||
Comprehensive loss |
$ | ( |
) | $ | ( |
) | ||
Net loss attributable to BBGI stockholders per Class A and B common share: |
||||||||
Basic and diluted |
$ | ( |
) | $ | ( |
) | ||
Dividends declared per common share |
$ | $ | — | |||||
Weighted average shares outstanding: |
||||||||
Basic and diluted |
||||||||
See accompanying notes to consolidated financial statements
33
BEASLEY BROADCAST GROUP, INC.
CONSOLIDATED STATEMENTS OF EQUITY
Common Stock |
Accumulated Other Comprehensive Loss |
|||||||||||||||||||||||||||||||||||||||||||
Class A |
Class B |
Additional Paid-In Capital |
Treasury Stock |
Retained Earnings |
Noncontrolling Interest |
Total Equity |
||||||||||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
Shares |
Amount |
|||||||||||||||||||||||||||||||||||||||
| Balances as of January 1, 2020 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||||
| Issuance of common stock |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Adjustment from related party acquisition |
— | — | — | — | ( |
) | — | — | — | — | — | ( |
) | |||||||||||||||||||||||||||||||
| Purchase of treasury stock |
— | — | — | — | — | ( |
) | ( |
) | — | — | — | ( |
) | ||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | — | ( |
) | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Cash dividends, $ |
— | — | — | — | — | — | — | ( |
) | — | — | ( |
) | |||||||||||||||||||||||||||||||
| Other comprehensive loss |
— | — | — | — | — | — | — | — | ( |
) | — | ( |
) | |||||||||||||||||||||||||||||||
| Noncontrolling interest created in consolidation |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Balances as of December 31, 2020 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Acquisition of noncontrolling interest |
— | — | — | — | ( |
) | — | — | — | — | — | ( |
) | |||||||||||||||||||||||||||||||
| Adjustment from related party acquisition |
— | — | — | — | ( |
) | — | — | — | — | — | ( |
) | |||||||||||||||||||||||||||||||
| Purchase of treasury stock |
— | — | — | — | — | ( |
) | ( |
) | — | — | — | ( |
) | ||||||||||||||||||||||||||||||
| Net loss |
— | — | — | — | — | — | — | ( |
) | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Other comprehensive gain |
— | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
| Elimination of noncontrolling interest |
— | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
| Balances as of December 31, 2021 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | — | $ | |||||||||||||||||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
See accompanying notes to consolidated financial statements
34
BEASLEY BROADCAST GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, 2020 |
Year Ended December 31, 2021 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
||||||||
| Stock-based compensation |
||||||||
| Provision for bad debts |
( |
) | ||||||
| Depreciation and amortization |
||||||||
| Impairment losses |
— | |||||||
| Non-cash interest expense |
— | |||||||
| Gain on dispositions |
( |
) | ( |
) | ||||
| Other operating gain |
( |
) | — | |||||
| Amortization of loan fees |
||||||||
| Loss on extinguishment of long-term debt |
||||||||
| Gain on forgiveness of long-term debt |
— | ( |
) | |||||
| Deferred income taxes |
( |
) | ( |
) | ||||
| Equity in earnings of unconsolidated affiliates |
||||||||
| Change in operating assets and liabilities: |
||||||||
| Accounts receivable |
( |
) | ||||||
| Prepaid expenses |
( |
) | ||||||
| Other assets |
( |
) | ( |
) | ||||
| Accounts payable |
( |
) | ||||||
| Other liabilities |
( |
) | ||||||
| Other operating activities |
||||||||
| |
|
|
|
|||||
| Net cash provided by (used in) operating activities |
( |
) | ||||||
| |
|
|
|
|||||
| Cash flows from investing activities: |
||||||||
| Capital expenditures |
( |
) | ( |
) | ||||
| Proceeds from dispositions |
||||||||
| Proceeds from life insurance |
— | |||||||
| Payments for investments |
( |
) | — | |||||
| |
|
|
|
|||||
| Net cash used in investing activities |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Cash flows from financing activities: |
||||||||
| Issuance of debt |
||||||||
| Payments on debt |
( |
) | ( |
) | ||||
| Payment of debt issuance costs |
( |
) | ( |
) | ||||
| Reduction of finance lease liabilities |
( |
) | ( |
) | ||||
| Dividends paid |
( |
) | — | |||||
| Purchase of treasury stock |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| Net cash provided by financing activities |
||||||||
| |
|
|
|
|||||
| Net increase in cash and cash equivalents |
||||||||
| Cash and cash equivalents at beginning of period |
||||||||
| |
|
|
|
|||||
| Cash and cash equivalents at end of period |
$ | |
$ | |||||
| |
|
|
|
|||||
| Cash paid for interest |
$ | $ | ||||||
| |
|
|
|
|||||
| Cash paid for income taxes |
$ | $ | ||||||
| |
|
|
|
|||||
| Supplemental disclosure of non-cash investing and financing activities: |
||||||||
| Acquisition of noncontrolling interest |
$ | — | $ | |||||
| |
|
|
|
|||||
| Extinguishment of trade sales payable |
$ | — | $ | |||||
| |
|
|
|
|||||
| Class A common stock returned to treasury stock |
$ | — | $ | |||||
| |
|
|
|
|||||
| Class A common stock issued for debt repayment |
$ | $ | — | |||||
| |
|
|
|
|||||
See accompanying notes to consolidated financial statements
35
BEASLEY BROADCAST GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) |
Nature of Business |
Beasley Broadcast Group, Inc. (the “Company” or “BBGI”) is a multi-platform media company operating two
reportable business segments whose primary business is operating radio stations throughout the United States. The Company offers local and national advertisers integrated marketing solutions across audio, digital and event platforms. The Company owns and operates 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. The Company also now operates an esports segment, however, it does not exceed the thresholds for separate disclosure.
