BEASLEY BROADCAST GROUP INC - Quarter Report: 2005 September (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the Quarterly Period Ended September 30, 2005

OR

Commission File No. 0-29253

BEASLEY BROADCAST GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)

3033 Riviera Drive, Suite 200

Naples, Florida 34103

(Address of Principal Executive Offices and Zip Code)

(239) 263-5000

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class A Common Stock, $.001 par value, 7,620,888 Shares Outstanding as of November 1, 2005

Class B Common Stock, $.001 par value, 16,792,743 Shares Outstanding as of November 1, 2005

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BEASLEY BROADCAST GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

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BEASLEY BROADCAST GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

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BEASLEY BROADCAST GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

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BEASLEY BROADCAST GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

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BEASLEY BROADCAST GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1)    Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been omitted pursuant to the SEC rules and regulations. The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of management, all adjustments necessary to present fairly the financial position and results of operations for the periods indicated.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and include the consolidated accounts of Beasley Broadcast Group, Inc. (the “Company”) and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet as of December 31, 2004 has been derived from the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2004. The financial statements and related notes included in this report should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

Results of the third quarter of 2005 are not necessarily indicative of results for the full year.

Certain amounts previously reported in the 2004 condensed consolidated condensed financial statements have been reclassified to conform to the 2005 presentation.

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BEASLEY BROADCAST GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

(2)    Stock-Based Employee Compensation

As of September 30, 2005, the Company has one stock-based employee compensation plan. The Company accounts for this plan under the recognition and measurement principles of APB Opinion 25, Accounting for Stock Issued to Employees. The following table illustrates the effect on net income and net income per share as if the Company had applied the fair value recognition provisions of SFAS 123, Accounting for Stock-Based Compensation, as amended by SFAS 148, Accounting for Stock-Based Compensation-Transition and Disclosure, to stock-based employee compensation.

On July 1, 2005, the Company granted 267,500 shares of restricted stock to certain employees under its current stock-based employee compensation plan with a fair value of $14.38 per share, the closing stock price on the grant date. The restricted shares generally vest ratably and become fully vested after a period of three to five years from the date of grant. The fair value of the restricted stock was $3.8 million as of the grant date and was recorded as unearned compensation, a component of stockholders’ equity. Compensation expense will be recognized over the respective vesting period of each grant. For the three and nine months ended September 30, 2005, the Company recorded stock-based employee compensation of $0.8 million related to the issuance of restricted stock.

(3)    Recent Accounting Pronouncements

In December 2004, FASB issued SFAS 123(R), Share-Based Payment. SFAS 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

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BEASLEY BROADCAST GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

SFAS 123(R) replaces SFAS 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion 25, Accounting for Stock Issued to Employees. SFAS 123(R) eliminates the alternative to use Opinion 25’s intrinsic value method of accounting that was provided in SFAS 123 as originally issued. Under Opinion 25, issuing stock options to employees generally resulted in recognition of no compensation cost. SFAS 123(R) requires entities to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant date fair value of those awards. On April 14, 2005, the SEC announced an amendment to the compliance dates for SFAS 123(R) that delays the effective date for calendar year-end companies until the beginning of 2006. The Company has not completed its evaluation of the impact of the adoption of SFAS 123(R).

(4)    Termination of Asset Purchase Agreement

In June 2004, the Company entered into an asset purchase agreement to acquire WGQR-FM and WBLA-AM in the Elizabethtown radio market in North Carolina for approximately $850,000. On June 24, 2005, the FCC released a decision denying the request for waiver of the multiple ownership rules that the Company had filed in connection with its application to acquire WGQR-FM and WBLA-AM. The decision also dismissed the related pending assignment application. Consequently, the asset purchase agreement was effectively terminated on June 24, 2005 and the Company wrote off $141,000 of previously capitalized costs related to the asset purchase agreement.

