Media General Reports Third-Quarter 2010 Results, Provides Outlook

Oct 20, 2010, 07:30 ET from Media General, Inc.

RICHMOND, Va., Oct. 20 /PRNewswire-FirstCall/ -- Media General, Inc. (NYSE: MEG) today reported operating income of $11.5 million in the third quarter of 2010, compared with an operating loss of $67.7 million in the third quarter of 2009.  The 2009 results included a pretax non-cash impairment charge of $84.2 million and gains of $1.9 million associated with an insurance recovery and $2 million from implementing a freeze on a retirement plan.  Operating income for the third quarter of 2009, adjusted for the impairment, insurance gain and retirement plan freeze, was $12.6 million.

In the current quarter, a net loss of $10.7 million, or 48 cents per share, reflected higher interest expense related to the company’s new financing structure as well as a non-cash tax expense.  In the 2009 third quarter, the company reported a net loss of $62.5 million, or $2.80 per share, including the impairment charge and the singular gains noted above, and a $910,000 gain from a favorable tax ruling related to the sale of SP Newsprint.

Total revenues in the quarter increased 3.3 percent to $163.2 million, driven by an 18 percent increase in Broadcast television revenues, which reflected strong Political advertising and an underlying firming in television advertising.  Total operating expenses, excluding the items noted above, increased 4.4 percent, an improvement from the company’s guidance of 7-8 percent, due mostly to keeping open positions unfilled and lower-than-expected newsprint prices.  The impact of furlough days drove a majority of the expense increase compared with last year.  Additionally, gains on sales of fixed assets were $2.3 million lower this year.  

“Our third-quarter operating results benefited from $9.7 million in Political revenues compared with $1.5 million last year, and reflected particularly strong campaign spending in Florida and Ohio,” said Marshall N. Morton, president and chief executive officer.  “Political advertising overall was lower than expectations, even though candidate spending was on target, mostly due to lower issues spending.  At the same time, transactional advertising revenues strengthened in the quarter and offset the lower-than-expected Political revenues.  National television advertising, excluding Political, was up 12 percent, and Local time sales increased 4 percent.  Automotive advertising, in particular, was strong, and the telecommunications and retail categories firmed as well.  

“We were pleased with our progress implementing an array of new online advertising opportunities.  In the third quarter, our local media websites generated a 15 percent increase in revenues.  Online Classified revenues grew for the third quarter in a row and increased more than 12 percent, due in part to our Yahoo! and Zillow partnerships.  Local online revenues rose 22.5 percent, as aggressive sales initiatives continued.  Page views and unique visitors for our newspaper and television websites in the third quarter increased 5.6 percent and 3.5 percent, respectively.  We recently extended our partnerships for Yahoo! display and Zillow real estate advertising to several TV markets and announced a new partnership for locally branded daily deals with Groupon,” Mr. Morton said.

Media General’s Publishing revenues declined 7.6 percent from last year.  Retailer spending was restrained in most newspaper markets, resulting in a 7.8 percent drop in Local revenues.  Classified revenues declined 11.4 percent from last year, and National revenues decreased 2 percent.  Printing and distribution outside sales increased 9.4 percent in the quarter.  

Market Segments

Virginia/Tennessee market profit in the third quarter was $7.4 million, compared with $10.7 million in the 2009 third quarter.  Revenues declined 3.9 percent from last year and expenses increased 3.8 percent.  Broadcast revenues grew 4.9 percent, mostly from the Tennessee gubernatorial race, local races and issues advertising.  The Virginia gubernatorial election was held in 2009.  Publishing revenues decreased 5.9 percent.  Higher third-party printing and distribution revenues partially offset declines in most other categories.  For the market, Local revenues decreased 3.3 percent, and Classified revenues were down 6.2 percent.  National revenues declined 9.2 percent, due primarily to lower spending by telecommunications advertisers.  Digital revenues rose 11.5 percent, reflecting increases in Local, National and Classified online advertising.

