Good day, and welcome to the Beasley Broadcast Group 2014 Third Quarter Results Webcast. Today's call is being recorded. At this time, I would like to turn the call over to Ms. Caroline Beasley. Please go ahead, ma'am. .

Thank you, and good morning. Welcome to the Beasley Broadcast Group Third Quarter 2014 Webcast.

Before beginning, I'd like to emphasize that this webcast will contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties described in the Risk Factors 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 S-K. 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 our website..

I'd also remind listeners that following its completion, a replay of today's webcast can be accessed for 5 days on our website, and you can also find a copy of today's press release on the Investors or Press Room sections of the site..

So to say that we've been busy this quarter is an understatement.

Before getting into the details for the quarter, I'd like to remind everyone that, on October 1, the company entered into an asset exchange agreement with CBS Radio, whereby we will swap 5 radio stations, our 2 FMs in Philly and our 2 FMs and 1 AM in Miami for a total of 14 CBS stations, including 7 in Charlotte, 6 in Tampa and 1 in Philadelphia..

As a result of the proposed transaction, we are required to report the stations that CBS will assume ownership of under discontinued operations on the income statement and as assets held for sale on the balance sheet..

So in other words, the results on the income statement, other than income from discontinued operations and that's net of taxes and basic and diluted net income per share from discontinued operations, represent the remaining stations in our portfolio, excluding the 5 stations in Philly and Miami that we're swapping to CBS.

However, we are not including the benefit and financial results of the 14 stations to be added in Charlotte, Tampa and Philadelphia..

As noted at the time we made the announcement, the station exchange will substantially broaden and diversify our local radio platform and revenue base with 14 new stations that are geographically complementary to our continuing operations, while also presenting financial and operating synergies with the company's ongoing station portfolio and digital operations..

Notably, we expect the transaction to be accretive to our SOI in the first 18 months of ownership. So for the quarter, taking into consideration both continuing operations and discontinued operations, net revenue decreased 5.4%, while SOI declined 17.6%.

On a continuing operation basis, net revenue decreased 5%, reflecting revenue declines in our Wilmington and Greenville, Newborn, Jacksonville market clusters. And on a positive note, our initiative to expand our digital offerings resulted in an approximate 22% increase in digital revenue at our stations..

In addition, we generated approximately $170,000 in political this quarter from the continuing ops stations, with the majority from our Fayetteville and Augusta clusters..

SOI on a containing ops basis declined $800,000, which largely reflects the revenue decline. And on a continuing ops basis, we have 3 markets that report to Miller Kaplan and these markets accounted for about 55% of the revenue. The total revenue in these 3 markets increased 3% compared to our station clusters, which were flat. .

For the third quarter, net revenue from discontinued ops decreased 5.9%, reflecting declines in both Miami and Philly. SOI on a discontinued operations basis declined $800,000.

So as you'll note from the press release, net revenues from discontinued operations accounted for about 47% of the total combined revenue, when you combine the continued and discontinued operations of the company..

I'd emphasize that the third quarter was a transitional period, and we look forward to completing the CBS station swap in the current quarter, so that reporting for 2015 will reflect our new platform and our integration initiatives. .

I'd now like to review the performance in our Las Vegas cluster. The Las Vegas market increased 4.4% in the third quarter.

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compares with our cluster declining 2.9%. Our local and national revenue were down, which were partially offset by increases in digital and NTR. As far as ratings in Vegas, Rhythmic AC, KOAS continues to be our cluster leader, with a solid top 5 position with adults, 25-54, and country KCYE and Classic Hits KKLZ remained top 10 players..

Elsewhere, our diary cluster ratings remained strong at this time. In Greenville, Newborn, Jacksonville, we have 4 out of the market's top 6 stations with adults, 25-54, including WIKS, which is #1. The Fort Myers cluster has 2 out of the market's top 3 stations with adults, 25-54, including the #1 station, WRXK.