(5)    Long-Term Debt

Long-term debt is comprised of the following:

As of September 30, 2005, the revolving credit loan had a maximum commitment of $75.0 million and included a $10.0 million sub-limit for letters of credit, which may be increased to $20.0 million upon the Company’s request and with the approval of the Bank of Montreal, Chicago Branch in its capacity as a letter of credit issuer. At the Company’s election, the revolving credit loan and term loan may bear interest at either the base rate or LIBOR plus a margin that is determined by the Company’s debt to operating cash flow ratio. The base rate is equal to the higher of the prime rate or the overnight federal funds rate plus 0.5%. Interest on base rate loans is payable quarterly through maturity. Interest on LIBOR loans is payable on the last day of the selected LIBOR period and, if the selected period is longer than three months, every three months after the beginning of the LIBOR period. The revolving credit loan and term loan carried interest, based on LIBOR, at 4.2858% and 5.125% as of December 31, 2004 and September 30, 2005, respectively, and mature on June 30, 2011. The scheduled reductions in the amount available under the revolving credit loan may require principal repayments if the outstanding balance at that time exceeds the maximum amount available under the revolving credit loan.

As of September 30, 2005, the Company had $73.0 million in remaining commitments available under the revolving portion of its credit facility; however, as of September 30, 2005, the Company’s maximum consolidated total debt covenant would have limited additional borrowings to $51.4 million.

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BEASLEY BROADCAST GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

The credit facility is secured by substantially all of the Company’s assets and guaranteed jointly and severally by all of the Company’s subsidiaries. The guarantees were issued to the Company’s lenders for repayment of the outstanding balance of the credit facility. If the Company defaults under the terms of the credit agreement, the subsidiaries may be required to perform under their guarantees. The maximum amount of payments the subsidiaries would have to make in the event of default is $148.2 million. The guarantees for the revolving credit loan and term loan expire on June 30, 2011.

As of September 30, 2005, the scheduled repayments of the credit facility for the remainder of fiscal 2005, the following four years and thereafter are as follows:

The Company is required to satisfy financial covenants under its credit facility, which require it to maintain specified financial ratios and to comply with financial tests, such as ratios for maximum consolidated total debt, minimum interest coverage and minimum fixed charges. As of September 30, 2005, these financial covenants included:

Failure to comply with these financial covenants, scheduled interest payments, scheduled principal repayments, or any other terms of its credit facility could result in the acceleration of the maturity of its outstanding debt. The Company believes that it will have sufficient liquidity and capital resources to permit it to meet its financial obligations for at least the next twelve months.

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BEASLEY BROADCAST GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)—(Continued)

As of September 30, 2005, management of the Company believed it was in compliance with applicable financial covenants.

On June 27, 2005, the Company’s credit agreement was amended to, among other things, reduce the rate of interest it pays on each loan made thereunder.

(6)    Income Taxes

The Company’s effective tax rate is approximately 40%, which differs from the federal statutory rate of 34% due to the effect of state income taxes and certain expenses that are not deductible for tax purposes.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion together with the financial statements and related notes included elsewhere in this report. The results discussed below are not necessarily indicative of the results to be expected in any future periods. This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including any projections of earnings, revenues or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” and other similar words. Such forward-looking statements may be contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” among other places. Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as unforeseen events that would cause us to broadcast commercial-free for any period of time, and changes in the radio broadcasting industry generally. We do not intend, and undertake no obligation, to update any forward-looking statement. Key risks to our company are described in our annual report on Form 10-K, filed with the Securities and Exchange Commission on March 2, 2005.

General

We own and operate 41 radio stations in the following markets: Atlanta, GA, Boston, MA, Philadelphia, PA, Miami-Ft. Lauderdale, FL, Las Vegas, NV, West Palm Beach-Boca Raton, FL, Ft. Myers-Naples, FL, Fayetteville, NC, Greenville-New Bern-Jacksonville, NC, and Augusta, GA. We refer to each group of radio stations that we own in each radio market as a market cluster.

