Beasley Looks for Big-Market Move - Radio World

Beasley Looks for Big-Market Move

As chairman and CEO of Beasley Broadcast Group Inc., George Beasley's to-do list is quite expansive...Near the top of his list are three cities: Philadelphia, Miami and Las Vegas.
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As chairman and CEO of Beasley Broadcast Group Inc., George Beasley's to-do list is quite expansive.

Near the top of his list are three cities: Philadelphia, Miami and Las Vegas.

Making a bigger mark in Philadelphia, where the company already has two FMs and two AMs, Miami (two FMs and three AMs) or Las Vegas (three FMs), would send a message to the industry and investors alike.

Goal line

These markets are the best shot his 40-year-old company has to reach its next milestone - to have a top-rated station cluster in a major market.

It would mean a lot to a family-run radio company that Beasley launched from a 500-watt daytimer in rural North Carolina - a station with a signal that went about as far as a "big yell," as Beasley is fond of saying.

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After all these years, the backbone of the 42-station company remains mid-sized markets, such as Greenville and Fayetteville, N.C., Augusta, Ga., and Ft. Myers, Fla.

Although Beasley has a four-decade-long track record, the company still is a fairly new face to the investment community, having become a publicly traded company only two years ago.

"It was a learning experience," Beasley said of the initial public offering. Its $99 million proceeds helped fund the Centennial Broadcasting acquisitions last year.

"It's not bad, it's just different. If the market is good you can go out and raise needed money."

Paul T. Sweeney is the equities managing director at Credit Suisse First Boston in New York and a radio industry analyst. He said that when the recession and Wall Street skittishness disappear, Beasley Broadcast will be well-positioned to benefit from the investments it has made in its larger markets, particularly Philadelphia and Miami.

"I think the company's long-term growth prospects are quite good. There's a lot of upside in the larger markets," Sweeney said.

Surprise moves

The "upside" in major markets is something with which Beasley does have some experience. The company caused the industry do a double-take in 1988 with its $87 million purchase of KRTH(AM/FM) in Los Angeles.

After all, Beasley Broadcast was a virtual unknown on the west coast. No one expected a family-owned company headed by a former high school principal from North Carolina to make a play in the cutthroat Los Angeles market.

"One writer said if he was trying to pick a company that would end up with KRTH, we would have been last on his list," Beasley said. "I think that was the first time the industry took notice of us."

Beasley unloaded the AM station a year later but turned the FM into a perennially top-five-rated station in the 25-54 demographic. The company sold the FM to Infinity Broadcasting Corp. in 1993 for $117 million, then the highest price ever paid for a stand-alone FM station.

The proceeds of the sale helped Beasley purchase Philadelphia's WDAS(FM) for $26 million. Beasley turned the property into a high-revenue urban station and sold it in 1996 for $103 million to Evergreen Media Corp.

Seeking out underperforming stations in growth markets and turning them around with its unique brand of operational prowess has been the cornerstone of the company's strategy.

Turning point?

But the company is at a crossroads, so to speak, and George G. Beasley is scanning the horizon for his next opportunity.

"We would like to increase our share of the revenue (in the big markets) and I think we can," Beasley said. "As we go forward, when we finally emerge from this economic slump, it may be prudent for us to add additional stations."

Beasley acknowledges that won't be easy in this current economic climate. Growth capital is harder to come by since the recession curbed advertising spending and caused capital markets to tighten up.

In 2001, Beasley's broadcast cash flow fell to $32.3 million, a 6.2-percent decrease from the previous year. After-tax cash flow fell 17 percent during the same period. The company's long-term debt more than doubled in the fiscal year period 2000 to 2001, from $103 million to $210 million, while its working capital shrank from $18 million to about $6 million during the same period, according to BIA Financial Network.

Market return

Recent market conditions, coupled with Beasley Broadcast's debt load and low stock price ($14.45 at the end of February) have derailed his recent attempts to raise capital for acquisitions.

Beasley said he is waiting for a rebound in advertising to increase his cash flow margins, allowing him to pay down debt to the point where he can justify raising new capital through an equity offering.

"Nobody wants to go out and raise money with current stock prices being what they are," Beasley said.

Beasley spent heavily in 2001. The company's net loss of $21.8 million during 2001 reflects expenses related to the acquisitions it made during the year, including its January 2001 entry into the Las Vegas market with the purchase of three FMs from Centennial Broadcasting.

