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BEASLEY BROADCAST GROUP INC - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS(Edgar Glimpses Via Acquire Media NewsEdge) 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 February 14, 2014. General We are a radio broadcasting company whose primary business is operating radio stations throughout the United States. We currently own and operate 44 radio stations in the following markets: Atlanta, GA, Augusta, GA, Boston, MA, Fayetteville, NC, Fort Myers-Naples, FL, Greenville-New Bern-Jacksonville, NC, Las Vegas, NV, Miami-Fort Lauderdale, FL, Philadelphia, PA, West Palm Beach-Boca Raton, FL, and Wilmington, DE. We also operate one radio station in the expanded AM band in Augusta, GA. Upon closing of the asset exchange agreement (see "Recent Developments - Discontinued Operations" elsewhere in this Item) we will own and operate 53 radio stations in the following markets: Atlanta, GA, Augusta, GA, Boston, MA, Charlotte, NC, Fayetteville, NC, Fort Myers-Naples, FL, Greenville-New Bern-Jacksonville, NC, Las Vegas, NV, Philadelphia, PA, Tampa-Saint Petersburg, FL, West Palm Beach-Boca Raton, FL, and Wilmington, DE. We refer to each group of radio stations in each radio market as a market cluster. Recent Developments Discontinued Operations. On October 1, 2014, we entered into an asset exchange agreement with CBS Radio under which we agreed to exchange all of the assets used or useful in the operations of WRDW-FM and WXTU-FM in Philadelphia, PA and WKIS-FM, WPOW-FM and WQAM-AM in Miami, FL for all of the assets used or useful in the operations of WIP-AM in Philadelphia, PA, WHFS-AM, WHFS-FM, WLLD-FM, WQYK-FM, WRBQ-FM and WYUU-FM in Tampa, FL and WBAV-FM, WBCN-AM, WFNZ-AM, WKQC-FM, WNKS-FM, WPEG-FM and WSOC-FM in Charlotte, NC currently owned and operated by CBS Radio. The proposed asset exchange will substantially broaden and diversify our local radio broadcasting platform and revenue base with fourteen new stations that are geographically complementary to our ongoing operations, while also presenting financial and operating synergies with our ongoing station portfolio and digital operations. The transaction is being structured as a like-kind exchange in accordance with Section 1031 of the Internal Revenue Code. No assurance can be given, however, that the transaction will qualify as a like-kind exchange under Section 1031 of the Internal Revenue Code. The proposed asset exchange, which is expected to close in the fourth quarter of 2014, is subject to approval by the Federal Communications Commission, the expiration of the applicable Hart-Scott-Rodino waiting period, and other customary closing conditions. The assets of WRDW-FM, WXTU-FM, WKIS-FM, WPOW-FM and WQAM-AM, to be exchanged under the asset exchange agreement, have been classified as held for sale. A summary of assets held for sale as of December 31, 2013 and September 30, 2014 is as follows: December 31, September 30, 2013 2014 Property and equipment, net $ 3,329,535 $ 3,209,416 FCC broadcasting licenses 77,213,134 77,213,134 Goodwill 6,567,054 6,567,054 $ 87,109,723 $ 86,989,604 13 -------------------------------------------------------------------------------- Table of Contents Upon completion of the transaction, we will have significantly decreased operations in the Philadelphia, PA radio market and will no longer have any operations in the Miami-Fort Lauderdale, FL radio market. Therefore, the results of operations of WRDW-FM, WXTU-FM, WKIS-FM, WPOW-FM and WQAM-AM have been reported as discontinued operations for the three and nine months ended September 30, 2013 and 2014. A summary of discontinued operations is as follows: Three months ended September 30, 2013 2014 Net revenue $ 12,223,198 $ 11,502,333 Station operating expenses 7,249,851 7,344,422 Depreciation and amortization 139,922 141,668 Other (income) expense, net (2,128 ) - Income from discontinued operations before income taxes 4,835,553 4,016,243 Income tax expense 1,860,153 1,549,715 Income from discontinued operations $ 2,975,400 $ 2,466,528 Nine months ended September 30, 2013 2014 Net revenue $ 36,547,980 $ 34,500,964 Station operating expenses 22,260,808 22,168,457 Depreciation and amortization 421,988 421,011 Other (income) expense, net (8,039 ) 330,416 Income from discontinued operations before income taxes 13,873,223 11,581,080 Income tax expense 5,330,942 5,255,852 Income from discontinued operations $ 8,542,281 $ 6,325,228 The proposed asset exchange is expected to close in the fourth quarter of 2014 and we do not expect the results of discontinued operations to be materially impacted by the proposed asset exchange during the period through closing. Also, we do not expect the proposed asset exchange to have a material impact of our liquidity, financial condition or results of continuing operations during the period through closing. We expect to realize a gain on exchange of radio stations of approximately $63.0 million upon closing of the asset exchange. We also expect to incur transaction costs of approximately $2.0 million as a result of the asset exchange. Dividends. On August 24, 2014, our board of directors declared a cash dividend of $0.045 per share on our Class A and Class B common stock. The dividend of $1.0 million in the aggregate was paid on October 10, 2014, to stockholders of record on September 30, 2014. While we intend to pay quarterly cash dividends for the foreseeable future, all subsequent dividends will be reviewed quarterly and declared by the board of directors at its discretion. Financial Statement Presentation The following discussion provides a brief description of certain key items that appear in our financial statements and general factors that impact these items. 