Caroline Beasley - EVP & CFO.

Welcome to this Beasley Broadcast Group 2014 Fourth Quarter Results. 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 fourth quarter 2014 webcast.

Before beginning, I would like to emphasize that this broadcast will contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties 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 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 would also remind listeners that following its completion, a replay of today's webcast can be accessed for five days on our website. Before getting into the details for the quarter, I would like to remind everyone that on December 1st, the company closed on the asset exchange with CBS radio.

Whereby, we swapped 5 radio stations, including 2 FM's in Philly and 2 FM's and 1 AM in Miami for a total of 14 former CBS stations, including 7 in Charlotte, 6 in Tampa and 1 in Philadelphia. This station exchange substantially broadened and diversified our local radio and marketing solutions platform and our revenue base.

The stations that were added are geographically complimentary to our continuing operation. Since closing, we have been initiating strategies to extract financial and operating synergies. We expect the transaction to be accretive to our SOI in the first 18 months of ownership.

As a result of the transaction on a GAAP basis, we're required to report the five stations that CBS assumed ownership of under discontinued operations on the income statement for both the fourth quarter and full-year, despite having operated them through November.

In addition on a GAAP basis, the 14 stations that we received in this swap from CBS are included in our Q4 and full-year income statements only for the month of December. We recognize that the required reporting does not provide investors with good insights on our current operating base.

In February, we filed an 8-K which provided pro forma revenue, expense and operating income data for the nine months ended 9/30/2014 and the full-year 2013.

In this morning's announcement, we also included a non-GAAP fourth quarter and full-year 2014 pro forma presentation which assumes we began operating the 14 CBS stations and CBS began operating the 5 stations that we exchanged to them as of January 1, 2013.

However, the pro forma presentation does not reflect our recently initiated and planned format, personnel and expense reduction changes in the new markets. All of which we expect to benefit from in our results as we move through 2015 and into 2016.

For the full-year, taking into consideration those continuing ops and discontinued ops, net revenue decreased 3.4%, while SOI was down 12.2%. On a pro forma basis for the year, revenue decreased 1.9% and SOI decreased 1.9%.

When comparing pro forma 2014 results with actual 2013 results, there is a $7.3 million revenue increase and we expect to convert some of this revenue increase into SOI which underscores our optimism that the transaction will be accretive to our results given the SOI margins we've historically achieved.

For the fourth quarter, taking into consideration both continuing and discontinued operations, net revenue decreased 2.2% and SOI was down 13.4%. On a continuing operation basis for the fourth quarter, net revenue increased 23.5% and SOI increased 14.6%. On a pro forma basis, revenue was down 4.3% and SOI was down 8%.

I would emphasize that the fourth quarter was a transitional period by all measures and that we look forward to future reporting which will reflect our new platform, our integration initiative and the initiative under which to drive SOI improvements. Generally, our Charlotte cluster is very strong and a market leader.

There are changes in that market, are and will continue to be focused on optimizing processes and the cost structure. In Tampa, we saw and are working to harness the upside in, what is now, our largest fully-clustered market. In this regard, we closed on the CBS transaction on December 1st and began making changes that week.

We changed the format at WYFF FM in Tampa, from sports talk to Christmas and ultimately a rock based format. We also made a series of management and personnel changes in Tampa and I will address those in a few moments. Both Tampa and Charlotte also continue to streamline functions, while launching and integrating our digital initiatives.

Now moving on to the ratings in our markets, I'm proud to report that the fourth quarter saw tremendous ratings growth in nearly all markets. Overall, our large PPM markets were up by an average of 3.2% with adults 25-54, from Q3 to Q4. In addition, our smaller diary rated markets are up an average of 4.3% from book to book with adults 25-54.

In Tampa which is now our largest market with Mix CHR, WiLD 94.1 saw the largest growth, skyrocketing to number 1 in its target demo of persons 18-49. We also have the number 1 country station in Tampa with WQYK.

Elsewhere, Tampa's legendary Q105 Classic Hits station was flat with adults 25-54 from quarter-to-quarter, while our Spanish CHR station WYUU was down slightly. As noted before, Beasley's Charlotte cluster is very strong with four out of the top seven stations with adults 25-54 and prime.

The largest is country, WSOC which is number 1 in the format in the market and number 2 in the market overall. Charlotte is a very competitive market in the urban format and we have the top two stations with the legendary urban contemporary WPEG and urban AC, WBAV.

The market's number one mainstream AC station, WKQC is also now a Beasley station and, it was the number 1 station in the market for the holiday book. And finally, our sports station, WFNZ is the number 1 all sports outlet in the market.

So overall our Charlotte cluster is incredibly healthy and fits perfectly with our concentrated presence in the mid-Atlantic U.S. This is a region we know very well and we expect to build on the strength of our new Charlotte cluster, as we fine-tune the stations and their operations.

Out west, in Vegas, our largest station remains urban AC KOAS which is top five with adults 25-54. Country KCYE is still the dominant country outlet in the market. And finally, in January, we flipped adult hits KVGS BOB FM to a hot AC and it is now known as Star 107.9.

As mentioned a moment ago, the fall book brought tremendous ratings growth across Beasley diary markets. So, if we look beyond the markets just discussed, urban contemporary Foxy 99 in Fayetteville, North Carolina saw one of the best books in the history of the station, registering a 20.6 share in its target demo of 18-49.