Florida market profit was $2.1 million, compared with $524,000 a year ago.  Revenues increased 6.7 percent and expenses increased 2.5 percent.  Broadcast revenues grew more than 35 percent, due to strong Political advertising on WFLA and also BP oil spill-related advertising.  Political revenues were $5 million compared with essentially nothing last year, reflecting Florida’s hotly contested gubernatorial, U.S. Senate and attorney general races.  Publishing revenues decreased 10.4 percent.  Total market Classified and Local revenues decreased 18 percent and 2.5 percent, respectively.  National revenues increased 3.4 percent, including BP advertising, as well as higher spending by automotive, financial services and travel advertisers on WFLA.  Printing and distribution revenues increased 5.4 percent.  Digital revenues increased 10.8 percent, due to solid growth in Local and National online advertising.

Mid-South market profit was $7 million, compared with $5.5 million in the prior year.  Total revenues increased 10 percent, due to strong Political spending.  The Mid-South Market includes 11 television stations and three community newspapers.  Political revenues were $1.8 million, compared with $418,000 in 2009.  Total Broadcast revenues in the Mid-South increased 14 percent.  Total Publishing revenues declined 4 percent.  Total market Local and National revenues increased 4.9 percent and 11.2 percent, respectively, offsetting a decline in Classified revenues of 7.6 percent.  Digital media revenues rose 20 percent, reflecting higher Local, National and Classified spending.

The North Carolina market reported a loss of $51,000, compared with a profit of $1.4 million last year.  Revenues decreased 4.1 percent, and expenses increased 4 percent from last year.  Broadcast revenues increased 4.1 percent, mostly due to higher spending in the National automotive category at the market’s two television stations.  Political revenues were $118,000, reflecting the absence of hotly contested races in the state.  Publishing revenues in North Carolina declined 9.5 percent in the third quarter.  For the market, National revenues increased 11.5 percent while Local and Classified revenues each decreased 6 percent.  Digital media revenues increased 26 percent, due to higher Local and Classified revenues.

Ohio/Rhode Island market profit was $4.4 million, compared with $2.5 million last year, due to strong Political and National revenues from the market’s two NBC-affiliated television stations.  Total revenues increased 19 percent.  Political revenues were $2.1 million compared with $518,000 in 2009, reflecting gubernatorial and Congressional races in Ohio and a gubernatorial race in Rhode Island.  National advertising increased 28 percent, due to increased automotive, furniture store and grocery store advertising.  Local revenues rose 3 percent.  Digital media revenues rose nearly 10 percent.

Advertising Services and Other segment profit of $483,000, declined from $1.5 million last year, due largely to a decrease in revenues from DealTaker.com, the company’s shopping and coupon website, and Blockdot, which specializes in interactive entertainment and advergaming technologies.  

Other Results

Interest expense was $17 million in the third quarter, compared with $10.5 million last year, due to the company’s new financing structure.  Debt at the end of third quarter of 2010 was $673 million, compared with $712 million at the beginning of the year.  

Corporate expense increased due to the impact of employee furlough days and a gain from freezing a retirement plan in 2009.

Income tax expense in the third quarter was $5.3 million.  The previously estimated third-quarter non-cash tax expense of $7.5 million was partially offset by an additional $1.5 million tax refund related to the company’s net operating loss carryback claim as well as a $700,000 non-cash tax benefit resulting from the intraperiod allocation of tax to other comprehensive income items.  Last year’s third quarter showed an income tax benefit of $16.7 million on continuing operations related to the impairment charge.

EBITDA (loss from continuing operations before interest, taxes, depreciation and amortization) was $24.9 million in the third quarter of 2010, compared with a deficit of $51.7 million in the 2009 period, including the non-cash impairment charge.  After-Tax Cash Flow was $7.8 million, compared with $22.1 million in the prior-year’s quarter.  Capital expenditures in the third quarter of 2010 were $6.8 million, compared with $3.6 million in the prior-year period.  Free Cash Flow (After-Tax Cash Flow minus capital expenditures) was $1 million, compared with $18.4 million in the prior-year period, excluding the impairment charge.

Media General provides the non-GAAP financial metrics EBITDA from continuing operations, After-Tax Cash Flow, Free Cash Flow, Operating Income adjusted for impairment, insurance gain and the freeze on the retirement plan, and Operating Expenses adjusted for impairment, insurance gain and the freeze on the retirement plan.  The company believes these metrics are useful in evaluating financial performance and/or are common alternative measures used by investors, financial analysts and rating agencies.  These groups use EBITDA, along with other measures, to evaluate a company’s ability to service its debt requirements and to estimate the value of the company.  A reconciliation of these metrics to amounts on the GAAP statements has been included in this news release.