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, generally 15% of gross revenue. Local revenue generally consists of advertising airtime and digital 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 and digital 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. 14-------------------------------------------------------------------------------- Table of Contents Our net revenue is generally determined by the advertising rates that we are able to charge and the number of advertisements that we can broadcast without jeopardizing listener levels. Advertising rates are primarily based on the following factors: • a radio station's audience share in the demographic groups targeted by advertisers as measured principally by quarterly reports issued by the Arbitron Ratings Company; • the number of radio stations, as well as other forms of media, in the market competing for the attention of the same demographic groups; • the supply of, and demand for, radio advertising time; and • the size of the market. 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. Our revenues are typically lowest in the first calendar quarter of the year. We use barter sales agreements to reduce cash paid for operating costs and expenses by exchanging advertising airtime for goods or services; however, we endeavor to minimize barter revenue in order to maximize cash revenue from our available airtime. We also continue to invest in digital support services to develop and promote our radio station websites. We derive revenue from our websites through the sale of advertiser promotions and advertising on our websites and the sale of advertising airtime during audio streaming of our radio stations over the internet. Operating Expenses. Our operating expenses consist primarily of (1) programming, engineering, sales, advertising and promotion, and general and administrative expenses incurred at our radio stations, (2) general and administrative expenses, including compensation and other expenses, incurred at our corporate offices, and (3) 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. Critical Accounting Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect reported amounts and related disclosures. We consider an accounting estimate to be critical if: • it requires assumptions to be made that were uncertain at the time the estimate was made; and • changes in the estimate or different estimates that could have been selected could have a material impact on our results of operations or financial condition. Our critical accounting estimates are described in Item 7 of our annual report on Form 10-K for the year ended December 31, 2013. There have been no material changes to our critical accounting estimates during the third quarter of 2014. Recent Accounting Pronouncements Recent accounting pronouncements are described in Note 2 to the accompanying financial statements. Three Months Ended September 30, 2014 Compared to the Three Months Ended September 30, 2013 The following summary table presents a comparison of our results of operations for the three months ended September 30, 2013 and 2014 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 financial statements and notes to financial statements included in Item 1 of this report. Three months ended September 30, Change 2013 2014 $ % Net revenue $ 13,726,904 $ 13,047,411 $ (679,493 ) (5.0 )% Station operating expenses 9,256,297 9,421,385 165,088 1.8 Corporate general and administrative expenses 2,157,138 2,194,584 37,446 1.7 Interest expense 1,337,605 1,080,812 (256,793 ) (19.2 ) Income tax expense 191,868 119,868 (72,000 ) (37.5 ) Income from discontinued operations (net of income taxes) 2,975,400 2,466,528 (508,872 ) (17.1 ) Net income 3,186,891 2,458,810 (728,081 ) (22.8 ) 15 -------------------------------------------------------------------------------- Table of Contents Net Revenue. Net revenue from continuing operations decreased $0.7 million during the three months ended September 30, 2014. Significant factors affecting net revenue included a $0.4 million decrease in advertising revenue from our Wilmington market cluster, and a $0.3 million decrease in advertising revenue from our Greenville-New Bern-Jacksonville market cluster. Net revenue was comparable to the same period in 2013 at our remaining market clusters, however net revenue from our Las Vegas market cluster for the three months ended September 30, 2014 included $0.3 million in additional advertising revenue from KVGS-FM, which was acquired in the third quarter of 2013. Station Operating Expenses. Station operating expenses from continuing operations increased $0.2 million during the three months ended September 30, 2014. Significant factors affecting station operating expenses included a $0.4 million increase at our Las Vegas market cluster, which included a $0.3 million increase in station operating expenses from KVGS-FM. Station operating expenses were comparable to the same period in 2013 at our remaining market clusters. Corporate General and Administrative Expenses. Corporate general and administrative expenses during the three months ended September 30, 2014 were comparable to