On November 1, 2016, Beasley acquired 17 radio stations (net of divestitures) (“the Greater Media stations”). The actual results presented herein reflect the Company’s legacy Beasley Broadcast Group broadcasting and digital operations and two months of results from the Greater Media stations. The 2016 and 2015 fourth quarter and full year pro-forma results presented herein reflect the Company’s legacy Beasley Broadcast Group broadcasting and digital operations and the results from the Greater Media stations as if the transaction had been completed on January 1, 2015.
The $25.3 million, or 89.1%, year-over-year increase in net revenue during the three months ended December 31, 2016, reflects the operation of stations in Boston, Philadelphia, Detroit and New Jersey acquired from Greater Media on November 1, 2016 as well as higher revenue from the Company’s legacy-owned Tampa-St. Petersburg, Charlotte and Las Vegas market clusters.
Station Operating Income (SOI, a non-GAAP financial measure), rose 80.3% year-over-year in the fourth quarter of 2016. The increase in SOI reflects two months of operations of the Greater Media stations, the increase in quarterly net revenues at Beasley’s existing stations and station operating expenses in the 2016 and 2015 fourth quarters that amounted to 69.8% and 68.3% of net revenue,respectively.
Operating income of $49.9 million in the fourth quarter of 2016, an increase of approximately $43.8 million over the comparable 2015 period, is primarily attributable to the rise in station operating income and an approximate $45.5 million gain on the acquisition of the Greater Media stations resulting from the net difference in the valuation of the assets and the purchase price paid.
The Company also incurred approximately $5.2 million of pre-tax merger expenses in the fourth quarter, while fourth quarter interest expense increased approximately $2.8 million due related to the financing of the acquisition of the Greater Media stations transaction. As a result of these factors, net income per diluted share increased to $1.57 per diluted share in the three months ended December 31, 2016 compared to $0.14 per diluted share in the three months ended December 31, 2015.
Net income for the 2016 fourth quarter of $41.5 million compared to net income of $3.3 million a year ago, with the rise primarily attributable to the gain on acquisition and other growth in operating income described above. Net income included a $0.8 million and $0.6 million loss on modification of long-term debt in the three months ended December 31, 2016 and December 31, 2015, respectively.
“On a stand-alone basis, Beasley legacy station revenue increased approximately 7.6%. Immediately following the close of the Greater Media transaction we began the integration process including the
implementation of sales and cost initiatives, the elimination of redundant overhead and other strategies to derive synergies and value from the expanded scale and diversity of our portfolio.
"Partially reflecting, the change of ownership and related transitional concerns, on a stand-alone basis, the Greater Media stations’ revenue decreased 6.1% or approximately $2.3 million in the fourth quarter with about 60% of the decline attributable to Philadelphia. Overall, we are making continued progress with the integration of the new stations as we implement best practices, processes, and talent from both companies to optimize audience engagement and drive results. We believe we are on track to complete the integration and realize the synergies expected from this transaction within 12 to 18 months.
“In the fourth quarter, including the Greater Media stations, we again outperformed our markets in terms of revenue growth based on markets that report to Miller Kaplan. Our clusters rose approximately 2.0% compared with the overall markets, which increased 0.5%. Our outperformance was driven by our recently acquired Detroit cluster, which generated an impressive year-over-year revenue increase of over 6.9%, compared with the Detroit market, which was down 3.2%. Beyond Detroit, our outperformance was broad-based and included our clusters in Augusta, Boston, Charlotte, Fayetteville, Las Vegas, Greenville-New Bern-Jacksonville and Tampa-St. Petersburg.
“Our strategic priorities in 2017 are focused on three key areas. First, we plan to continue to deliver strong core programming and targeted localism across our station platform as these strategies support ratings and market leadership. Second, we remain focused on improving SOI margins across our station platform through efficiencies without impacting the listener experience. Third, our capital structure allows us to allocate free cash flow from operations to reducing leverage while returning capital to shareholders through dividends which, together, we believe supports our goal of enhancing shareholder value.”