Outlook

For the fourth quarter of 2010, Media General expects total revenues to increase 6-8 percent from the prior year.  Broadcast revenues are expected to increase 24-26 percent, driven by strong Political advertising.  Publishing revenues are expected to decrease 5-7 percent, due to lower revenues in most categories.  Digital Media revenues are expected to increase 9-11 percent.  

Total operating costs are expected to increase 8-9.5 percent, due to the impact of furlough days, higher newsprint expense and increased support of new revenue initiatives.  The company continues to expect free cash flow for the full year 2010 of $58-$60 million, including a $28 million tax refund, most of which was received in April.

Conference Call, Webcast and Financial Statements

The company will hold a conference call with financial analysts today at 10 a.m. ET.  The conference call will be available to the media and general public through a limited number of listen-only dial-in conference lines and via simultaneous Webcast.  To dial in to the call, listeners may call 1-866-314-9013 about 10 minutes prior to the 10 a.m. start.  The participant passcode is “Media General.”  Listeners may also access the live Webcast by logging on to www.mediageneral.com and clicking on the “Live Webcast” link on the homepage about 10 minutes in advance.  A replay of the Webcast will be available online at www.mediageneral.com beginning at 12 p.m. today.  A telephone replay will also be available, beginning at 1 p.m. today and ending at 1 p.m. on October 27, 2010, by dialing 1-888-286-8010 or 617-801-6888, and using the passcode 36750530.

Forward-Looking Statements

This news release contains forward-looking statements that are subject to various risks and uncertainties and should be understood in the context of the company’s publicly available reports filed with the Securities and Exchange Commission.  Media General’s future performance could differ materially from its current expectations.

About Media General

Media General is a leading provider of news, information and entertainment across multiple media platforms, serving consumers and advertisers in strong local markets, primarily in the Southeastern United States.  Media General’s operations are organized in five geographic market segments and a sixth segment that includes the company’s interactive advertising services and certain other operations.  The company’s operations include 18 network-affiliated television stations and their associated websites, three metropolitan and 20 community newspapers and their associated websites, and more than 200 specialty publications that include weekly newspapers and niche publications targeted to various demographic, geographic and topical communities of interest.  Many of the company’s specialty publications have associated websites.  Media General additionally operates three interactive advertising services companies:  Blockdot, which specializes in interactive entertainment and advergaming technologies; DealTaker.com, a coupon and shopping website; and NetInformer, a leading provider of wireless media and mobile marketing services.

Media General, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

Thirteen Weeks Ending

Thirty-Nine Weeks Ending

September 26,

September 27,

September 26,

September 27,

(Unaudited, in thousands except per share amounts)

2010

2009

2010

2009

Revenues

Publishing

$            77,687

$            84,097

$          241,890

$          263,136

Broadcast

75,009

63,375

214,603

187,352

Digital media and other

10,517

10,536

31,746

30,043

Total revenues

163,213

158,008

488,239

480,531

Operating costs:

Employee compensation

74,494

69,966

222,531

230,117

Production

37,765

37,185

110,129

120,313

Selling, general and administrative

26,288

21,354

78,521

68,128

Depreciation and amortization

13,204

14,881

40,602

45,256

Goodwill and other asset impairment

---

84,220

---

84,220

Gain on insurance recovery

---

(1,915)

---

(1,915)

Total operating costs

151,751

225,691

451,783

546,119

Operating income (loss)

11,462

(67,683)

36,456

(65,588)

Other income (expense):

Interest expense

(17,015)

(10,489)

(53,927)

(31,718)

Gain on sale of investments

---

910

---

701

Other, net

184

212

725

621

Total other expense

(16,831)

(9,367)

(53,202)

(30,396)

Loss from continuing operations before income taxes

(5,369)

(77,050)

(16,746)

(95,984)

Income tax expense (benefit)

5,288

(16,670)

14,940

(27,625)

Loss from continuing operations

(10,657)