Recent Developments

On July 1, 2005, we granted 267,500 shares of restricted stock to certain employees under our 2000 Equity Plan with a fair value of $14.38 per share, the closing stock price on the grant date. The restricted shares generally vest ratably and become fully vested after a period of three to five years from the date of grant. The fair value of the restricted stock was $3.8 million as of the grant date and was recorded as unearned compensation, a component of stockholders’ equity. Compensation expense will be recognized over the respective vesting period of each grant. For the three and nine months ended September 30, 2005, we recorded stock-based employee compensation of $0.8 million related to the issuance of restricted stock.

On June 27, 2005, our credit agreement was amended to, among other things, reduce the rate of interest we pay on each loan made thereunder.

In June 2004, we entered into an asset purchase agreement to acquire WGQR-FM and WBLA-AM in the Elizabethtown radio market in North Carolina for approximately $850,000. On June 24, 2005, the FCC released a decision denying the request for waiver of the multiple ownership rules that we had filed in connection with our application to acquire WGQR-FM and WBLA-AM. The decision also dismissed the related pending assignment application. Consequently, the asset purchase agreement was effectively terminated on June 24, 2005 and we wrote off $141,000 of previously capitalized costs related to the asset purchase agreement.

Financial Statement Presentation

Net Revenue.    Our net revenue is primarily derived from the sale of advertising airtime to local and national advertisers. Net revenue is gross revenue less agency commissions. Local revenue generally consists of

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advertising airtime sales to advertisers in a radio station’s local market either directly to the advertiser or through the advertiser’s agency. National revenue generally consists of advertising airtime sales to agencies purchasing advertising for multiple markets. National sales are generally facilitated by our national representation firm, which serves as our agent in these transactions.

The advertising rates that we are able to charge and the number of advertisements that we can broadcast without jeopardizing listener levels generally determine our net revenue. Advertising rates are primarily based on the following factors:

Our net revenue is affected by general economic conditions, competition and our ability to improve operations at our market clusters. Seasonal revenue fluctuations are also common in the radio broadcasting industry and are primarily due to variations in advertising expenditures by local and national advertisers. Typically, revenues are lowest in the first calendar quarter of the year and highest in the fourth calendar quarter.

We use trade sales agreements to reduce cash paid for expenses by exchanging advertising airtime for goods or services; however, we minimize our use of trade sales agreements to maximize cash revenue from our inventory of airtime. The following summary table presents a comparison of our trade sales revenue and expenses.

Operating Expenses.    Our operating expenses consist primarily of (1) programming, engineering, and promotional expenses, reported as cost of services, and selling, general and administrative expenses incurred at our radio stations, (2) general and administrative expenses, including compensation, insurance and other expenses, incurred at our corporate offices, (3) stock-based employee compensation, and (4) depreciation and amortization. We strive to control our operating expenses by centralizing certain functions at our corporate offices and consolidating certain functions in each of our market clusters.

Income Taxes.    Our effective tax rate is approximately 40%, which differs from the federal statutory rate of 34% due to the effect of state income taxes and certain of our expenses that are not deductible for tax purposes.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect reported amounts and related disclosures. We consider an accounting estimate to be critical if:

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Impairment of FCC Broadcasting Licenses and Goodwill.    We are required to estimate the fair value of our FCC broadcasting licenses and reporting units on at least an annual basis. To estimate the fair value of our FCC broadcasting licenses as of December 31, 2004, we obtained appraisals from an independent appraisal company. The appraisal company estimated the fair values of our FM broadcast licenses using discounted future cash flows and the fair values of our AM licenses using a market valuation approach. The appraisal includes several assumptions and estimates including the determination of future cash flows and an appropriate discount rate. If the appraisal company had made different assumptions or used different estimates, including those used to determine future cash flows and the discount rate, the fair value of our FCC broadcasting licenses could have been materially different. We used internally-generated estimates of future cash flows to determine the fair value of each of our reporting units as of December 31, 2004. These estimates required management judgment and if we had made different assumptions the fair value of our reporting units could have been materially different. We did not record any impairment losses on our FCC broadcasting licenses or goodwill in 2004. There can be no assurance that impairment of our FCC broadcasting licenses or goodwill will not occur in future periods.

