Beasley Broadcast Group Inc (BBGI) 2008 Q4 法說會逐字稿

Welcome to the Beasley Broadcast Group fourth quarter webcast. Before beginning, I would like to emphasize that this webcast will contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties that are described in the Risk Factor section of our most recent Form 10-K. Today's webcast will also contain a discussion of certain non-GAAP financial measures within the meaning of Item 10 of [Reg SJ].

A reconciliation of these non-GAAP measures with their most directly comparable financial measures, calculated and presented in accordance with GAAP, can be found in this morning's news announcement and on the Company's website. I'd also remind listeners that following its completion, a replay of today's webcast can be accessed for five days on the Company's website, bbgi. com. Investors can also find a copy of today's press release on the Investors or Press Room sections of the sites.

Bruce Beasley, our President and COO, is with me this morning. Our remarks will focus on the fourth quarter results and our markets, after which we will address questions that were emailed to our investor relations inbox. Our decision to host a webcast this morning allows us to maintain our interaction with investors and Wall Street, while providing some additional savings of our prior practice of having both a conference call and webcast.

Before the fourth quarter, our net revenue decreased 12.9%. The majority of the revenue decline is from our Fort Myers, Las Vegas and Miami clusters, as these markets continue to be significantly impacted by the real estate slowdown and financial crisis. The Philadelphia and Crystal Carolina clusters also experienced significant declines in the quarter. However, quarterly revenue at our (inaudible) North Carolina cluster increased 8% compared to last year, and this reflects primarily strong political spending in the fourth quarter.

Speaking of political, we recorded approximately $1.5 million in political revenue for the quarter and approximately $2.4 million in political for the year. In the six of our 11 markets that report to [Miller Kaplan], our clusters performed in line with our markets on a combined basis, as [tunnel] revenue in these markets and our clusters both declined 15.5%. Notably our clusters outperformed their markets on a local revenue basis, with our stations down 18.3%, compared to the markets down 20.6%.

However, our clusters did not perform in line with markets on a national basis with BBGI's being down 16%, compared to the markets down 8.9%. We believe this is partly attributable to [inter rep] Chapter 7 filing during the period and the transition of our national [rep firm to cap]. According to Miller Kaplan, the Philadelphia market declined 9.9%, compared to our stations which decreased 10%. Our clusters underperformance is a direct result of national, and local and other revenue outperformed the total [billing] markets.

In Miami, total market revenue declined 18.5%, while our total Miami cluster revenue declined 9.2%. Just as in Philly, local and other outperformed the markets, while national underperformed. The Las Vegas market remains among the most economically challenged in the country with a total market revenue decline of 18.3% and our station cluster down 27.6%. Fort Myers also remains extremely weak with quarterly market revenue 27.3% behind last year and our clusters declining 29.4%.

Despite the extremely challenging operating environment, we had another quarter of growth related to our interactive and off-air initiatives with revenue from these sources rising 31% and accounting for 5.2% of the Company's total fourth quarter revenue. In total, we recorded about $1.6 million in quarterly interactive revenue and generated net margins in excess of 50% on this revenue. Station operating expenses for the quarter decreased 11.5%. And this decline reflects lower sales expenses related to revenue levels and across-the-board expense discipline.

Our station operating income decreased 16.4%, or by $1.6 million to $8.3 million. Corporate G&A, excluding stock-based compensation expense, was $1.6 million for the quarter, or a decrease of 20% or approximately $400,000. The reduction reflects lower compensation expense and other cost cutting measures, partially offset by an increase in the Company's continued investment in interactive.

Stock-based compensation expense for the quarter was down 32% and we recorded approximately $400,000. During the fourth quarter, we repurchased approximately 1.1 million shares of BBGI stock for a total of $1.1 million. At the same time, George Beasley, our Chairman and CEO, purchased approximately 1.1 million shares of BBGI stock for a total of $1.1 million. For the year, the Company repurchased approximately 1.2 million shares for a total of $1.8 million.

Interest expense for the quarter was down by 36% to $2.1 million. This primarily reflects lower borrowing costs and voluntary repayment under our credit facility. During the quarter, we made voluntary repayments totaling $4.6 million. And for the full year, we made voluntary repayments of $16.6 million. The 2008 fourth quarter and full-year operating losses reflect a non-cash pretax impairment charge of $62.5 million or $1.66 negative per share, related to the annual impairment test of our FCC licenses and our goodwill in our Wilmington, Las Vegas, Augusta, West Palm Beach, Atlanta, and Boston markets. This is a result of the decrease in the projected revenue growth rate in these markets.

Excluding the impact of this charge and reflecting the efficiencies achieved for cost reductions, our fourth quarter and full-year net income and net income per share equaled or exceeded the results from the comparable 2007 period. Our effective tax rate for the year was approximately 37.3% and there were no current cash taxes.

Turning to the balance sheet as of 12/31/08, total senior debt was $174.5 million. And the latest trend 12-month consolidated operating cash flow was $28.9 million for a leverage ratio of 6.04 times. This compares to our leverage covenant of 6.25 times as of 12/31. Under the existing terms of the credit agreement, the Company has a leverage covenant set down to 5.75 times as of March 31st, 2009. We are in discussions with our lenders to obtain an amendment to the credit agreement to address this set down. Cash on hand as of 12/31/08 was $3.5 million. We spent $268,000 in CapEx for the quarter and $1.6 million for the full year.