the same period in 2013. Interest Expense. The $0.3 million decrease in interest expense during the three months ended September 30, 2014 was primarily due to a decrease in long-term debt outstanding. Income Tax Expense. Our effective tax rate for continuing and discontinued operations combined was approximately 40% for the three months ended September 30, 2014 which differs from the federal statutory rate of 35% due to the effect of state income taxes and certain expenses that are not deductible for tax purposes. Our effective tax rate for continuing and discontinued operations combined was approximately 39% for the three months ended September 30, 2013 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. Income from Discontinued Operations. The results of operations for WRDW-FM and WXTU-FM in the Philadelphia radio market and WKIS-FM, WPOW-FM and WQAM-AM in the Miami-Fort Lauderdale radio market have been reported as discontinued operations for the three months ended September 30, 2014 (see "Recent Developments - Discontinued Operations" elsewhere in this Item). Net Income. Net income during the three months ended September 30, 2014 decreased $0.7 million as a result of the factors described above. Nine Months Ended September 30, 2014 Compared to the Nine Months Ended September 30, 2013 The following summary table presents a comparison of our results of operations for the nine months ended September 30, 2013 and 2014 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 financial statements and notes to financial statements included in Item 1 of this report. Nine months ended September 30, Change 2013 2014 $ % Net revenue $ 41,070,224 $ 40,143,834 $ (926,390 ) (2.3 )% Station operating expenses 27,721,668 28,089,890 368,222 1.3 Corporate general and administrative expenses 6,380,716 6,812,207 431,491 6.8 Interest expense 5,711,729 3,404,616 (2,307,113 ) (40.4 ) Loss on extinguishment of long-term debt 1,260,784 30,569 (1,230,215 ) (97.6 ) Income tax expense (benefit) (733,721 ) 834,353 1,568,074 213.7 Income from discontinued operations (net of income taxes) 8,542,281 6,325,228 (2,217,053 ) (26.0 ) Net income 7,965,347 6,162,971 (1,802,376 ) (22.6 ) 16 -------------------------------------------------------------------------------- Table of Contents Net Revenue. Net revenue from continuing operations decreased $0.9 million during the nine months ended September 30, 2014. Significant factors affecting net revenue included a $0.7 million increase in other revenue from a logo agreement, a $0.9 million decrease in advertising revenue from our Wilmington market cluster, and a $0.7 million decrease in advertising revenue from our Greenville-New Bern-Jacksonville market cluster. Net revenue was comparable to the same period in 2013 at our remaining market clusters, however net revenue from our Las Vegas market cluster for the nine months ended September 30, 2014 included $1.4 million in additional advertising revenue from KVGS-FM, which was acquired in the third quarter of 2013. Station Operating Expenses. Station operating expenses from continuing operations during the nine months ended September 30, 2014 were comparable to the same period in 2013. However, station operating expenses increased $0.8 million at our Las Vegas market cluster including $1.1 million in additional station operating expenses from KVGS-FM. Station operating expenses were comparable to the same period in 2013 at our remaining market clusters. Corporate General and Administrative Expenses. The $0.4 million increase in corporate general and administrative expenses during the nine months ended September 30, 2014 was primarily due to an increase in stock-based compensation expense. Interest Expense. Interest expense decreased $2.3 million during the nine months ended September 30, 2014. Significant factors affecting interest expense included a $1.0 million fee paid in connection with the prepayment of the second lien facility in the second quarter of 2013 and a decrease in long-term debt outstanding. Loss on Extinguishment of Long-Term Debt. In connection with the amended credit agreement, we recorded a loss on extinguishment of long-term debt of approximately $31,000 during the nine months ended September 30, 2014. In connection with the amended first lien credit agreement and the prepayment of the second lien facility we recorded a loss on extinguishment of long-term debt of $1.3 million during the nine months ended September 30, 2013. Income Tax Expense.Our effective tax rate for continuing and discontinued operations combined was approximately 50% for the nine months ended September 30, 2014 which differs from the federal statutory rate of 35% due to the effect of state income taxes and certain expenses that are not deductible for tax purposes. The effective tax rate for the nine months ended September 30, 2014 also reflects a $1.4 million increase from a change to our federal tax rate based on a projected increase in taxable income for 2014 and a $0.3 million decrease from a change to our effective state tax rate. We evaluated our taxable income projections during the first quarter of 2014 and determined, based on certain changes in facts and circumstances related to the projections, that the federal tax rate should increase from 34% to 35%. The change in the federal tax rate has been accounted for as a change in accounting estimate during the nine months ended September 30, 2014. Our effective tax rate for