Impairment of Property and Equipment.    We are required to assess the recoverability of our property and equipment whenever an event has occurred that may result in an impairment loss. If such an event occurs, we will compare estimates of related future undiscounted cash flows to the carrying amount of the asset. If the future undiscounted cash flow estimates are less than the carrying amount of the asset, we will reduce the carrying amount to the estimated fair value. The determination of when an event has occurred and estimates of future cash flows and fair value all require management judgment. The use of different assumptions or estimates may result in alternative assessments that could be materially different. We did not identify any events that may have resulted in an impairment loss on our property and equipment in 2004 or during the nine months ended September 30, 2005. There can be no assurance that impairment of our property and equipment will not occur in future periods.

Valuation of Accounts Receivable.    We continually evaluate our ability to collect our accounts receivable. Our ongoing evaluation includes review of specific accounts at our radio stations, the current financial condition of our customers and our historical write-off experience. This ongoing evaluation requires management judgment and if we had made different assumptions about these factors, the allowance for doubtful accounts could have been materially different.

Recent Pronouncements

In December 2004, FASB issued SFAS 123(R), Share-Based Payment. SFAS 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. SFAS 123(R) replaces SFAS 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion 25, Accounting for Stock Issued to Employees. SFAS 123(R) eliminates the alternative to use Opinion 25’s intrinsic value method of accounting that was provided in SFAS 123 as originally issued. Under Opinion 25, issuing stock options to employees generally resulted in recognition of no compensation cost. SFAS 123(R) requires entities to recognize the cost of employee services received in exchange for awards of equity instruments based on the grant date fair value of those awards. On April 14, 2005, the SEC announced an amendment to the compliance dates for SFAS 123(R) that delays the effective date for calendar year-end companies until the beginning of 2006. We have not completed our evaluation of the impact of the adoption of SFAS 123(R).

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Three Months Ended September 30, 2005 Compared to the Three Months Ended September 30, 2004

The following summary table presents a comparison of our results of operations for the three months ended September 30, 2004 and 2005 with respect to certain of our key financial measures. These changes illustrated in the table are discussed in greater detail below. This section should be read in conjunction with the condensed consolidated financial statements and notes to condensed consolidated financial statements included in Item 1 of this report.

Net Revenue.    The $0.3 million increase in net revenue during the three months ended September 30, 2005 was primarily due a $1.3 million increase at our Philadelphia market cluster and a $0.4 million increase at our Ft. Myers-Naples market cluster due to improved performance. These increases were partially offset by a $0.4 million decrease at our Augusta market cluster as a result of increased competition in that market and a $0.4 million decrease at our Las Vegas market cluster primarily due to weaker performance at one radio station that subsequently changed formats on October 3, 2005. The increases were also partially offset by a $0.3 million decrease at our Miami-Ft. Lauderdale market cluster primarily due to the absence of revenue from broadcasting the Miami Dolphins football games, which contributed $0.6 million in 2004. The program rights agreement to broadcast the Miami Dolphins football games was not renewed in 2005. This decrease at our Miami-Ft. Lauderdale market cluster was partially offset by a $0.4 million increase in revenue from broadcasting the Florida Marlins baseball games. Net revenue during the three months ended September 30, 2005 also includes an aggregate $0.5 million decrease in trade sales revenue from our market clusters due to our continued efforts to reduce the non-cash use of our inventory of airtime.

Cost of Services.    During the three months ended September 30, 2005, cost of services increased at six of our ten market clusters due to our continued investment in the programming and promotion of our radio stations. However, cost of services decreased $0.4 million at our Miami-Ft. Lauderdale market cluster primarily due to the absence of program rights fees due to the non-renewal of the Miami Dolphins football team program rights agreement, which cost $1.6 million in 2004. This decrease was partially offset by a $0.8 million increase in program rights fees to broadcast the Florida Marlins baseball games and increased contractual costs related to certain on-air personalities.

