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At a glance.
Company: Beasley Broadcast Group
CEO: George Beasley
Headquarters: Naples
Annual revenues (2010): $98 million
Stock symbol: BBGI
52-week stock price (low/high): $3.59/$9.34
Recent stock price: $3.90
Dividend: Suspended
Source: Google Finance
If you've ever thought about taking your company public one day, consider speaking with George Beasley.
Beasley, 79, is the chairman and CEO of Naples-based Beasley Broadcast Group, a company that owns and operates 42 radio stations in 11 markets, from Las Vegas to Miami and Philadelphia.
Beasley overcame two of the biggest drawbacks to taking a company public nearly a decade ago: loss of control and a change in the entrepreneurial culture of the company.
To overcome these challenges, Beasley created a publicly traded company in 2000 with two classes of shares. This accomplished two things: It raised about $99 million in capital while allowing Beasley to retain control of the stock of the company.
Although rare, media companies owned by family enterprises have often used this dual-class share system to raise capital while retaining management control to provide long-term vision. One class of shares owned by the founders has greater voting powers on matters such as board appointments, and another class is sold to the public. Some extremely successful companies, such as Warren Buffett's Berkshire Hathaway and Google, also have adopted this dual-class share structure.
Besides raising capital for acquisitions, Beasley says one of the major benefits of taking his company public was that it strengthened the management controls. When it was privately held, Beasley's radio enterprise was a collection of partnerships and corporations. These were brought together under the Beasley Broadcast Group umbrella and the management had to adapt to the rigors of public ownership. “The way I felt is we'd end up a stronger company with more controls,” Beasley says.
Beasley says he doesn't mind the fact that his personal business is now an open book. For example, Beasley's total compensation was nearly $1.1 million in 2010 and his 53% stake in the company was worth $46 million based on the recent stock price, according to the most recent proxy filings with the Securities and Exchange Commission.
Because his personal fortune is at stake, Beasley stepped in when he felt the common stock fell to unreasonably low valuations in late 2008, repurchasing shares when they fell during the recession. “I was not going to let it tank,” he says.
Beasley, who recently was inducted into the Business Hall of Fame by Junior Achievement of Southwest Florida, estimates a third of his publicly traded radio competitors have been acquired or gone out of business in this recession. “I've never seen anything hit like that,” he says.
But Beasley Broadcast Group has been in business 50 years and its CEO experienced the previous downturn in the early 1990s. “Back then, we had too much debt. We sold off properties and pared down,” Beasley recalls.
So when Beasley saw this most recent economic downturn and a 25% drop in revenues, he suspended dividends, started paying down debt and reduced expenses. So far this year, those efforts are paying off. The company reported a 44% increase in net income to $6.2 million in the first nine months of this year on revenues of $72.5 million compared with the same period a year ago.
A family affair
George Beasley's children manage the day-to-day operations of the company. Bruce Beasley is president and chief operating officer, Caroline Beasley is chief financial officer and Brian Beasley is vice president of operations.
George Beasley was a high school principal in North Carolina when he purchased his first radio station 50 years ago in the hopes of making a better life for his large family. “There were seven of us living in a three-bedroom house,” says Bruce Beasley. “From an early age we were taking vacations and sitting in radio-station lobbies.”
George Beasley says he made sure his children worked in demanding jobs early on. “We found them the crappiest jobs,” he chuckles, recalling one of his children worked in a pickle factory. “We wanted them to know what work was all about.” When they had proved themselves, Beasley agreed they could work in the radio business, starting at the bottom and working their way up.
Major decisions took place around the dining room table — and they still do today. Bruce Beasley recalled his father gathering the family around the dinner table 28 years ago to discuss the acquisition of a radio station in Philadelphia for the then-huge sum of $6 million. It was a make-or-break decision that could have cost the family their entrepreneurial dream, but George Beasley made sure the rest of his family was on board. That tradition continues today despite the fact that Beasley Broadcast is publicly traded.
Bruce, Caroline and Brian have stakes in Beasley Broadcast, so their outlooks are aligned with other shareholders. “We all talk about what's the right thing for the company,” says Bruce Beasley.
The elder Beasley says one key to preserving a harmonious family is that each child in the business has a specific job. “They stay out of each other's way,” he says.
Going public
In the 1990s, the federal government loosened ownership rules that prevented single entities from owning more than two stations in a single market. That allowed Beasley to cluster stations in markets such as Fort Myers, Miami and Philadelphia and offer advertisers multiple formats.
The IPO boom of the late 1990s, spurred by new developments in Internet technology, provided a relatively inexpensive source of capital to make further acquisitions in such cluster markets. Beasley sold 35% of the company in February 2000 for $99 million, just as the IPO boom was ending. “It was a good way to raise capital,” he says.
To do that, Beasley established two classes of shares, according to the prospectus. The 7 million “Class A” shares were sold and listed on the Nasdaq stock exchange, with one vote per share on shareholder matters. The Beasley family retained ownership of 17 million “Class B” shares, with 10 votes per share. Today, the directors and executives of the company own 28.2% of the Class A shares and 85.1% of the Class B shares, which together carry 83.1% of the voting power, according to the most recent proxy statement.
The ownership structure aligns the family's interests with outside shareholders, the Beasleys say. For example, in early December 2008, at the height of the U.S. financial crisis, Beasley Broadcast's Class A stock fell to below $1 for two days. So within weeks, George Beasley acquired more than 1 million shares of that common stock for his own account in a privately negotiated transaction and the company bought another 1 million shares, each for $1 a share. “We have a personal stake,” says Caroline Beasley.
Beasley acknowledges that he is probably more focused on the next quarterly earnings report than he would if he were running a privately held company. “If I were a private company, I'd focus almost entirely on 2012,” he says. And the Sarbanes Oxley rules have been a financial burden on smaller listed companies like Beasley, initially costing the company about $500,000 to implement.
But Beasley says he'd feel the same pressure to produce positive results whether he headed a public or privately held company. Institutional investors rarely call him, he says. “As long as you run it like a business, they're not demanding,” he says.
Still, the company's focus on earnings isn't subject to the whims of speculative shareholders who jump in and out of stocks and make drastic demands. Beasley's stock is thinly traded.
While the family aggressively trimmed company expenses during the downturn, Beasley says it's important to invest in new technologies such as the Internet. “You're dealing with new competition every day,” he says.
Beasley says the Internet has allowed the company to expand by streaming online, though he acknowledges that the company can't command the same advertising rates as traditional radio. In the most recent earnings call, Caroline Beasley told investors that the company has spent about $1 million on capital expenditures in the first nine months of this year.
Beasley continues its investment on HD Radio, a nascent technology that gives radio stations extra channels on the FM band. “It's about three to four years away from where we want it to be,” Beasley says.
But that's the kind of long-term vision that a family controlled business can take. Beasley recalls with some glee what one person told him when he bought his first radio station in 1961, when television was the hot new media: “Radio is a thing of the past.”
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