Similarly our urban contemporary 101.9 Kiss FM in the Greenville-New Bern-Jacksonville market notched another double-digit 18-49 book with a 15.4 share marking a lead of over 3 shares compared to the station in second place.

And finally, our country outlet Kicks 99, was once again the number 1 station in the Augusta market with adults 25-54, 18-49 and 18-34, despite a direct competitor. Now turning back to the financials, interest expense for the quarter was down 29% and this reflects both the lower cost of borrowing and reduction in principal compared to Q4 of 2013.

And for those who may not have been aware of the terms of the CBS stations exchange discussed on today's webcast, there was no capital consideration involved. Though we did not incur any borrowings in connection with the transaction and given the expected accretion we actually see it as a delivering event, over time.

The company recorded a $54 million non-cash book gain as a result of the CBS station swap which is reflected in the Q4 and full-year income statements and on our balance sheet in the increase in shareholder's equity.

Additionally, as a result of the exchange we incurred about $1.3 million in transaction-related costs and approximately $500,000 in employee termination expenses in the fourth quarter and full-year of '14. And in 2014, our effective tax rate for the combined, continuing and discontinued ops was 43%.

In addition, we expect to pay about $2.4 million in taxes, specifically related to the CBS swap transaction.

Turning to the balance sheet, during the quarter, we made repayments totaling $1.3 million against our debt which was reduced to $97.7 million and the latest trailing 12-month operating cash flow was $28.1 million, with our leverage ratio at 3.47 times.

And our credit agreement allows us to receive the benefit of up to $10 million of cash on hand, when calculating net leverage, so our net leverage was 3.11 times and that compares to our covenant of 4.5 times. Cash on hand at the end of the year was $14.3 million. Looking ahead in 2015, there are several items I would like to highlight.

First, the CBS station exchange reflects our legacy focus on maximizing and leveraging the value of our stations and we believe the transaction to be beneficial to our shareholders. Immediately as a result of the increased in shareholders' equity and over the long-term as we optimize the programming and cost structure of the new station.

Over the last 50 plus years, Beasley has been built through a series of value-building acquisitions, divestitures and exchanges and we fully expect this transaction to extend our record of success.

Given today's competitive landscape, operating in markets where you're not fully clustered is challenging and the exchange provides us with leading clusters in both Tampa and Charlotte with upsides for different reasons in both markets.

The transaction places us in the enviable position of owning a full complement of FM stations in 7 of the 12 markets where we operate and increases our portfolio to 53 stations. And, we reached 7.7 million listeners on a weekly basis. Now with respect to the new markets we entered, Tampa-St.

Pete is the 18th largest radio market, when ranked by revenue and Charlotte is the nation's 24th largest radio revenue market. Based on Miller Kaplan data, the trailing 12-month radio revenue in Tampa-St. Pete was approximately $115 million for 2014 and in Charlotte it was approximately $84 million.

This represents for Tampa, a 2.6% decrease in market revenue and in Charlotte, a 7% increase in market revenue for 2014. The six-station cluster we acquired in Tampa-St. Pete garnered a competitive share of market revenue and we see several opportunities to build our share in this market.

The seven-station cluster we acquired in Charlotte is the market leader on a revenue basis. And as discussed this morning, our strategy is focused on extending Charlotte's successes and driving some efficiencies in operations. Overall, our post-closing integration cost efficiency and operating plans are proceeding.

One of the top motivations to do the transaction was the upside we had identified in Tampa. And we've acted quickly to begin capitalizing on it. The most notable change that we made in Tampa was the format and call letter change of WYFF from sports talk to rock, with the call letters now WBRN.

The station is now anchored by Tampa Bay's leading morning show personality, Bubba the Love Sponge and we were very pleased with the results to-date. We've already made other meaningful changes in Tampa including transferring two proven Beasley managers to lead our operations in the market.

Kent Dunn was named Vice President and Market Manager and Tee Gentry was named Operations Manager for our cluster. Kent most recently served as Vice President and Market Manager for our Augusta cluster which has consistently been a top performer for us.

And Tee served as our Augusta cluster Operations Manager as well as the PD for our leading station in that market, Kicks 99. With our Tampa programming ratings, and managed term radio and digital experience to the company and our efforts in Tampa.

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 expectations that the transaction will lead to station operating income accretion in the first 18 months after closing, we plan to further reduce the company's leverage. Overall, we believe this transaction represents a unique and innovative means for our company to enhance shareholder value on a mid and long-term basis.

And I note that the transaction resulted in an approximate 34% increase in our book value at 12/31, from 9/30 levels. I would like to add that overall, our digital and NTR revenue plans are progressing and we're seeing positive results as reflected by the double-digit growth in continuing operation's digital revenue in the fourth quarter.

Finally, our long-term performance demonstrates that our organization-wide focus on core programming and targeted localism are supporting the tremendous ratings strength which is clearly evident from the fall ratings results I shared with you a moment ago.

We believe this focus and the application of our commitment to localism to our new markets is the best means of improving revenue share across our platform and enhancing shareholder value. So on behalf of our corporate and station personnel, I would like to thank you for a much for dialing into our webcast today.

And should you have any questions, please free to give me a call. Thank you..

That does conclude today's conference. We thank you for your participation..