Selling, General and Administrative Expenses.    The $0.2 million decrease in selling, general and administrative expenses during the three months ended September 30, 2005 was primarily due to a decrease in trade sales expenses related to the reduction in trade sales revenue.

Corporate General and Administrative Expenses.    The $0.3 million increase in corporate general and administrative expenses during the three months ended September 30, 2005 was primarily due to increased compensation and other costs associated with complying with regulations applicable to public companies.

Stock-Based Employee Compensation.    On July 1, 2005, we granted 267,500 shares of restricted stock to certain employees under our 2000 Equity Plan and recorded $0.8 million of stock-based employee compensation related to these grants during the three months ended September 30, 2005.

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Nine Months Ended September 30, 2005 Compared to the Nine Months Ended September 30, 2004

The following summary table presents a comparison of our results of operations for the nine months ended September 30, 2004 and 2005 with respect to certain of our key financial measures. These changes illustrated in the table are discussed in greater detail below. This section should be read in conjunction with the condensed consolidated financial statements and notes to condensed consolidated financial statements included in Item 1 of this report.

Net Revenue.    The $4.9 million increase in net revenue during the nine months ended September 30, 2005 was due to improved performance at seven of our ten market clusters and included a $4.2 million increase at our Philadelphia market cluster and a $1.2 million increase at our Ft. Myers-Naples market cluster due to improved performance. These increases were partially offset by a $0.8 million decrease at our Augusta market cluster as a result of increased competition in that market. Net revenue from our Miami-Ft. Lauderdale market cluster included a $0.5 million increase in revenue from broadcasting the Florida Marlins baseball games and a decrease due to the absence of revenue from broadcasting the Miami Dolphins football games, which contributed $0.5 million in 2004. Net revenue during the nine months ended September 30, 2005 also includes an aggregate $1.0 million decrease in trade sales revenue from our market clusters due to our continued efforts to reduce the non-cash use of our inventory of airtime.

Cost of Services.    The $1.8 million increase in cost of services during the nine months ended September 30, 2005 was primarily due to an increase in programming and promotional expenses at seven of our ten market clusters due to our continued investment in the programming and promotion of our radio stations. Cost of services increased $0.9 million at our Miami-Ft. Lauderdale market cluster primarily due to a $1.4 million increase in program rights fees to broadcast the Florida Marlins baseball games and increased contractual costs related to certain on-air personalities. These increases were partially offset by a decrease due to the absence of program rights fees due to the non-renewal of the Miami Dolphins football team program rights agreement, which cost $1.3 million in 2004.

Selling, General and Administrative Expenses.    The $2.5 million increase in selling, general and administrative expenses during the nine months ended September 30, 2005 was primarily due to $1.4 million of employee separation costs at our Philadelphia market cluster and increased sales commissions incurred in connection with generating the increase in net revenue at our market clusters.

Corporate General and Administrative Expenses.    The $0.6 million increase in corporate general and administrative expenses during the nine months ended September 30, 2005 was primarily due to increased compensation, legal fees and other costs associated with complying with regulations applicable to public companies.

Stock-Based Employee Compensation.    On July 1, 2005, we granted 267,500 shares of restricted stock to certain employees under our 2000 Equity Plan and recorded $0.8 million of stock-based employee compensation related to these grants during the nine months ended September 30, 2005.

Liquidity and Capital Resources

Overview.    Our primary sources of liquidity are internally generated cash flow and our credit facility. Our primary liquidity needs have been, and for the next twelve months and thereafter are expected to continue to be,

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for working capital, debt service, and other general corporate purposes, including capital expenditures. Other liquidity needs for the next twelve months and thereafter may also include additional share repurchases, payments of cash dividends and radio station acquisitions. We expect to provide for future liquidity needs through one or a combination of the following sources of liquidity:

We believe that we will have sufficient liquidity and capital resources to permit us to provide for our liquidity requirements and meet our financial obligations for the foreseeable future. However, poor financial results, unanticipated acquisition opportunities or unanticipated expenses could give rise to additional debt servicing requirements or other additional financing or liquidity requirements sooner than we expect and we may not secure financing when needed or on acceptable terms.

