Beasley Broadcast Group Inc (BBGI) 2004 Q3 法說會逐字稿

Good morning ladies and gentlemen, and welcome to your Beasely Broadcast Group Third Quarter Financial Results Conference Call. (OPERATOR INSTRUCTIONS). It is now my pleasure to introduce your host Director of Corporate Communications, Denyse Mesnik. Ma'am you may begin.

Thank you. Good morning everyone and welcome to the Beasely Broadcast Group 2004 Third Quarter Conference Call. Thank you for joining us. Before proceeding, I'd like to emphasis that this call will contain statement that are forward-looking statements relating to the future financial results of Beasely Broadcast Group. This is our caution that such statements are based upon current expectations and assumptions and involve certain risks and uncertainties within the meaning of the US Private Securities Litigation Reform Act of 1995. Listeners should also note that these statements are only predictions. They are subject to inherent risks and uncertainties and may be impacted by several factors, including economic and regulatory changes, the loss of key personnel, a downturn in the performance of our large-market radio stations, the Company's substantial debt levels, and changes in the radio broadcast industry generally.

The Company's actual performance and results could differ materially because of these factors and other factors discussed in the Management's Discussion and Analysis of Results of Operations and Financial Condition Section of our SEC filing. Copies of which can be obtained from the SEC Website www.sec.gov or Beasely Broadcast Group's Website, www.bbgi.com. All information in this conference call is as of October 28, 2004. And the Company undertakes no obligation to update these statements or to update expectations from prior conversations. I would also like to remind listeners that this call is being webcast live over the Internet and that a replay of the call will be available on our corporate Website again that is www.bbgi.com for 14 days after the call ends.

Investors can also find a copy of today's press release on the Investor's or Press Room section at our site. We may discuss certain non-GAAP financial measures within the meaning of item 10 of Regulation S-K during this call. A reconciliation of these non-GAAP measures with their most directly comparable financial measures calculated and presented in accordance with GAAP can be found on the Company's Website. And now it's my pleasure to turn the floor over to Caroline Beasley, our Chief Financial Officer.

Thank you, Denyse. I'd like to welcome everyone to our conference call this morning and there was a busy reporting day; so we'll try to keep our remarks brief and to the point. George Beasley, our Chairman and CEO could not be with us this morning, so after my remarks Bruce and Allen will provide a quick overview of the operating highlights for the quarter.

For the quarter, our revenues increased 8.2 percent. Our Philadelphia clusters revenues increased approximately 22 percent for the quarter. The Company benefited from significant increases at our country station and for the first time this year increases from our rhythmic CHR station. We also continued to see double-digit increases in our Ft. Myers and Las Vegas clusters. Our Miami, Greenville-New Bern, and Fayetteville clusters were also up for the quarter. Station operating expenses increased to 5.8 percent and this increase is primarily due to increased selling expenses. And our station operating income increased 13.2 percent. Interest expense for the quarter decreased to 44.4 percent. The decrease was due to a reduction of the outstanding balance under our credit facilities also lower borrowing costs associated with lower leverage and finally the roll off of certain swabs and colors.

Our effective tax rates for the quarter was approximately 40 percent and current taxes payable were 187,000. As of September 30, our total single debt was 162 million and the weighted trailing 12-month consolidated operating cash flow was 32.5 million for a leverage of 4.98 times. Cash on hand as of 09/30 was 10.4 million. CapEx for the quarter was 561,000 of which 261,000 was maintenance and on a year-to-date basis, we've spent 3.2 million in CapEx, of which 807,000 has been for maintenance.

Now I'd like to go into guidance for fourth quarter, and as we indicated on the press release, we are saying that we expect our revenues to decrease 2 percent for the quarter to 31.5 million. I'd like to spend a little time by setting this revenue numbers because there are several items that directly relate to this decrease. First of all last year the Marlins went to the play off and the World Series. Those games generated an additional $550,000 in revenues. Also there was an NTR that our country station at Miami held last year that generated an additional $235,000 in revenue. However that event lost money, so we chose not to hold it this year. Continuing on our sport station in Miami holds the right to the Florida Panthers Hockey team and since there is a lockout there are no games and therefore no revenues. And finally last year the Dolphins played all their games in third and fourth quarter while this year they are playing 1 game in 2005. So, all these items add up to approximately 1.1 million in revenue. So if you were to compare revenue without these items in fourth quarter '04 projected revenue would increase approximately 1 percent.