(60,380)

(31,686)

(68,359)

Discontinued operations:

Income (loss) from discontinued operations (net of tax)

---

(98)

---

96

Gain (loss) related to divestiture of operations (net of tax)

---

(1,984)

---

5,136

Net Loss

$          (10,657)

$          (62,462)

$          (31,686)

$          (63,127)

Net income (loss) per common share:

Loss from continuing operations

$              (0.48)

$              (2.71)

$              (1.42)

$              (3.07)

Discontinued operations

---

(0.09)

---

0.23

Net loss per common share

$              (0.48)

$              (2.80)

$              (1.42)

$              (2.84)

Net income (loss) per common share - assuming dilution:

Loss from continuing operations

$              (0.48)

$              (2.71)

$              (1.42)

$              (3.07)

Discontinued operations

---

(0.09)

---

0.23

Net loss per common share - assuming dilution

$              (0.48)

$              (2.80)

$              (1.42)

$              (2.84)

Weighted-average common shares outstanding:

Basic and diluted

22,366

22,273

22,333

22,236

Media General, Inc.

BUSINESS SEGMENT

(Unaudited, in thousands)

Revenues

Depreciation & Amortization

Operating Profit (Loss)

Three Months Ending September 26, 2010

Virginia/Tennessee

$    46,105

$            (3,285)

$                 7,399

Florida

38,958

(1,718)

2,052

Mid-South

39,065

(2,875)

7,030

North Carolina

18,174

(1,478)

(51)

Ohio/Rhode Island

14,688

(809)

4,426

Advertising Services & Other

6,757

(185)

483

Eliminations

(534)

-

(6)

21,333

Unallocated amounts:

Acquisition intangibles amortization

(1,518)

(1,518)

Corporate expense

(1,336)

(7,888)

$  163,213

$          (13,204)

Corporate interest expense

(17,007)

Other

(289)

Consolidated loss from continuing

operations before income taxes

$               (5,369)

(Unaudited, in thousands)

Revenues

Depreciation & Amortization

Operating Profit (Loss)

Three Months Ending September 27, 2009

Virginia/Tennessee

$    47,980

$            (3,380)

$               10,674

Florida

36,519

(2,076)

524

Mid-South

35,513

(3,364)

5,479

North Carolina

18,946

(1,703)

1,430

Ohio/Rhode Island

12,314

(849)

2,509

Advertising Services & Other

7,160

(209)

1,529

Eliminations

(424)

-

-

22,145

Unallocated amounts:

Acquisition intangibles amortization

(1,775)

(1,775)

Corporate expense

(1,525)

(4,752)

$  158,008

$          (14,881)

Interest expense

(10,489)

Net gain on sale of investments

910

Gain on insurance recovery

1,915

Goodwill and other asset impairment

(84,220)

Other

(784)

Consolidated loss from continuing

operations before income taxes

$             (77,050)

(Unaudited, in thousands)

Revenues

Depreciation & Amortization

Operating Profit (Loss)

Nine months ended September 26, 2010

Virginia/Tennessee

$  140,903

$            (9,862)

$               25,491

Florida

114,424

(5,242)

4,823

Mid-South

117,127

(8,895)

21,269

North Carolina

56,195

(4,592)

2,597

Ohio/Rhode Island

42,129

(2,479)

11,388

Advertising Services & Other

19,035

(650)

2,808

Eliminations

(1,574)

-

(8)

68,368

Unallocated amounts:

Acquisition intangibles amortization

(4,660)

(4,660)

Corporate expense

(4,222)

(23,600)

$  488,239

$          (40,602)

Corporate interest expense

(53,904)

Other

(2,950)

Consolidated loss from continuing

operations before income taxes

$             (16,746)

(Unaudited, in thousands)

Revenues

Depreciation & Amortization

Operating Profit (Loss)

Nine months ended September 27, 2009

Virginia/Tennessee

$  145,408

$          (10,525)

$               24,033

Florida

116,386

(6,266)

(2,313)

Mid-South

106,252

(10,152)

12,516

North Carolina

57,601

(5,095)

1,355

Ohio/Rhode Island

36,014

(2,541)

5,245

Advertising Services & Other

19,963

(657)

2,894

Eliminations

(1,093)

2

(46)

43,684

Unallocated amounts:

Acquisition intangibles amortization

(5,361)

(5,361)

Corporate expense

(4,661)

(20,014)

$  480,531

$          (45,256)

Interest expense

(31,718)

Net gain on sale of investments

701

Gain on insurance recovery

1,915

Goodwill and other asset impairment

(84,220)

Other

(971)

Consolidated loss from continuing

operations before income taxes

$             (95,984)

Media General, Inc.