COVID-19
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. In 2020, the Company was impacted by deteriorating general economic conditions resulting from the COVID-19
pandemic that caused a downturn in the advertising industry. The decreased demand for advertising materially negatively impacted the Company results of operations, liquidity and financial condition. In 2021, the Company benefited from a general economic recovery from the COVID-19
pandemic however the continuing impact of subsequent COVID-19
variants may result in general economic conditions deteriorating again in the future. 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. These initiatives continued reducing the Company’s expenses throughout the remainder of 2020 and, to a lesser extent, during 2021, and the Company expects expense reductions to continue into 2022. The Company’s 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 Company’s stockholders.
The extent to which the assets. As a result, many of the Company’s estimates and assumptions require increased judgment and carry a higher degree of variability and volatility. The Company’s estimates may change as new events occur and additional information emerges, and such changes are recognized or disclosed in its consolidated financial statements.
COVID-19
pandemic will continue to impact the Company’s business and financial results going forward will be dependent on future developments which are uncertain and unpredictable. Accordingly, it is reasonably possible that these uncertainties could materially impact the Company’s significant accounting estimates related to, but not limited to, allowance for doubtful accounts, impairment of Federal Communications Commission (“FCC”) licenses and goodwill, and determination of right-of-use
(2) |
Summary of Significant Accounting Policies |
Principles of Consolidation
The financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of the Company and its wholly owned subsidiaries, including OutlawsXP, Inc. (“Outlaws”). As of December 31, 2020, the Company held an approximately
economic interest in Outlaws and an approximately
economic interest in Renegades Holdings, Inc. (“Renegades”). On March 12, 2021, the Company entered into an agreement to exchange its ownership interest in Renegades for the interest held by Renegades in Outlaws. As a result of the exchange, Outlaws became a wholly owned subsidiary of the Company, and the Company no longer holds an economic interest in Renegades. Renegades were included in the financial statements of the Company up to the date of the exchange transaction. Net assets and results of operations for Outlaws and Renegades as of and for the years ended December 31, 2020 and 2021 were not significant. All significant inter-company transactions and balances have been eliminated.
Use of Estimates
Preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Such estimates include (i) the amount of allowance for doubtful accounts; (ii) future cash flows used for testing recoverability of property and equipment; (iii) fair values used for testing FCC licenses and goodwill for impairment; (iv) estimates used to determine the incremental borrowing rate to record lease liabilities and related assets (v) the realization of deferred tax assets; and (vi) actuarial assumptions related to the SERP. Actual results and outcomes may differ from management’s estimates and assumptions.
right-of-use
36
Cash and Cash Equivalents
All short-term investments with an original maturity of three months or less are considered to be cash equivalents.
Accounts Receivable
Accounts receivable consist primarily of uncollected amounts due from advertisers for the sale of advertising airtime. The amounts are net of advertising agency commissions and an allowance for doubtful accounts. The allowance for doubtful accounts reflects management’s estimate of probable losses in accounts receivable. Management determines the allowance based on historical information, relative improvements or deteriorations in the age of the accounts receivable and changes in current economic conditions. Interest is not accrued on accounts receivable.
Property and Equipment
Property and equipment is recorded at fair value in a business combination or otherwise at cost and depreciated using the straight-line method over the estimated useful life of the asset. If an event or change in circumstances were to indicate that the carrying amount of property and equipment is not recoverable, the carrying amount will be reduced to the estimated fair value. Repairs and maintenance are charged to expense as incurred.
FCC Licenses
FCC licenses, including translator licenses, are generally granted for renewable terms of eight years . Renewal costs are generally minor and expensed as incurred. Licenses are tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the Company’s 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 Company’s 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 radio market clusters. See Note 5 for changes in the carrying amount of FCC licenses for the years ended December 31, 2020 and 2021. The weighted-average period before the next renewal of the Company’s FCC licenses is 4.2 years.
Goodwill
Goodwill is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the Company’s goodwill might be impaired. The Company assesses qualitative factors to determine whether it is necessary to perform a quantitative assessment for each reporting unit. If the quantitative assessment is necessary, the Company will determine the fair value of each reporting unit. If the fair value of any reporting unit is less than the carrying amount, the Company will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized will not exceed the total amount of goodwill allocated to the reporting unit. For the purpose of testing its goodwill for impairment, the Company has identified its radio market clusters and esports as its reporting units.
Other Intangibles
Other intangibles include advertiser relationships and franchise rights, which are amortized over their respective estimated useful lives and brands and other intangibles with indefinite lives which are not amortized. If an event or change in circumstances were to indicate that the carrying amount of any other intangibles is not recoverable, the carrying amount will be reduced to the estimated fair value.
Investments
Other assets include an investment in Quu, Inc. (“Quu”). The Company is considered to have the ability to exercise significant influence over the operating and financial policies of Quu. Therefore, the investment in Quu is accounted for using the equity method. The Company will recognize its share of the earnings of Quu in the periods for which it is reported. Any loss in value of the investment that is other than a temporary decline will be recognized. Other assets also include a noncontrolling interest in AUDIOis, which does not have a readily determinable fair value and therefore is recorded at cost less impairment. The Company evaluates the investments on a quarterly basis to identify impairment. When the evaluation indicates that an impairment exists, the Company will estimate the fair value of the investment and recognize an impairment loss equal to the difference between the fair value and the carrying amount of the investment. The carrying amount of the investment in QUU was $2.1 million and 2.0 million as of December 31, 2020 and 2021, respectively.
37
Debt Issuance Costs
Debt issuance costs are capitalized and amortized over the life of the related debt as interest expense on a straight-line basis which approximates the effective interest method. Unamortized debt issuance costs are reported as a direct deduction from the carrying amount of the related debt.
Leases
The Company determines whether a contract is or contains a lease at inception. The term for each lease agreement begins on the commencement date and includes the noncancelable period specified in the agreement together with: (1) the periods covered by options to extend the lease if the Company is reasonably certain to exercise that option, (2) the periods covered by an option to terminate if the Company is reasonably certain not to exercise that option and (3) the period covered by an option to extend (or not terminate) if controlled by the lessor. 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 lessee’s 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. 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 that 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.
Treasury Stock
Treasury stock is accounted for using the cost method whereby the entire cost of the acquired stock is recorded as treasury stock.
Stock-Based Compensation
The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost is recognized in earnings over the period during which an employee is required to provide service. No compensation cost is recognized for equity instruments for which employees do not render the requisite services.