Our Philadelphia and Las Vegas clusters are expected to continue their double-digit revenue growth in fourth quarter. Miami on the other hand is expected to struggle partially due to the Miami Dolphins poor performance this year. Also the 4 hurricanes that hit Florida in August and September have impacted fourth quarter bookings in both Miami and Fort Myers and then we do expect our Augusta market to continue to struggle somewhat in the fourth quarter. We expect cost of services and selling, G&A combined to decrease approximately 3 percent and this decrease is directly related to the decrease in revenue explained previously. Our corporate G&A expenses for the quarter are projected to be 1.6 million, D&A expense we are projecting 900,000, we are projecting 2 million in interest expenses for the quarter. Our effective tax rate is 40 percent, we are projecting to become a Federal taxpayer in fourth quarter, incurring approximately 450,000 in Federal taxes and additionally we will incur approximately 300,000 in state taxes, and for those of you who are keeping track of this, we anticipate deferred tax expense to be about 1.4 million for the quarter.

CapEx will be approximately 1.5 million for the quarter with about 1 million of this in investment. A large part of the projected CapEx outlay increased the build out and conversion to HT Radio and also included if the cost has standardized our traffic software system in the Company. This will be the guidance that you receive for fourth quarter. We undertake no obligation to update this information until the next conference call. Thank you very much and I will turn it over to Bruce.

Thank you Caroline. Before I start my comments this morning I would like to congratulate our managers and their local team in our various markets for what we believe is a fantastic job in Q3. I would like to briefly elaborate on some of the numbers, Caroline, just provided and then take a little time to touch on the big picture here at Beasley Broadcast Group. As in prior quarters the underlying driver behind our performance is local revenue strength. For example when looking at Miller Kaplan numbers for the third quarter, our portfolio grew local revenue up 5.3 compared to 3.5 for our markets. We have always placed a strong emphasis on attracting and retaining local advertisers, a skill we originally honed in our mid-size markets, but are now using it to affect markets like Las Vegas, where our market cluster grew local revenue almost twice as fast as the market, up 16.3 versus the market being up 8.4. What's different about this third quarter is the extent to which we also grew national revenue in our 3 largest markets above and beyond this secular growth rate. For example, earlier in the economic recovery our 3 largest market clusters typically won and lost national advertising at the same rate as the competition. In the '04 third quarter, however each of these clusters grew national advertising revenue faster than their markets.

In Miami, national grew at 12.1 compared to the market up 10.6. In Las Vegas our cluster grew 22.9 compared to the market up 18.6 and in Philadelphia we grew an amazing 82.3 compared to the market up 7.7. Together these trends pushed our Company to grow revenue according to Miller Kaplan where we were up 8.4 compared to our markets up 5.3,and remember these are not reported revenues, as these figures do not include trade and NTR contributions, whether they are simply and unadulterated look at how our station clusters are performing on a spot advertising basis. A quick look at some of the category performances during the quarter would back up this analysis. Some of the traditional, national categories like telecom and TV advertising were up 27 and 16 percent respectively over the year ago third quarter. In our main stay local categories such as auto, restaurants and retail were all up 10 to 20 percent.

Caroline did a pretty good job of outlining what we are expecting for Q4. So I won't spend a whole lot of time on that forecast. As you remember, we had a very positive spring book at our Philadelphia and Miami clusters and that is the book we are going to be selling during the second half of '04. I think our Q3 results demonstrate some of the upsides that is possible in stations like WRDW in Philadelphia which reach near break-even in Q3 less than a full year after launch last November. However whether we can continue to generate results in Q4 that outpace the industry remains to be seen as many factors remain beyond our control. But we are optimistic that performance specifically relating to things we can't control such as programming, personnel and ratings should continue to bear fruit in the near future. And with that I will turn it over to Allen.

Thank you Bruce. And as Bruce said, once again the Las Vegas market was one of the fastest growing markets in the country. Our 3-station cluster there continued to outperform the market in the latest quarter. According to , our cluster's spot revenue grew 17.3 percent versus 10.5 percent for the market as a whole. The summer Arbitron report just out yesterday was strong for all 3 stations. KKLZ in particular continued its growth with its 6 consecutive upbooks. KKLZ now has a 4.9 share of adults 2554. KSTJ our AD station is back up to a 5 share from a 4.2 share in the spring and KJUL, our standards music station moved up to number 2, 12 plus and number 2 in its target demo of 3564 adults. The cumulative effect of our audience at revenue growth in recent months has been an increase in our Q3 market revenue share from 13.3 back in 2002 to 14.3 last year and now this year 15.2 percent share of the total market revenue. With over $90 million as spot revenue in the Vegas market, over the last 2 years, Las Vegas has actually contributed 1.7 million in incremental revenue growth for the Company. Now, I will turn the call back to Caroline for questions and answers.

Thank you Allen and at this point we would just open the floor out for questions.

Thank you. The floor is now open for questions. (OPERATOR INSTRUCTIONS). Paul Sweeney, CSFB.