I hope today's report highlights the ability of our station and corporate personnel to effectively manage our portfolio of stations in this extremely challenging environment. And while this cost discipline and focus has positioned the Company to benefit when radio advertising demand returns to more normal levels. I will now turn it over to Bruce and we'll address some of the questions that were emailed following his comments. Thank you. This morning, I will spend a few minutes adding some color to Caroline's comments in terms of our markets and other issues of importance to regular investors at this time. In '08, we faced one of the most challenging operating environments in the Company's history due to the recession. We've taken decisive action in addressing this environment on several fronts, as we significantly reduced cost at the station corporate levels, made voluntary debt repayments, completed significant Company share repurchases, further built our interactive business, strengthened our national rep alliance, and added network affiliations at stations.

Nevertheless, the full-year and fourth quarter revenue levels reflected the impact of the unprecedented slowdown across the majority of our markets and most ad categories. While we are inundated with daily servings of negative economic news, I can tell you that radio is here to stay. That recent listening and usage trends confirm that this is an industry that will continue to play a roles in people's lives. Our job is to keep our people in business and it would be more important to help us with them emerging from today's difficult environment.

We've faced and managed through every other recessionary period in our 45-plus years of operation in the radio industry. From our perspective, Beasley has a solid standing in most markets programming-wise, we continue to identify additional areas for cost savings. And we have our A-players in place at every level of our organization who are up to the challenges we are facing. BBGI has proven the effectiveness of our interactive model with advertisers and we've been awarded with consistent growth with interactive revenue, accounting for over 5% of Q4 revenue and approximately 4.8% of our total revenue in '08. On a dollar basis, BBGI's '08 interactive and off air revenues rose $5.8 million. That's an increase of about 39% over last year.

Let me take a few minutes to expand on some of Caroline's remarks about our markets. In Miami, our managers are doing a very good job. We believe we can continue to outperform the market, particularly as we complete the transition of our national rep business to cap. R96, our [olympic] radio station in Miami, ratings show that the station remains first in its target demo and these ratings will help in our effort to grow national revenue. In Philadelphia, the cluster has consistently been outperforming the market, and -- which continues to do so relative to the market on a local basis.

We also -- the market was hindered by a shift in the rep firms, as well as by lingering PPM issues, both of which impaired our national sales revenue. While wires fared pretty well through the PPM issues of '08 and has been a stellar performer with interactive, our country station in the market, WXTU, is facing challenges related to the adaptation of electronic measurement technology and sample sizes. While we continue to be advocates of PPM, it's clearly impacted the Philadelphia results for us and other broadcasters in the market for over a year.

PPM was understandably in certain demos and this hurt WXTU in the second half of '08, as the station bounced from number seven in the 25 to 54 demo to number 15. We are dealing first hand with the problem, but we are hindered by the pace of correction by Arbitron. We have seen improvements in terms of sample size and consistency of PPM data. And WXTU has been moving in the right direction. In the next year, PPM will be introduced into Miami. Having been an early adapter of the technology, we believe we understand how to manage programming to deliver appropriate PPM ratings.

Moving to Las Vegas, this market continues to be is a severely economically challenged. Our strategy here is to set the cluster up to be successful as the economy rebounds. Last fall, we brought former CBS Las Vegas radio veteran, Tom [Holm], in as market manager for our five station cluster and the transition has been very positive. As our third largest market, the health and growth of our cluster is a priority. I'm pleased that our persistence in identifying the right leadership for this market has paid off, but we have a lot of work ahead of us. And the market is showing no signs of improvement in the near term.

The other market in our portfolio, that's in the ICU, is Fort Myers and Naples. President Obama's visit here last month brought some visibility and focus to exactly how challenged this market is. We're in good standing in the market with our stations, personnel, programming, and we made progress with improvements in our rock station, based on a change in the morning show. Locally, the tourist market remains relatively healthy. Residents and merchants are hopeful that the stimulus package will play a role in stabilizing real estate by allowing people to stay in homes and that would be an important first step towards recovery. Still it's too early to expect much upside for Fort Myers, so we remain disciplined with expense reduction and cost containment programs which don't impair our programming and sales efforts.

Several of our other mid-sized markets are also reporting that they expect the stimulus package to generate economic activity later this year. For example, the Fayetteville market is expected to benefit from military jobs creation while in Augusta, a nuclear power plant should provide economic benefits. As I mentioned earlier, no ad reliant business has been immune from the impact of ad spending declines.

We taken accepts throughout the year and throughout our organization to reduce expenses significantly, but have done so while continuing to prudently invest -- increase investments in new technologies, new revenues initiatives, and in our sales and marketing capabilities in order to drive future growth. While the near-term outlook on the economy remains extraordinarily challenging, we remain positive about the long-term prospects for the industry and the Beasley Broadcast Group.

We are confident in our station, and our corporate level manager, salespeople, on air talent, programmers, promotion staff and everyone throughout the Company who continue to step up to the current challenges to ensure we capitalize on the strongest positions that we've built in our markets. With that, we will address a couple of questions that have been emailed to us. Caroline, I will turn that over to you.

Okay. The first question that I have is from Tracy Young with JP Morgan. She had a number of questions, but I think there was only one question not addressed in our comments and that is, what is the after tax charge on impairment. That dollar amount, after taxes, is approximately $38.4 million. Another question we received on our debt situation, as well as our competitors' debt situation. We feel that we've addressed on our call the status of where Beasley is. And I would just have to ask you all to inquire with our competitors about theirs.

With that, that does conclude the questions that we received. And it does conclude our call. Thank you for taking the time today to listen. Thank you very much.