Income Taxes
The Company recorded income taxes under the liability method. Deferred tax assets and liabilities are recognized for all temporary differences between tax and financial reporting bases of the Company’s assets and liabilities using enacted tax rates applicable to the periods in which the differences are expected to affect taxable income. Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense.
Comprehensive Loss
Comprehensive loss consists of net loss and other gains and losses affecting equity that, under accounting principles generally accepted in the United States of America, are excluded from net loss, including unrecognized net actuarial gains and losses related to the SERP.
Loss per Share
Basic net loss per share is computed by dividing net loss attributable to common stockholders of the Company by the weighted average number of common shares outstanding for the period. Common shares outstanding include shares of both Class A and Class B common stock, which have equal rights and privileges except with respect to voting. Diluted net loss per share reflects the potential dilution that could occur if stock options, restricted stock or other contracts to issue common stock were exercised or converted into common stock and were not anti-dilutive. When reporting a net loss, the effect of restrictive stock units and restricted stock is excluded under the treasury stock method as the addition of shares would be anti-dilutive.
38
Concentrations of Risk
Certain cash deposits with financial institutions may at times exceed FDIC insurance limits.
The radio stations located in Boston, MA, Detroit, MI and Philadelphia, PA collectively contributed 59.2 % of the Company’s net revenue in 2021. The radio stations located in Boston, MA, Detroit, MI, Philadelphia, PA and Tampa-Saint Petersburg, FL collectively contributed 66.3 % of the Company’s net revenue in 2020.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are based on market data obtained from sources independent of the Company. Unobservable inputs reflect the Company’s own assumptions based on the best information available in the circumstances. The fair value hierarchy prioritizes the inputs used to measure fair value into three broad levels. The three levels of the fair value hierarchy are defined as follows:
Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities as of the reporting date.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, as of the reporting date.
Level 3 – Unobservable inputs for the asset or liability that reflect management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability as of the reporting date.
Sports Programming Costs
Sports programming rights for a specified season are amortized on a straight-line basis over the season. Other payments are expensed when the additional contract elements, such as post-season games, are broadcast.
Segments
The Company currently operates three operating segments (Audio, Digital, esports) and two
reportable segments (Audio, Digital). The identification of segments is consistent with how the segments report to and are managed by the Company’s Chief Executive Officer (the Company’s Chief Operating Decision Maker). Operating results are reported to the Chief Operating Decision Maker on a statement of operations, which includes net revenue, operating expenses, impairment losses, gains and losses on dispositions and depreciation and amortization. Corporate expenses include general and administrative expenses and certain other income and expense items not allocated to the operating segments.
(3) |
Acquisitions and Dispositions |
On January 28, 2022, the Company entered into an agreement to sell substantially all of the assets used in the operations of 1.25 million in cash. The sale, which is subject to approval by the FCC and other customary closing conditions, is expected to close during the second or third quarter of 2022. If the sale is completed, the Company will recognize a loss on disposition of approximately $1.5 million.
WWNN-AM
in Boca Raton, FL to a third party for $On December 31, 2020, the Company completed the sale of certain land in Charlotte, NC to a third party for $4.65 million. As a result of the sale, the Company recorded a gain of $4.4 million in the fourth quarter of 2020.
(4) |
Property and Equipment |
Property and equipment is comprised of the following:
December 31, |
Estimated useful lives (years) |
|||||||||||
2020 |
2021 |
|||||||||||
| Land |
$ | $ | — | |||||||||
| Buildings and improvements |
||||||||||||
| Broadcast equipment |
||||||||||||
| Transportation equipment |
||||||||||||
| Office equipment |
||||||||||||
| Construction in progress |
— | |||||||||||
| |
|
|
|
|||||||||
| Less accumulated depreciation and amortization |
( |
) | ( |
) | ||||||||
| |
|
|
|
|||||||||
| $ | $ | |||||||||||
| |
|
|
|
|||||||||
39
The Company recorded depreciation expense of $7.4 million and $8.0 million for the years ended December 31, 2020 and 2021, respectively.
(5) |
FCC Licenses |
Changes in the carrying amount of FCC licenses for the years ended December 31, 2020 and 2021 are as follows:
| Balance as of January 1, 2020 |
$ | |||
| Impairment losses |
( |
) | ||
| |
|
|||
| Balance as of December 31, 2020 |
||||
| Disposition |
( |
) | ||
| |
|
|||
| Balance as of December 31, 2021 |
$ | |||
| |
|
The Company performed its annual impairment test for its FCC licenses as of November 30, 2021 and did no t
record
any impairment losses related to the FCC licenses in each of its reporting units. On February 3, 2021, the Company completed the sale of 0.4 million. The sale included an FCC translator license with a carrying amount of $0.1 million.
WHSR-AM
in West Palm Beach-Boca Raton, FL to a third party for $Due to the impact of the 6.8 million related to the FCC licenses in its 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 The key assumptions used in the discounted cash flow analyses are as follows:
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 $COVID-19
pandemic and an increase in the discount rate used in the discounted cash flow analyses to estimate the fair value of the 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. | Revenue growth rates |
( | |
| Market revenue shares at maturity |
||
| Operating income margins at maturity |
||
| Discount rate |
On December 31, 2020, the Company completed the sale of certain land in Charlotte, NC to a third party for $4.65 million. As a result of the sale, the Company no longer utilizes 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.