A couple of questions. First, I was wondering if you could just give us a sense how you guys kind of go into your budget process of thinking about Clear Channel's Less is More initiated in '05 and how that may or may not impact you next year. I know in Philadelphia it has been competitive markets related to spotting into their Clear Channel reducing the spot load up to Labor Day and then be a one on one competitor kind of doing so as well and is it kind of what you thought you're seeing there in Philadelphia that is impacting there and maybe '05. And secondly, Caroline, in terms of the fourth quarter guidance, give us a sense maybe just in terms of the months in the quarter specifically post political. Out of the cases for post political, do you think that some of the good results you had in the third quarter might have been the result of either direct political money understations or maybe more appropriately television?

I will address the less is more situations particularly in Philadelphia. As you know, we are starting our budgeting process next week as a matter of fact and we will be going onto the next couple of weeks. As far as we are concerned in Philadelphia, our new rhythmic CHR radio station is running 8 units per hour right now and certainly we don't expect to see that decrease at all as well as our country station in Philadelphia is running anywhere from 12 to 14 units per hour and we believe that we are okay with where we are there. However I do think the less is more situation with Clear Channel will affect us positively in Philadelphia just because there will be less inventory available in the market due to Clear Channel's decrease in their unit loads or in their inventory loads. So I think it will affect us positively.

And then as far as the political Paul, I mean let me just give you a break out on the actuals. How they broke out for us month by month, July we were at 9, August 10 and September 6 percent. So, we are actually up less than 6 in September than the other months I'm sure a portion of this was due to the hurricanes and in August and September that impacted our power stations that you know how much of that is political or less political in the third quarter. We had about 350,000 in political. So, year-to-today we had about 450 comments with political and when I compare that to 2000, think like we are pacing pretty much on track as far as political. So, yes I mean it probably impacted a little bit but I think the offset from the decrease in the hurricane's probably impacted us a little more so we are happy we added that I don't know if it was a major factor.

As you look at to the fourth quarter is that impacting your October, November, and December? Do you see any--?

Yes, I mean last couple of weeks, we seem to have seen the increase in political certainly and also like it's going to impact November since the election knows what November the second. But for October it has -- for October we are looking at -- have ever been up 1 percent, which actually we have seen a swing to the positive a couple of weeks ago we were looking at October being down. So, I think that's probably directly related to political if you compare that last year when we had the more play off in the world series in the October and that was 550,000 in revenues that we just didn't have this year and in fact that we were looking at up 1 percent in October, I think that's pretty good. Hello?

Does that complete the question Paul?

Yes, it does. Thank you.

Marcus Andrew, Deutsche Bank Securities.

Thanks, good morning everybody. Can you talk about how you can improve your national you can control it I mean obviously you have better in the national than the market. Is that due to ratings or is there something definitely you do with your reps and others?

Andrew, obviously ratings impacts national revenues substantially more than it does local revenue-- we met a change last year in our Philadelphia market with the new national sales manager, that we believe positively impacted our growth there and as you saw it was pretty amazing growth in Philadelphia for the third quarter but combination of having a really strong national sales manager and having good ratings gives you an opportunity to see national grow.

With regard to wires in Sicily '05 be year should be another year of well above average growth there or you kind of settle in our power ratio?

No, we expect to see wire grow substantially in'05.

It's great, thank you very much.

Tyler Wallace, UBS

Thank you very much. Maybe this is Bruce or Caroline, typically I think after hurricane Andrew at some point there was a reversal in the insurance dollars going into the market. And then advertising picking up. Have you seen that yet and are you anticipating that at all? And then separately, we have seen some ratings data that suggest that Miami is down for this summer ratings and Bruce maybe you could talk to that a little bit. Does that to have much impact on you-- or is it really the spring book and then its fall that really matters. Thanks.

I will tackle the first question and Bruce will tackle about the second one. Yes, typically in our hurricane we do see an initial dropping revenues and then a big revenue impact. But this past year has not been a typical year in that we saw 4 hurricanes hit or affect at least one of our markets and 6 or 7 weeks period. So, we certainly expect that we will see a benefit of revenues coming back into the markets. I think it's in Florida what it happened in the past but hurricane were on untitled territory and we just have to wait and see but we would expect to see revenues return. But we'd expect to say I'm -- the revenues return.

Yeah, in term as far as ratings in Miami as far as ratings go most business is placed after fall and the spring book. But we have to look at our ratings. We did fall a little bit in Miami. There is nothing wrong with our radio stations there. We believe that the hurricanes had a little bit of an impact -- hurricanes going through that area had a little bit of an impact and we also believe just Arbitron's methodology had a little bit of an impact. So we are very very comfortable with our radio stations there and I see no problems at all going forward.

And Bruce, just a follow up question on inventory. So do you anticipate that next year, if you look across your whole portfolio that you will not be reducing inventory or do you think you will be?

At this point in time, we feel pretty darn comfortable about our inventory levels at all of our radio stations. As we've said many times over the past years that we do.