continuing and discontinued operations combined was approximately 37% for the nine months ended September 30, 2013 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. The effective tax rate for the nine months ended September 30, 2013 also reflects a $0.3 million decrease from a change to our effective state tax rate. Income from Discontinued Operations. The results of operations for WRDW-FM and WXTU-FM in the Philadelphia radio market and WKIS-FM, WPOW-FM and WQAM-AM in the Miami-Fort Lauderdale radio market have been reported as discontinued operations for the nine months ended September 30, 2014 (see "Recent Developments - Discontinued Operations" elsewhere in this Item). Net Income. Net income during the nine months ended September 30, 2014 decreased $1.8 million as a result of the factors described above. Liquidity and Capital Resources Overview. Our primary sources of liquidity are internally generated cash flow and our revolving credit loan. Our primary liquidity needs have been, and for the next twelve months and thereafter are expected to continue to be, for working capital, debt service, and other general corporate purposes, including capital expenditures and radio station acquisitions. 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 towers and equipment. We have also purchased or constructed office and studio space in some of our markets to facilitate the consolidation of our operations. We do not expect the asset exchange agreement with CBS Radio to have a material impact of our liquidity, financial condition or results of operations prior to the date on which the assets are transferred to CBS Radio. 17-------------------------------------------------------------------------------- Table of Contents Our credit agreement permits us to repurchase sufficient shares of our common stock to fund withholding taxes in connection with the vesting of restricted stock, subject to compliance with financial covenants, up to an aggregate amount of $2.0 million per year. We paid $0.4 million to repurchase 42,296 shares during the nine months ended September 30, 2014. Our credit agreement permits us to pay cash dividends and to repurchase additional shares of our common stock, subject to compliance with financial covenants, up to an aggregate amount of $5.0 million for each of 2014 and 2015, and $6.0 million for each year thereafter. The aggregate amount increases to $10.0 million in any year that our consolidated total debt is less than three times our consolidated operating cash flow. We paid cash dividends of $3.1 million during the nine months ended September 30, 2014. On August 24, 2014, our board of directors declared a cash dividend of $0.045 per share on our Class A and Class B common stock. The dividend of $1.0 million in the aggregate was paid on October 10, 2014, to stockholders of record on September 30, 2014. We expect to provide for future liquidity needs through one or a combination of the following sources of liquidity: • internally generated cash flow; • our credit facility; • additional borrowings, other than under our existing credit facility, to the extent permitted thereunder; and • additional equity offerings. 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 next twelve months. However, poor financial results or unanticipated expenses could give rise to defaults under our credit facility, 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. Our ability to reduce our consolidated total debt ratio, as defined by our credit agreement, by increasing operating cash flow and/or decreasing long-term debt will determine how much, if any, of the remaining commitments under our revolving 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 consolidated total debt ratio and we may not be permitted to make any additional borrowings under our revolving credit facility. The following summary table presents a comparison of our capital resources for the nine months ended September 30, 2013 and 2014 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 financial statements and notes to financial statements included in Item 1 of this report. Nine months ended September 30, 2013 2014 Net cash provided by operating activities $ 14,047,435 $ 13,162,883 Net cash used in investing activities (5,965,856 ) (2,588,403 ) Net cash used in financing activities (7,252,496 ) (11,652,292 ) Net increase (decrease) in cash and cash equivalents $ 829,083 $ (1,077,812 ) Net Cash Provided By Operating Activities. Net cash provided by operating activities decreased $0.9 million during the nine months ended September 30, 2014. Significant factors affecting net cash provided by operating activities included a $2.2 million decrease in interest payments, a $1.9 million increase in cash paid for station operating expenses, a $2.0 million decrease in cash receipts from sales, and a $0.4 million decrease in income tax payments. Net Cash Used In Investing Activities. Net cash used in investing activities during the nine months ended September 30, 2014 included payments of $2.6 million for capital expenditures. Net cash used in investing activities for the same period in 2013 included a payment of $4.0 million for the acquisition of KVGS-FM in Las Vegas, NV and payments of $2.1 million for capital expenditures. Net Cash Used In Financing Activities. Net cash used in financing activities during the nine months ended September 30, 2014 included repayments of $7.9 million under our credit facility, payments of $3.1 million for cash dividends, payments of $0.4 million for loan fees related to the amended credit agreement, and payments of $0.4 million for repurchases of our Class A common stock. Net cash used in financing activities for the same period in 2013 included repayments of $6.5 million under our credit facility and payments of $0.6 million for loan fees related to the amended first lien credit agreement. 