(6) |
Other Intangibles |
Other intangibles as of December 31, 2021 are comprised of the following:
Asset |
Accumulated amortization |
Net asset |
Amortization period (years) |
|||||||||||||
| Advertiser relationships |
$ | $ | ( |
) | $ | |||||||||||
| Franchise rights |
( |
) | ||||||||||||||
| |
|
|
|
|
|
|||||||||||
| ( |
) | |||||||||||||||
| Brands |
— | |||||||||||||||
| Other intangibles with indefinite lives |
— | |||||||||||||||
| |
|
|
|
|
|
|||||||||||
| $ | $ | ( |
) | $ | ||||||||||||
| |
|
|
|
|
|
|||||||||||
40
Other intangibles as of December 31, 2020 are comprised of the following:
Asset |
Accumulated amortization |
Net asset |
Amortization period (years) |
|||||||||||||
| Advertiser relationships |
$ | $ | ( |
) | $ | |||||||||||
| Franchise rights |
( |
) | ||||||||||||||
| Sponsorship base |
( |
) | ||||||||||||||
| |
|
|
|
|
|
|||||||||||
| ( |
) | |||||||||||||||
| Brands |
— | |||||||||||||||
| Other intangibles with indefinite lives |
— | |||||||||||||||
| |
|
|
|
|
|
|||||||||||
| $ |
$ | ( |
) | $ |
||||||||||||
| |
|
|
|
|
|
|||||||||||
The Company recorded amortization expense of $3.5 million and $3.2 million for the years ended December 31, 2020 and 2021, respectively. Estimated future amortization expense related to intangible assets subject to amortization for the next five years and thereafter is as follows:
| 2022 |
$ | |||
| 2023 |
||||
| 2024 |
||||
| 2025 |
||||
| 2026 |
||||
| Thereafter |
||||
| |
|
|||
| Total |
$ | |||
| |
|
(7) |
Other Assets |
On March 1, 2019, the Company (i) issued 235,296 shares of Class A common stock with a fair value of $1.0 million, (ii) agreed to provide $1.0 million of media advertising over a three year period, and (iii) contributed $2.5 million in cash for an aggregate investment of $4.5 million in Renegades, an esports organization, in exchange for 3,750,000 shares. The Company acquired an additional 416,666 shares in the third quarter of 2019 for $0.5 million in cash. In January 2020, the Company acquired an additional 833,334 shares for an aggregate of $1.0 million in cash. As a result of the additional investment in January 2020, the Company obtained control of Renegades and consolidated the accounts of Renegades in the accompanying financial statements as of and for the year ended December 31, 2020. On March 12, 2021, the Company entered into an agreement to exchange its ownership interest in Renegades for the interest held by Renegades in Outlaws. As a result of the exchange, Outlaws is now a wholly owned subsidiary of the Company, and the Company no longer holds an economic interest in Renegades. Therefore, the accounts of Renegades are no longer consolidated in the Company’s financial statements subsequent to the date of the exchange. Also, as a result of the exchange, the Company recorded a loss of approximately $3,000 attributable to the difference between the estimated fair value of the economic interest held by Renegades in Outlaws and the carrying amount of the Company’s ownership interest in Renegades in the first quarter of 2021. The Company used a discounted cash flow model with annual revenue growth rates ranging from 5 % to 57 %, operating margins ranging from (27 )% to 67 %, and a discount rate of 13.5 % to determine the loss.
(8) |
Other Current Liabilities |
Other current liabilities are comprised of the following:
December 31, |
||||||||
2020 |
2021 |
|||||||
| Accrued interest |
$ | $ | ||||||
| Accrued payroll expenses |
||||||||
| Deferred revenue |
||||||||
| Trade sales payable |
||||||||
| Income taxes payable |
— | |||||||
| Other accrued expenses |
||||||||
| |
|
|
|
|||||
| $ | $ | |||||||
| |
|
|
|
|||||
41
(9) |
Long-Term Debt |
Long-term debt is comprised of the following:
December 31, 2020 |
December 31, 2021 |
|||||||
| Secured notes |
$ | — | $ | |||||
| Credit facility - term loan |
— | |||||||
| Credit facility - revolving credit facility |
— | |||||||
| Promissory note |
— | |||||||
| |
|
|
|
|||||
| Less unamortized debt issuance costs |
( |
) | ( |
) | ||||
| |
|
|
|
|||||
| $ | |
$ | |
|||||
| |
|
|
|
|||||
On February 2, 2021, the Company issued $300.0 million aggregate principal amount of 8.625 % senior secured notes due on February 1, 2026 (the “Notes”) under an indenture dated February 2, 2021 (the “Indenture”). 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. 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. The Company used the net proceeds from the Notes, to repay the credit facility, the promissory note, and a loan from George Beasley (see Note 15.0 million during the first quarter of 2021.
7
) and to pay 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 its assets; enter into transactions with affiliates; prepay certain kinds of indebtedness; and issue or sell stock of its subsidiaries. Prior to February 1, 2025, the Company will be subject to certain premiums, as defined in the Indenture, for optional or mandatory (upon certain contingent events) redemption of some or all of the Notes. In connection with the issuance of the Notes and the repayment of the credit facility, the Company recorded a loss on extinguishment of long-term debt of $On March 1, 2021, the Company entered into a loan with Synovus Bank for $10.0 million pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The loan bore interest at a rate of 1.0 % per annum and was scheduled to mature on March 1, 2026. Principal and interest payments were deferred, with interest accruing, until after the period in which the Company was allowed to apply for loan forgiveness pursuant to the PPP. In September 2021, the Company submitted an application for forgiveness, and, in November 2021, the loan was forgiven in full.
As of December 31, 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. 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. As noted above, the credit facility was repaid on February 2, 2021, using a portion of the proceeds from the Notes offering.
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. On June 30, 2020, the Company entered into an amendment to the promissory note applicable to the remaining balance. As amended, the promissory note bore 5 % per annum payable quarterly in arrears and additional interest at 10 % per annum. The promissory note had a remaining balance of $5.5 million as of December 31, 2020. As noted above, the amended promissory note was repaid on February 2, 2021, using a portion of the proceeds from the Notes offering.
cash-pay
interest at payment-in-kind
(10) |
Leases |
The Company leases office space, radio towers and office equipment. Discount rates are based on the Company’s incremental borrowing rate due to the rate implicit in the leases being not readily determinable. The Company used the current borrowing rate on its credit facility, adjusted for the effects of collateralization, to determine the various rates it would pay to finance similar transactions over similar time periods.