Leland Westerfield, Harris Nesbitt

Thank you very much and good morning everyone. Two questions if I may and I apologize if you've already dealt with this in some detail but could you again walk me through the demos in Philadelphia and specifically at WRDW. And then secondly, Caroline, in to the fourth quarter adjustments relating to various sports and hurricane issues. If I did my arithmetic right, there would have been on a, say apples-to-apples basis, the fourth quarter would look right now to be growing in the 2 to 3 percent range. Would you concur after the adjustments that you enumerated earlier?

Le, I'll tackle the WRDW issue. We still feel very very positive throughout the radio station, we had a little bit a dip in our ratings and that is certainly not uncommon in a new radio ration. However, as far as our goals are set, we are still number one teams in that market. We slipped from 3rd to 4th; I think 34 well within the range of our short-term goals, which are to be in the top 5, 18 to 34. So, there is really nothing wrong there in that market. It is just growing pains as you do grow. We do have competitors there; they are certainly not going to give up their positions easily. We understand that and we believe we are on the right track.

And then Le as far as the revenue, if you go through your adjustments I do concur with you. Aside from the 1.1 million that we write out in revenues. If you take that out of consideration and if you are looking at the projected increase between 1 and 2 percent then you can consider, cannot be hurricane impact and as I was telling someone this morning I went back and compared the bookings in that 6 or 7 weeks period in Miami and Fort Myers market and we had about 800,000 follow-up bookings in that 6, 7- week period that is for hurricane hit than the prior year. Now how much of that related to the1.1 million. Okay, let's say about $250,000 to $300,000. So they never can have about a half a million dollar impact, which is another couple of percentage point. So, yes, we are looking at 3, 4 percent something like that.

Quickly one followup on that. On the West Coast Florida on the Gulf Coast side in the first 6 months of the year your performance had been something torrid. I think, well into the upper double-digit range above 20 percent in some cases. How is Fort Myers-Naples at this point and in terms of growth?

And for the first three quarters, if you take a look at, how we performed in the first three quarters. First quarter, we were up 33 percent, second quarter we were up 14 percent and third quarter we've been up 20 percent and looking at fourth quarter that market is facing basically flat to slightly up and here again I'll contribute that to the hurricanes

That is good Caroline, you have to turnaround fairly quickly because as we experienced in 1992 with Andrew over on the east coast it will come we are just kind of cautiously waiting for it to come.

(OPERATOR INSTRUCTIONS). David Bank, RBC Capital.

Couple of questions. First I guess in Miami, can you just repeat what your performance was at Miami versus the market for the quarter, and I am not sure if you gave up by local and national or just overall? And then, I just have a couple other questions. Just on in terms of this summer book at power, which was down a little bit, are there any sort of format issue -- format words or anything like that and anything else you can point to? Then also, Caroline, you gave pretty good guidance or explanation, I would say, what is going on in terms of that 1.1 million of revenue. Is it fair to say that all of the business was about break-even, so we just strip out about 1.1 million of expenses in terms of comparing the expenses. And two more, one just clarifying, are you guys paying any federal cash taxes in 4Q and if you could kind of quantify the contributions revenue bottom line on RTW in Philadelphia which I am sure you can't but any -- some description?

David, I will take the POW thing and I will leave the other three to Caroline. Though, there is nothing different, there hasn't been anything different in the Miami market is as far as competitive nature goes for POW and well almost going on two years. So, I think the comment I made earlier, sometimes you get a bad role from arbitral coupled with hurricanes, our 2 consultants Jerry Clifton and Bill Tanner, see nothing wrong as well as our local management team there with Greg Reed and nothing wrong with our radio station there. And I am sure, you will see that radio station top right back up in the full book.

And as far as performance goes in Miami, the market was -- for the third quarter 3 percent and we were up 3 percent for the quarter as well. And this is just passed out. The market was basically flat local and national was up about 11 percent, and we are pretty much performed in Miami with the market. That should answer that question. David, I just not catch your silly question, I can move on to the other one and we can go back to that one. The 1.1 million in revenue adjust there was a corresponding expenses of about 1.1 million that related to that. So, we actually you can just assume that, those items are break-even to the bottom line. We will be a federal cash tax payer in fourth quarter, and as far as the RTW contribution for fourth quarter, station operating income and I am not going to go into detail with that, but we would certainly host that, they would at least break-even.

Okay, are your intervals exhausted is that way you are federal cash tax payer right now?

They will be in fourth quarter.

Okay. And do you know what your annual amortization, book tax differences, in terms of that shelter?

It is about 1.4.

1.4 million.

Thank you very much guys. Sorry for so many questions.

No problem.

(OPERATOR INSTRUCTIONS)

Thank you very much.

Thank you. That does concludes today's conference call. Please disconnect your lines at this time, and enjoy the rest of the day. That does conclude today's conference call. Please disconnect your lines at this time and enjoy the rest of your day.