In Fayetteville, we have the #1 and #2 stations in the market with adults, 25-54, and they are WZFX and WKML. And the Augusta cluster has been #1 station, 25-54, in the market with Kicks Country. Finally, at JBR, in Wilmington, the station had 2 challenged ratings books recently.

However, programming adjustments have been made, following a research study and new promotions and marketing have begun. .

Now turning back to the financials. Corporate G&A, excluding stock-based comp, decreased $100,000 to $1.9 million. However, when we report continuing and discontinued operations, all corporate G&A expense is allocated to continuing operations, which creates a bit of a mismatch with the temporarily lower levels of revenue.

Stock-based comp expense for the quarter was $375,000 and interest expense for the quarter declined approximately 19%. The decrease reflects both the lower cost of borrowing and reduction in principal.

However, this is the other situation where all the interest expense is allocated to continuing operations, which here again creates a mismatch with the temporarily lower levels of revenue..

In Q3, our effective tax rate for the combined continuing operations and discontinued operations was 40%..

Now turning to the balance sheet. During the quarter, we made repayments totaling $3.3 million against our debt. The total debt at the end of the quarter was $99 million.

The latest trailing 12-month consolidated operating cash flow, as defined in the credit agreement and inclusive of continuing operations and discontinued operations, was $27.7 million with our leverage ratio at 3.57x. .

Our credit agreement allows us to receive the benefit of up to $10 million of cash on hand. So in calculating net leverage for the third quarter, it was 3.21x and that compares to our covenant of 4.5x..

Cash on hand, at the end of the quarter, was $13.2 million. And we spent $823,000 in CapEx, of which $713,000 was from continuing operations. Year-to-date, we've spent $2.6 million in CapEx, of which $2.3 million is from continuing operations..

Looking forward, there are a few items I'd like to highlight. First, the decision to enter into an asset exchange agreement with CBS was not made lightly and in some ways bittersweet. However, we believe this decision is in the best interest of our shareholders.

Given today's competitive landscape, operating in markets where you're not fully clustered is challenging. And the proposed exchange provides us with breathing clusters in both Tampa and Charlotte with upside, we believe, in those markets..

The announced transaction places us in a unique position of owning a full complement of FM stations in 7 of the 12 markets, where we will operate. And upon closing the proposed transaction, we'll increase our portfolio of owned and operated stations to 53 with approximately 7.7 million weekly listeners.

Today, we own and operate 44 stations in 11 markets with approximately 7.1 million listeners..

With respect to the new markets we'll be entering upon completion of the swap, Tampa, St. Pete, is the 18th largest radio market when ranked by revenue, while Charlotte is the nation's 24th largest radio revenue market..

We're actively developing post-closing integration, cost efficiency and operating plans and look forward to welcoming the new stations to Beasley.

Our operating initiatives, post closing, will focus on targeted localism and delivering quality programming, effective online marketing solutions and dedicated service to the listeners and advertisers in these markets..

From a financial standpoint, the asset exchange will allow us to meaningfully expand our operating and revenue base without incurring additional borrowings or using cash from operations..

Based on our expectation that the transaction will lead to SOI accretion in the first 18 months after closing, we plan to further reduce the company's leverage ratio, which is presently near its lowest level in 10 years..

Overall, we believe this transaction represents a unique and innovative means for Beasley to enhance shareholder value..

I'd like to add that, overall, our digital and NTR revenue plans are progressing and we're starting to see positive results, as reflected by the 22% growth in continuing operations digital revenue in Q3. We're actively and aggressively managing this business, as it represents a significant near and long-term opportunity..

Finally, despite Q3 industry ad spending trends in our markets, the radio advertising environment generally remains healthy and our long-term experience has shown that our organization-wide focus on core programming and targeted localism continue to support our rating strength..

We believe this focus and the near-term completion of the asset exchange are the best means of improving revenue share across our platform and enhancing shareholder value..

With that, I thank you for your time today. Should you have any questions, as I'm sure there are many, especially given the separation between continuing and discontinued ops, please feel free to give me a call. Thank you. .

This concludes today's conference. Thank you for your participation..