The following table summarizes lease information:
Year ended December 31, |
||||||||
2020 |
2021 |
|||||||
Lease cost |
||||||||
Operating lease cost |
$ | $ | ||||||
Finance lease cost: |
||||||||
Amortization of right-of-use |
||||||||
Interest on lease liability |
||||||||
Short-term lease cost |
||||||||
Total lease cost |
$ | $ | ||||||
42
Other information |
||||||||
Operating cash flows from operating leases |
$ | $ | ||||||
Operating cash flows from finance lease |
||||||||
Financing cash flows from finance lease |
||||||||
Right-of-use |
||||||||
Right-of-use |
December 31, 2021 |
||||
Weighted-average remaining lease term – operating leases |
||||
Weighted-average remaining lease term – finance lease |
||||
Weighted-average discount rate – operating leases |
||||
Weighted-average discount rate – finance lease |
||||
As of December 31, 2021, future minimum payments for operating and finance leases for the next five years and thereafter are summarized as follows:
2022 |
$ | |||
2023 |
||||
2024 |
||||
2025 |
||||
2026 |
||||
Thereafter |
||||
Total lease payments |
||||
Less imputed interest |
( |
) | ||
Present value of lease liabilities |
$ | |||
(11) |
Employee Benefit Plans |
Defined Contribution Plan
The Company has a defined contribution plan that conforms to Section 401(k) of the Internal Revenue Code. Under this plan, employees may contribute a minimum of 1 % of their compensation (no maximum) to the Plan. However, the Internal Revenue Code limited contributions to $19,500 (or $26,000 if aged 50 years or older) in 2020 and 2021. No
Supplemental Employee Retirement Plan
The benefit obligations related to the frozen SERP of $10.8 million and $10.2 million are reported in other long-term liabilities in the consolidated balance sheets as of December 31, 2020 and 2021, respectively. The Company contributed $0.5
43
The SERP is summarized as follows:
| Year ended December 31, |
||||||||
| 2020 |
2021 |
|||||||
| Change in Projected Benefit Obligation |
||||||||
| Benefit obligation at beginning of year |
$ | |
$ | |||||
| Interest cost |
|
|||||||
| Actuarial (gain) loss |
|
( |
) | |||||
| Benefits paid |
( |
) | |
( |
) | |||
| |
|
|
|
|||||
| Benefit obligation at end of year |
$ | |
$ | |||||
| |
|
|
|
|||||
| Change in Plan Assets |
||||||||
| Fair value of plan assets at beginning of year |
$ |
— |
|
$ |
|
| ||
| Employer contribution |
|
|
|
|
|
| ||
| Benefits paid |
|
( |
) |
|
( |
) | ||
| |
|
|
|
|||||
| Fair value of plan assets at end of year |
$ |
|
|
$ |
|
| ||
| |
|
|
|
|||||
| Funded status |
$ |
( |
) |
$ |
( |
) | ||
| Unrecognized net actuarial loss |
|
|
|
|
|
| ||
| |
|
|
|
|||||
| Cumulative employer contributions in excess of the net periodic pension cost |
$ |
( |
) |
$ |
( |
) | ||
| |
|
|
|
| Amounts Recognized in the Statement of Financial Position |
|
|||||||
| Current liabilities |
$ |
( |
) |
$ |
( |
) | ||
| Noncurrent liabilities |
|
( |
) |
|
( |
) | ||
| |
|
|
|
|||||
| Net amount recognized |
$ |
( |
) |
$ |
( |
) | ||
| |
|
|
|
|||||
| Amounts Recognized in Accumulated Other Comprehensive Income |
|
|||||||
| Net actuarial loss |
$ |
|
|
$ |
|
| ||
| |
|
|
|
|||||
| Total (before tax effects) |
$ |
|
|
$ |
|
| ||
| |
|
|
|
|||||
| Information for Pension Plans about Benefit Obligation and Plan Assets |
| |||||||
| Projected benefit obligation |
$ | $ | ||||||
| Accumulated benefit obligation |
$ | $ | ||||||
| Weighted-average assumptions for Disclosure |
||||||||
| Discount rate |
% | % | ||||||
| Mortality table |
||||||||
| Mortality improvement scale |
| Net periodic benefit cost |
||||||||
| Interest cost |
$ | $ | ||||||
| Recognized net actuarial (gain) loss |
— | |||||||
| |
|
|
|
|||||
| Net periodic benefit cost |
$ | $ | ||||||
| |
|
|
|
| Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income |
| |||||||
| Net actuarial (gain) loss |
$ | $ | ( |
) | ||||
| Recognized net actuarial (gain) loss |
— | ( |
) | |||||
| Total recognized in other comprehensive income (before tax effects) |
$ | $ | ( |
) | ||||
| Total recognized in net cost and other comprehensive income (before tax effects) |
$ | $ | ( |
) | ||||
| |
|
|
|
|||||
| Amounts Expected to be Recognized in Net Periodic Cost in the Coming Year |
|
|||||||
| (Gain) loss recognition |
$ |
|
|
$ |
|
| ||
| Prior service cost recognition |
$ |
|
|
$ |
|
| ||
| Net initial obligation (asset) recognition |
$ |
|
|
$ |
|
| ||
| Weighted-average assumptions used to determine Net Periodic Benefit Cost |
| |||||||
| Discount rate |
% | % | ||||||
| Corridor |
% | % | ||||||
| Average future working lifetime |
||||||||
| Mortality table |
||||||||
| Mortality improvement scale |
||||||||
| Estimated Future Benefit Payments |
|
|||||||
| 2022 |
|
$ |
| |||||
| 2023 |
|
$ |
| |||||
| 2024 |
|
$ |
| |||||
| 2025 |
|
$ |
| |||||
| 2026 |
|
$ |
| |||||
| 2027-2031 |
|
$ |
|
| ||||
| Contributions |
||||||
| Estimated contributions for 2022 |
$ |
|
| |||
| |
|
|||||
44
(12) |
Stockholders’ Equity |
The Company has two classes of common stock: Class A common stock and Class B common stock. In the election of directors, the holders of Class A common stock are entitled by class vote, exclusive of other stockholders, to elect two of the Company’s directors, with each Class A share being entitled to one vote. In the election of the other six directors and all other matters submitted to the stockholders for a vote, the holders of Class A shares and Class B shares shall vote as a single class, with each Class A share being entitled to one vote and each Class B share entitled to ten votes.