18-------------------------------------------------------------------------------- Table of Contents Credit Facility. On June 17, 2014, we amended our credit agreement to revise certain terms, including financial covenants and interest rate margins and to extend the maturity date of the credit facility. The amendment also increased the amount of cash dividends we may pay per year and eliminated mandatory prepayments of excess cash flow when our consolidated total debt is less than three times our consolidated operating cash flow. In addition, we repaid the revolving credit facility with $5.75 million of additional term loan borrowings and $1.25 million of cash of hand. In connection with the amended credit agreement, we recorded a loss on extinguishment of long-term debt of approximately $31,000 during the nine months ended September 30, 2014. As of September 30, 2014, the credit facility consisted of a term loan with a remaining balance of $99.0 million and a revolving credit facility with a maximum commitment of $20.0 million. As of September 30, 2014, we had $20.0 million in remaining commitments available under our revolving credit facility. At our election, the credit facility may bear interest at either (i) adjusted LIBOR, as defined in the credit agreement, plus a margin ranging from 2.75% to 4.75% that is determined by our consolidated total debt ratio, as defined in the credit agreement or (ii) the base rate, as defined in the credit agreement, plus a margin ranging from 1.75% to 3.75% that is determined by our consolidated total debt ratio. Interest on adjusted LIBOR loans is payable at the end of each applicable interest period and, for those interest periods with a duration in excess of three months, the three month anniversary of the beginning of such interest period. Interest on base rate loans is payable quarterly in arrears. The credit facility carried interest, based on adjusted LIBOR, at 3.4% as of September 30, 2014 and matures on August 9, 2019. The credit agreement requires mandatory prepayments equal to 50% of consolidated excess cash flow, as defined in the credit agreement, when our consolidated total debt is equal to or greater than three times our consolidated operating cash flow, as defined in the credit agreement. Prepayments of excess cash flow are not required when our consolidated total debt is less than three times our consolidated operating cash flow. Mandatory prepayments of consolidated excess cash flow are due 120 days after year end. The credit agreement also requires mandatory prepayments for defined amounts from net proceeds of asset sales, net insurance proceeds, and net proceeds of debt issuances. The credit agreement requires us to comply with certain financial covenants which are defined in the credit agreement. These financial covenants include: • Consolidated Total Debt Ratio. Our consolidated total debt on the last day of each fiscal quarter through December 31, 2014 must not exceed 4.5 times our consolidated operating cash flow for the four quarters then ended. The maximum ratio is 4.25 times for the period from January 1, 2015 through June 30, 2015, 4.0 times for the period from July 1, 2015 through December 31, 2015, 3.75 times for 2016, 3.25 times for 2017, and 3.0 times thereafter. • Interest Coverage Ratio. Our consolidated operating cash flow for the four quarters ending on the last day of each fiscal quarter through maturity must not be less than 2.0 times our consolidated cash interest expense for the four quarters then ended. The credit facility is secured by a first-priority lien on substantially all of the Company's assets and the assets of substantially all of its subsidiaries and is guaranteed jointly and severally by the Company and substantially all of its 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 Company and its applicable subsidiaries may be required to perform under their guarantees. As of September 30, 2014, the maximum amount of undiscounted payments the Company and its applicable subsidiaries would have had to make in the event of default was $99.0 million. The guarantees for the credit facility expire on August 9, 2019. The aggregate scheduled principal repayments of the credit facility for the remainder of 2014, the next four years, and thereafter are as follows: 2014 $ - 2015 4,390,625 2016 6,390,626 2017 7,668,752 2018 8,946,876 Thereafter 71,574,996 Total $ 98,971,875 19 -------------------------------------------------------------------------------- Table of Contents Failure to comply with financial covenants, scheduled interest payments, scheduled principal repayments, or any other terms of our credit agreement could result in the acceleration of the maturity of our outstanding debt, which could have a material adverse effect on our business or results of operations. As of September 30, 2014, we were in compliance with all applicable financial covenants under our credit agreement; our consolidated total debt ratio was 3.20 times, and our interest coverage ratio was 6.30 times. |