Part of the $113.5 million deal included two FMs and an AM in New Orleans, which Beasley promptly sold to Wilks Broadcasting LLC for $23 million. Beasley kept the AM to run on a brokered programming basis.

No. 1 in Augusta

In April, Beasley acquired two highly rated FM stations in the Augusta, Ga. market for approximately $12.0 million from GHB Broadcasting Inc., helping the Beasley cluster become the market's No. 1 in revenue, according to the BIA Financial Network.

Aside from the acquisitions and a slowdown in advertising, the company's financials were impacted by a $1.5 million format change in Philadelphia during the fourth quarter of 2000 and an unprofitable sports broadcast contract at its WQAM(AM) in Miami.

Beasley flipped its Philadelphia FM talker WWDB(FM) to '80s music format WPTP(FM). The move ousted midday talk personality Irv Homer and brought in a new group of veteran programmers, promotions staff and on-air personalities from across town and the country.

Among the standouts were well-known Philadelphia radio veteran Kim Douglas, now WPTP's midday personality. She was most recently with Jerry Lee's highly rated WBEB(FM).

In the summer 2000 Arbitron book, prior to the format flip, the station had a 1.3 share of adults 25-54, Monday-Sunday, 6 a.m. to midnight, making it No. 20 in the market. During the same book the following year, the station garnered a 3.9 share in the same demographic and daypart, moving up to the No. 11 spot.

The Miami sports contract, which Beasley entered into in 1997, gave it exclusive broadcast rights for the Miami Dolphins, Florida Marlins and Florida Panthers games. But the fees associated with the contract have proved costly.

Painful

As of Sept. 30, 2001, the expenses related to the deal have exceeded revenues by more than $3 million, according to the company.

Beasley Broadcast reports that its cash and credit are sufficient to fund its existing operations for the next 12 months. However, until the equity markets pick up, Beasley said he won't consider making any acquisition that is not an "unusually good opportunity."

Of course, Beasley Broadcast's competitors, many of whom are much larger than the Naples, Fla.-based company, are in the same financial boat.

"It's a very difficult advertising environment for media companies right now," said Sweeney in the first months of this year. "I think 2001 will go down as one of the worst years in radio advertising and Beasley has not escaped that."

The current economy aside, Beasley said he is optimistic about the growth prospects at his major-market clusters and the continued development of in-band/on-channel digital audio broadcasting technology, which he said will revolutionize the broadcast industry and help his company's 16 AMs.

"We're looking to convert all of our stations to digital as soon as the IBOC is in place. We expect that sooner rather than later," Beasley said.

"At that point, FM will sound like CD and AM will sound like FM does today. We will sound as good as those broadcasters broadcasting from satellite."

Beasley is excited about the potential impact of the Internet as well, although his company has backed away from streaming, principally because of royalty issues raised by the record labels, he said.

Internet

Beasley Broadcast primarily uses its Web sites to direct listeners to contests, concert information and bios of its on-air talent.

Some Beasley stations, such as its news-talk WGAC(AM) in Augusta, Ga., have been able to generate revenue by hosting online auctions of merchandise that companies trade for radio ad spots.

Beasley is a staunch believer in the long-term value of traditional radio, saying it will always be a locally driven medium whose signal is free.

Beasley Broadcast has placed a premium on signal strength following its experience with its first major-market station acquisition, WDMT(FM) in Cleveland, for $200,000 in 1976. The station's tower was too low because of its proximity to an airport.

"Every time we would break with a new format and get good ratings, someone with a better signal would come and take it away from us," Beasley said.

The airport eventually closed and Beasley was able to flip the station to a profitable urban format, selling the station to Ardman Broadcasting Corp. for $4.7 million in 1987.

"That taught me a lesson - if you're going to be competitive, you've got to have good signals," said Beasley, who now has four of his five children working at BBGI.

His son Bruce is president and co-chief operating officer, daughter Caroline is vice president and chief financial officer, son Brian is vice president of operations and Brad is general manager of three Beasley Broadcast stations in Fort Myers.

Beasley said the key to his company's past success, as well as its future, lies in its 600 employees.

"We're not so large that we don't know most of the people by name," Beasley said.

But Beasley Broadcast is large enough to have a fairly steady demand for employees, particularly salespeople, who are actively being sought by the company. Beasley has never cut back on his sales staff, not even during recessions.

"I think the people who work in this company are the most important assets we have," he said.

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