From time to time, the Company repurchases sufficient shares of its common stock to fund withholding taxes in connection with the vesting of restricted stock units and shares of restricted stock. The Company paid $0.2 million to repurchase 63,468 shares in 2021.
The Company paid cash dividends of $2.8 million in 2020. However, in response to the
COVID-19
pandemic, the board of directors suspended future quarterly dividend payments until it is determined that resumption of dividend payments is in the best interest of the Company’s stockholders. In addition, the Indenture governing the Notes limits the ability of the Company to pay dividends. (13) |
Revenue |
Revenue is comprised of the following:
Year ended December 31, |
||||||||
2020 |
2021 |
|||||||
| Audio |
$ | $ | ||||||
| Digital |
||||||||
| Other |
||||||||
| |
|
|
|
|||||
| $ | $ | |||||||
| |
|
|
|
|||||
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, 2020 |
December 31, 2021 |
|||||||
| Deferred revenue |
$ | $ | ||||||
Year ended December 31, |
||||||||
2020 |
2021 |
|||||||
| Losses on receivables |
$ | $ |
||||||
Audio revenue 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
45
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. Other revenue includes revenue from concerts, promotional events, talent fees and other miscellaneous items. Such revenue is generally recognized when the concert, promotional event, or talent services are completed.
December 31, |
December 31, |
|||||||
2020 |
2021 |
|||||||
Trade sales receivable |
$ |
$ |
||||||
Trade sales payable |
||||||||
Year ended December 31, |
||||||||
2020 |
2021 |
|||||||
Trade sales revenue |
$ | $ | ||||||
Digital revenue 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.
(14) |
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 that have been granted under the 2007 Plan generally vest over to five years of service.
A summary of restricted stock unit activity is presented below:
Units |
Weighted- Average Grant-Date Fair Value |
|||||||
Unvested as of January 1, 2020 |
$ | |||||||
Granted |
||||||||
Vested |
( |
) | ||||||
Forfeited |
( |
) | ||||||
Unvested as of December 31, 2020 |
||||||||
Granted |
||||||||
Vested |
( |
) | ||||||
Forfeited |
( |
) | ||||||
Unvested as of December 31, 2021 |
$ | |||||||
A summary of restricted stock activity is presented below:
Shares |
Weighted- Average Grant-Date Fair Value |
|||||||
Unvested as of January 1, 2020 |
$ | |||||||
Vested |
( |
) | ||||||
Forfeited |
( |
) | ||||||
Unvested as of December 31, 2020 |
||||||||
Vested |
( |
) | ||||||
Unvested as of December 31, 2021 |
$ | |||||||
As of December 31, 2021, there was $1.8 million of total unrecognized compensation cost for restricted stock units granted under the 2007 Plan. That cost is expected to be recognized over a weighted-average period of 2.4 years.
46
(15) |
Income Taxes |
Income tax benefit is as follows:
Year ended December 31, |
||||||||
2020 |
2021 |
|||||||
Current: |
||||||||
Federal |
$ | ( |
) | $ | — | |||
State |
— | |||||||
| ( |
) | — | ||||||
Deferred: |
||||||||
Federal |
( |
) | ||||||
State |
( |
) | ( |
) | ||||
| ( |
) | ( |
) | |||||
| $ | ( |
) | $ | ( |
) | |||
Income tax benefit differs from the amounts that would result from applying the federal statutory rate of 21 % to the Company’s loss before taxes as follows:
Year ended December 31, |
||||||||
2020 |
2021 |
|||||||
Expected tax benefit |
$ | ( |
) | $ | ( |
) | ||
State income taxes, net of federal benefit |
( |
) | ( |
) | ||||
Tax rate adjustments |
( |
) | ( |
) | ||||
Change in valuation allowance |
( |
) | ( |
) | ||||
Non-deductible items |
||||||||
Non-taxable items |
— | ( |
) | |||||
Other |
( |
) | ||||||
| $ | ( |
) | $ | ( |
) | |||
Temporary differences that give rise to the components of deferred tax assets and liabilities are as follows:
December 31, |
||||||||
2020 |
2021 |
|||||||
Deferred tax assets: |
||||||||
Allowance for doubtful accounts |
$ | $ | ||||||
Other assets |
( |
) | ||||||
Operating lease liabilities |
||||||||
Other long-term liabilities |
||||||||
Stock-based compensation |
||||||||
Interest expense limitation |
||||||||
Net operating losses |
||||||||
Subtotal |
||||||||
Valuation allowance |
( |
) | ( |
) | ||||
Total |
||||||||
Deferred tax liabilities: |
||||||||
Prepaid expenses |
( |
) | ( |
) | ||||
Property and equipment |
( |
) | ( |
) | ||||
Intangibles |
( |
) | ( |
) | ||||
Total |
( |
) | ( |
) | ||||
Net deferred tax liabilities |
$ | ( |
) | $ | ( |
) | ||
As of December 31, 2021, the Company has federal net operating losses of $6.9 million and state net operating losses of $32.0 million. The valuation allowance relates to net operating losses and unrealized losses on investments which management has determined, more likely than not, that such losses will not be utilized.
As of December 31, 2020 and 2021, the Company does not have any material unrecognized tax benefits and accordingly, has not recorded any interest or penalties related to unrecognized tax benefits. The Company and its subsidiaries file a consolidated federal income tax return and various state returns. These returns remain subject to examination by taxing authorities for all years after 2017.
47
(16) |
Loss Per Share |
Net loss per share calculation information is as follows:
Year ended December 31, |
||||||||
2020 |
2021 |
|||||||
Net loss attributable to BBGI stockholders |
$ |
( |
) |
$ |
( |
) | ||
Weighted-average shares outstanding: |
||||||||
Basic |
||||||||
Effect of dilutive restricted stock units and restricted stock |
||||||||
Diluted |
||||||||
Net loss attributable to BBGI stockholders per Class A and Class B common share – basic and diluted |
$ |
( |
) |
$ |
( |
) | ||
The Company excluded the effect of restrictive stock units and restricted stock under the treasury stock method when reporting a net loss as the addition of shares was anti-dilutive. The number of shares excluded was 29,406 and 229,777 for the years ended December 31, 2020 and 2021, respectively.