As of September 30, 2005, we held $15.8 million in cash and cash equivalents and had $73.0 million in remaining commitments available under the revolving portion of our credit facility; however, as of September 30, 2005, our maximum total leverage covenant would have limited additional borrowings to $51.4 million. Our ability to reduce our total leverage ratio by increasing operating cash flow and/or decreasing long-term debt will determine how much, if any, of the remaining commitments under the revolving portion of our credit facility will be available to us in the future. Poor financial results or unanticipated expenses could result in our failure to maintain or lower our total leverage ratio and we may not be permitted to make any additional borrowings under the revolving portion of our credit facility. Additionally, to the extent that we determine to make additional share repurchases or make future dividend payments instead of repaying indebtedness, or if we incur additional indebtedness in order to make such repurchases or dividend payments, our total debt ratio may be adversely affected and we may not be permitted to make additional borrowings under the revolving portion of our credit facility.

Historically, our capital expenditures have not been significant. In addition to property and equipment associated with radio station acquisitions, our capital expenditures have generally been, and are expected to continue to be, related to the maintenance of our studio and office space and the technological improvement, including upgrades necessary to broadcast HD Radio and maintenance of our broadcasting equipment. We have also purchased or constructed office and studio space in some of our markets to facilitate the consolidation of our operations.

The following summary table presents a comparison of our capital resources for the nine months ended September 30, 2004 and 2005 with respect to certain of our key measures affecting our liquidity. The changes set forth in the table are discussed in greater detail below. This section should be read in conjunction with the condensed consolidated financial statements and notes to condensed consolidated financial statements included in Item 1 of this report.

Net Cash Provided By Operating Activities.    Net cash provided by operating activities decreased for the nine months ended September 30, 2005 compared to the same period in 2004 primarily due to a $3.6 million

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increase in cash paid for income taxes, a $2.7 million increase in cash paid for station operating expenses, and a $0.6 million increase in cash paid for corporate general and administrative expenses. These decreases were partially offset by a $4.5 million increase in cash receipts from the sale of advertising airtime.

Net Cash Used In Investing Activities.    Net cash used in investing activities in the nine months ended September 30, 2005 was primarily due to cash payments for capital expenditures of $1.9 million; which were partially offset by cash proceeds of $0.6 million from the sale of a building in Augusta, GA. Net cash used in investing activities for the same period in 2004 was primarily due to cash payments for capital expenditures of $3.2 million.

Net Cash Used In Financing Activities.    Net cash used in financing activities in the nine months ended September 30, 2005 was primarily due to scheduled repayments of $3.7 million and voluntary repayments of $7.0 million of borrowings under our credit facility and $1.0 million for purchases of our Class A common stock. Net cash used in financing activities in the same period in 2004 was primarily due to voluntary repayments of $8.0 million of borrowings under our credit facility payments, payments of loan fees of $2.3 million associated with an amendment to our credit facility and $0.4 million for purchases of our Class A common stock.

Credit Facility.    Our credit facility consists of a revolving credit loan with a maximum commitment of $75.0 million and a term loan of $150.0 million. The revolving credit loan includes a $10.0 million sub-limit for letters of credit, which may be increased to $20.0 million upon our request and with the approval of the Bank of Montreal, Chicago Branch in its capacity as a letter of credit issuer. At our election, the revolving credit loan and term loan may bear interest at either the base rate or LIBOR plus a margin that is determined by our debt to operating cash flow ratio. The base rate is equal to the higher of the prime rate or the overnight federal funds rate plus 0.5%. Interest on base rate loans is payable quarterly through maturity. Interest on LIBOR loans is payable on the last day of the selected LIBOR period and, if the selected period is longer than three months, every three months after the beginning of the LIBOR period. The revolving credit loan and term loan carried interest, based on LIBOR, at 4.2858% and 5.125% as of December 31, 2004 and September 30, 2005, respectively, and mature on June 30, 2011. The scheduled reductions in the amount available under the revolving credit loan may require principal repayments if the outstanding balance at that time exceeds the maximum amount available under the revolving credit loan.