(17) |
Related Party Transactions |
Beasley Broadcasting Management, LLC
The Company leases its 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 members of the Beasley family. The lease agreement expires on May 31, 2023 . Rental expense was
$0.2
Beasley Family Properties, LLC
On September 30, 2021, the office space leased by the Company from GGB Estero, LLC for its radio stations in Fort Myers, FL was transferred to Beasley Family Properties, LLC, which is held by a trust for the benefit of Caroline Beasley, Bruce G. Beasley, Brian E. Beasley, and other members of the Beasley family. The lease agreement expires on August 31, 2024. Rental expense was $0.1 million for the year ended December 31, 2021.
Beasley Family Towers, LLC
The Company leases towers for 17 radio stations in various markets 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 members of December 31, 2038 . Rental expense was $0.6 million and $0.8 million for the years ended December 31, 2020 and 2021, respectively.
the
Beasley family and partially owned directly by Caroline Beasley, Bruce G. Beasley, Brian E. Beasley and other members of the Beasley family. The lease agreements expire on various dates through The Company leases office space for its radio stations in Fayetteville, NC from BFT. The lease agreement expires on August 31, 2030 . Rental expense was $22,000 and $0.1 million for the years ended December 31, 2020 and 2021, respectively.
GGB Augusta, LLC
The Company leases land for its radio stations in Augusta, GA from GGB Augusta, LLCNovember 1, 2023 . Rental expense was approximately $41,000 and $45,000 for the years ended December 31, 2020 and 2021, respectively.
,
which is held by a trust for the benefit of Caroline Beasley, Bruce G. Beasley, Brian E. Beasley and other members of the Beasley family. The lease agreement expires on GGB Estero, LLC
The Company leases office space for its radio stations in Fort 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 members of the Beasley family. The office space was transferred to Beasley Family Properties, LLC
on September 30, 2021. Rental expense was $0.2
48
GGB Las Vegas, LLC
The Company leases office space for its radio stations in Las Vegas, NV from GGB Las Vegas, LLCDecember 31, 2023 . Rental expense was $0.2
,
which is controlled by members of the Beasley family. The lease agreement expires on Wintersrun Communications, LLC
The Company sold the 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 members of the Beasley family 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, 2045 . 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
The Company leases 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
Loan from George Beasley
In June 2020, George Beasley, the Company’s former 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 loan’s 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 could have been drawn by U.S. Bank, National Association in the event that the Company failed to maintain a minimum liquidity amount under the then-existing credit facility. The loan was repaid on February 2, 2021, using a portion of the proceeds from the Notes offering (see Note 9).
(18) |
Commitments and Contingencies |
The Company has various commitments for rating services and on-air programming including sports broadcast rights for the Boston Bruins, Boston Celtics, and New England Patriots. As of December 31, 2021, future minimum payments for the next five years and thereafter are summarized as follows:
2022 |
$ |
|||
2023 |
||||
2024 |
||||
2025 |
||||
2026 |
||||
Thereafter |
||||
Total |
$ |
|||
In the normal course of business, the Company is party to various legal matters. The ultimate disposition of these matters will not, in management’s judgment, have a material adverse effect on the Company’s financial position.
(19) |
Financial Instruments |
The carrying amount of the Company’s 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 estimated fair value of the Company’s Notes, based on available market information as of December 31, 2021, was $295.9 million. The Company used Level 2 measurements under the fair value measurement hierarchy to determine the estimated fair value of the Notes. The carrying amount of the Company’s long-term debt as of December 31, 2020 was $263.5 million, which approximated fair value based on current market interest rates.
(20) |
Segment Information |
Effective January 1, 2021, the Company created a digital division that generates revenue primarily from the sale of digital advertising to customers of the Company’s radio stations and other advertisers throughout the United States. All digital operations are the responsibility of the Company’s Chief Digital Officer, who reports to the Company’s Chief Executive Officer (the Company’s Chief Operating Decision Maker). As a result, the Company has identified two reportable segments, Audio and Digital. The Audio segment generates revenue primarily from the sale of commercial advertising to customers of the Company’s 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. Corporate expenses include general and administrative expenses and certain other income and expense items not allocated to the operating segments. The identification of segments is consistent with how the segments report to and are managed by the Company’s Chief Operating Decision Maker.
49
Reportable segment information for the year ended December 31, 2021 is as follows:
| |
Audio |
Digital |
Other |
Corporate |
Total |
|||||||||||||||
| Net revenue |
$ |
$ |
$ |
$ |
— |
$ |
||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating expenses |
— |
|||||||||||||||||||
| Corporate expenses |
— |
— |
— |
|||||||||||||||||
| Depreciation and amortization |
||||||||||||||||||||
| Gain on disposition |
( |
) |
— |
— |
— |
( |
) | |||||||||||||
| Other operating (income) expense, net |
— |
— |
( |
) |
( |
) | ||||||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
| Operating income (loss) |
$ |
$ |
$ |
( |
) |
$ |
( |
) |
$ |
|||||||||||
| |
|
|
|
|
|
|
|
|
|
|||||||||||
Reportable segment information as of December 31, 2021 is as follows:
| |
Audio |
Digital |
Other |
Corporate |
Total |
|||||||||||||||
| Capital expenditures |
$ |
$ |
$ |
$ |
( |
) |
$ |
|||||||||||||
| Property and equipment, net |
||||||||||||||||||||
| FCC licenses |
— |
— |
— |
|||||||||||||||||
| Goodwill |
— |
— |
||||||||||||||||||
| Other intangibles, net |
— |
|||||||||||||||||||
50
BEASLEY BROADCAST GROUP, INC.
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 2020 and 2021
| Description |
Balance at Beginning of Period |
Charged to Costs and Expenses |
Deductions |
Balance at End of Period |
||||||||||||
| Year ended December 31, 2020: |
||||||||||||||||
| Allowance for doubtful accounts (deducted from accounts receivable) |
||||||||||||||||
| Valuation allowance for deferred tax assets |
— | |||||||||||||||
| Year ended December 31, 2021: |
||||||||||||||||
| Allowance for doubtful accounts (deducted from accounts receivable) |
( |
) | ||||||||||||||
| Valuation allowance for deferred tax assets |
— | |||||||||||||||
51
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by Rule
13a-15(b)
of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined by Exchange Act Rule 13a-15(e)).
Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2021, the end of the period covered by this report.Management’s Report on Internal Control over Financial Reporting
Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
| (1) | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
| (2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of managements and directors of the Company; and |
| (3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Management has used the framework set forth in the 2013 report entitled “Internal Control - Integrated Framework” published by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission to evaluate the effectiveness of the Company’s internal control over financial reporting. Management has concluded that the Company’s internal control over financial reporting was effective as of the end of the most recent fiscal year.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to Section 404(c) of the Sarbanes-Oxley Act that permits the Company to provide only management’s report in this annual report.
52
There has been no change in our internal control over financial reporting during the Company’s fourth fiscal quarter of 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
53
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information relating to directors and executive officers required by this Item 10 is incorporated in this report by reference to the information set forth under the captions “Proposal No. 1: Election of Directors,” “The Board of Directors and its Committees” and “Executive Officers” in our Definitive Proxy Statement for our 2022 Annual Meeting of Stockholders, which will be filed with the SEC no later than April 30, 2022 (“2022 Proxy Statement”). If applicable, the information required by this item regarding compliance by our directors and executive officers with Section 16(a) of the Securities and Exchange Act of 1934, as amended, is incorporated in this report by reference to the information set forth under the caption “Delinquent Section 16(a) Reports” in our 2022 Proxy Statement. The information relating to our Code of Business Conduct and Ethics is incorporated in this report by reference to the information set forth under the caption “Code of Business Conduct and Ethics” in our 2022 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated in this report by reference to the information set forth under the caption “Executive Compensation” in our 2022 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this Item 12 is incorporated in this report by reference to the information set forth under the caption “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” in our 2022 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item 13 is incorporated in this report by reference to the information set forth under the captions “Certain Relationships and Related Transactions” and “The Board of Directors and its Committees” in our 2022 Proxy Statement.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item 14 is incorporated in this report by reference to the information set forth under the caption “Audit Fees, Other Fees and Services of Independent Registered Public Accountants” in our 2022 Proxy Statement.
54
PART IV
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
| (a) | Financial Statements. A list of financial statements and schedules included herein is set forth in the Index to Financial Statements appearing in “ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.” |
| (b) | Exhibits. |
55
| 31.2 | Certification of Chief Financial Officer pursuant to Rule 15d-14(a) (17 CFR 240.15d-14(a)). | |
| 32.1 | Certification of Chief Executive Officer pursuant to Rule 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 15d-14(b) (17 CFR 240.15d-14(b)) and 18 U.S.C. Section 1350. | |
| 101.INS | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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. | |
| 104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | |
ITEM 16. FORM
10-K
SUMMARY None.
56
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
B EASLEY BROADCAST GROUP , INC . | ||
| By: |
/s/ C AROLINE BEASLEY | |
| Caroline Beasley Chief Executive Officer | ||
Date: |
February 23, 2022 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature |
Title |
Date | ||
| /s/ C AROLINE BEASLEY Caroline Beasley |
Chairman of the Board and Chief Executive Officer (principal executive officer) |
February 23, 2022 | ||
| /s/ B RUCE G. BEASLEY Bruce G. Beasley |
President and Director |
February 23, 2022 | ||
| /s/ B RIAN E. BEASLEY Brian E. Beasley |
Chief Operating Officer and Director |
February 23, 2022 | ||
| /s/ M ARIE TEDESCO Marie Tedesco |
Chief Financial Officer (principal financial and accounting officer) |
February 23, 2022 | ||
| /s/ A LLEN B. SHAW Allen B. Shaw |
Vice-Chairman of the Board |
February 23, 2022 | ||
| /s/ P ETER A. BORDES Peter A. Bordes |
Director |
February 23, 2022 | ||
| /s/ M ICHAEL J. FIORILE Michael J. Fiorile |
Director |
February 23, 2022 | ||
| /s/ L ESLIE V. GODRIDGE Leslie V. Godridge |
Director |
February 23, 2022 | ||
| /s/ C HARLES M. WARFIELD Charles M. Warfield |
Director |
February 23, 2022 | ||
57
Exhibit 21.1
Beasley Broadcast Group, Inc.
Subsidiaries
(State of incorporation)
Beasley Mezzanine Holdings, LLC (DE)
Beasley Media Group, LLC (DE)
Beasley Media Group Licenses, LLC (DE)
OutlawsXP, Inc. (DE)
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 333-219214, 333-145455, 333-115930, and 333-40806) and on Form S-3 (File No. 333-225893) of Beasley Broadcast Group, Inc. of our report dated February 23, 2022 relating to the consolidated financial statements appearing in this Annual Report on Form 10-K.
| /s/ Crowe LLP |
Fort Lauderdale, Florida
February 23, 2022
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Caroline Beasley, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Beasley Broadcast Group, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: February 23, 2022 | /s/ Caroline Beasley | |||
| Title: Chief Executive Officer | ||||
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Marie Tedesco, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Beasley Broadcast Group, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Dated: February 23, 2022 | /s/ Marie Tedesco | |||
| Title: Chief Financial Officer |
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Beasley Broadcast Group, Inc. (the “Company”) hereby certifies to such officer’s knowledge that:
(i) the accompanying Annual Report on Form 10-K of the Company for the year ended December 31, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: February 23, 2022 |
/s/ Caroline Beasley | |||
| Caroline Beasley | ||||
| Chief Executive Officer |
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Exhibit 32.2
Certification of Chief Financial Officer
Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Beasley Broadcast Group, Inc. (the “Company”) hereby certifies to such officer’s knowledge that:
(i) the accompanying Annual Report on Form 10-K of the Company for the year ended December 31, 2021 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Dated: February 23, 2022 |
/s/ Marie Tedesco | |||
| Marie Tedesco Chief Financial Officer |
The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.