Our credit agreement permits us to repurchase up to $50.0 million of our common stock and our board of directors has authorized us to repurchase up to $25.0 million of our common stock. As of September 30, 2005, we have repurchased $1.6 million of our Class A common stock. Our credit agreement also permits us to pay dividends on our common stock in an amount up to an aggregate of $7.5 million per year.

The credit facility is secured by substantially all of our assets and guaranteed jointly and severally by all of our subsidiaries. The guarantees were issued to our lenders for repayment of the outstanding balance of the credit facility. If we default under the terms of the credit agreement, the subsidiaries may be required to perform under their guarantees. The maximum amount of payments the subsidiaries would have to make in the event of default is $148.2 million. The guarantees for the revolving credit loan and term loan expire on June 30, 2011.

As of September 30, 2005, the scheduled repayments of the credit facility for the remainder of fiscal 2005, the following four years and thereafter are as follows:

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We must pay a quarterly unused commitment fee equal to 0.375% on the unused portion of the revolving credit loan. For the three and nine months ended September 30, 2005, our unused commitment fee was approximately $69,000 and $195,000, respectively.

We are required to satisfy financial covenants under our credit facility, which require us to maintain specified financial ratios and to comply with financial tests, such as ratios for maximum consolidated total debt, minimum interest coverage and minimum fixed charges. As of September 30, 2005, these financial covenants included:

As of September 30, 2005, we were in compliance with all applicable financial covenants. As of September 30, 2005, as calculated pursuant to the terms of our credit agreement, our consolidated total debt ratio was 4.46 times consolidated operating cash flow, our interest coverage ratio was 4.57 times interest expense, and our fixed charge coverage ratio was 1.77 times fixed charges.

Failure to comply with these financial covenants, to make scheduled interest payments or scheduled principal repayments, or to comply with any other terms of our credit facility could result in the acceleration of the maturity of our debt outstanding thereunder, which could have a material adverse effect on our business or results of operations.

The credit facility also contains other customary restrictive covenants. These covenants limit our ability to:

On June 27, 2005, our credit agreement was amended to, among other things, reduce the rate of interest we pay on each loan made thereunder.

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk is the risk of loss arising from adverse changes in market rates and prices such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our credit facility. As of September 30, 2005, all of our long-term debt bears interest at variable rates. Accordingly, our earnings are affected by changes in interest rates. Assuming the current level of borrowings at variable rates and assuming a one-percentage point increase in the current interest rate under these borrowings, we estimate that our annualized interest expense would increase by $0.7 million and our net income would decrease by $0.4 million. In the event of an adverse change in interest rates, management may take actions to mitigate our exposure. However, due to the uncertainty of the actions that would be taken and their possible effects, this interest rate analysis assumes no such actions. Further, the analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment.

As of September 30, 2005, we are a party to five interest rate swap agreements with a $75.0 million aggregate notional amount. These agreements expire from May to August 2006. As of September 30, 2005, the fair value of these agreements was an asset of $1.2 million.

ITEM 4.    CONTROLS AND PROCEDURES.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of September 30, 2005, the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

There has been no significant change in our internal control over financial reporting during our third fiscal quarter of 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II    OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS.

We currently and from time to time are involved in litigation and are the subject of threats of litigation that are incidental to the conduct of our business. These include indecency claims and related proceedings at the FCC as well as claims and threatened claims by private third parties. However, we are not a party to any lawsuit or other proceedings, or the subject of any threatened lawsuit or other proceedings that in the opinion of management, is likely to have a material adverse effect on our financial condition or results of operations.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table presents information with respect to repurchases we made of our Class A common stock during the three months ended September 30, 2005.

In June 2004, the board of directors authorized the Company to repurchase up to $25.0 million of its Class A common stock over a period of one year from the date of authorization. On May 12, 2005, the board of directors authorized a one-year extension of the repurchase period.

ITEM 6.    EXHIBITS.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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