CONSOLIDATED BALANCE SHEETS

September 26,

December 27,

(Unaudited, in thousands)

2010

2009

ASSETS

Current assets:

Cash and cash equivalents

$            21,857

$          33,232

Accounts receivable - net

89,546

104,405

Inventories

7,770

6,632

Other

39,679

60,786

Total current assets

158,852

205,055

Other assets

42,457

34,177

Property, plant and equipment - net

399,849

421,208

FCC licenses and other intangibles - net

570,948

575,608

Total assets

$       1,172,106

$     1,236,048

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$            25,158

$          26,398

Accrued expenses and other liabilities

94,424

72,174

Total current liabilities

119,582

98,572

Long-term debt

673,100

711,909

Deferred income taxes

27,603

7,233

Other liabilities and deferred credits

182,551

226,083

Stockholders' equity

169,270

192,251

Total liabilities and stockholders' equity

$       1,172,106

$     1,236,048

Media General, Inc.

REVENUES DETAIL

Thirteen Weeks Ending

Thirty-Nine Weeks Ending

September 26,

September 27,

September 26,

September 27,

(Unaudited, in thousands)

2010

2009

% Change

2010

2009

% Change

Virginia/Tennessee

Publishing

$                    38,295

$                    40,678

(5.9)%

$                  118,227

$                  124,162

(4.8)%

Broadcast

5,260

5,016

4.9 %

15,510

14,917

4.0 %

Digital media

2,550

2,286

11.5 %

7,166

6,329

13.2 %

Total Virginia/Tennessee revenues

46,105

47,980

(3.9)%

140,903

145,408

(3.1)%

Florida

Publishing

19,771

22,057

(10.4)%

63,001

73,174

(13.9)%

Broadcast

17,469

12,911

35.3 %

46,328

38,542

20.2 %

Digital media

1,718

1,551

10.8 %

5,095

4,670

9.1 %

Total Florida revenues

38,958

36,519

6.7 %

114,424

116,386

(1.7)%

Mid-South

Publishing

7,931

8,260

(4.0)%

24,206

25,400

(4.7)%

Broadcast

29,832

26,172

14.0 %

89,421

77,803

14.9 %

Digital media

1,302

1,081

20.4 %

3,500

3,049

14.8 %

Total Mid-South revenues

39,065

35,513

10.0 %

117,127

106,252

10.2 %

North Carolina

Publishing

11,737

12,963

(9.5)%

36,649

39,884

(8.1)%

Broadcast

5,239

5,032

4.1 %

16,294

14,964

8.9 %

Digital media

1,198

951

26.0 %

3,252

2,753

18.1 %

Total North Carolina revenues

18,174

18,946

(4.1)%

56,195

57,601

(2.4)%

Ohio/Rhode Island

Broadcast

14,172

11,844

19.7 %

40,606

34,612

17.3 %

Digital media

516

470

9.8 %

1,523

1,402

8.6 %

Total Ohio/Rhode Island revenues

14,688

12,314

19.3 %

42,129

36,014

17.0 %

Advertising Services & Other

Publishing 1

2

209

(99.0)%

4

718

(99.4)%

Broadcast (production company)

3,298

2,548

29.4 %

7,171

6,898

4.0 %

Digital media

3,457

4,403

(21.5)%

11,860

12,347

(3.9)%

Total Advertising Services & Other revenues

6,757

7,160

(5.6)%

19,035

19,963

(4.6)%

Eliminations

(534)

(424)

25.9 %

(1,574)

(1,093)

44.0 %

Total revenues

$                  163,213

$                  158,008

3.3 %

$                  488,239

$                  480,531

1.6 %

Selected revenue categories

(Unaudited, in thousands)

Publishing revenues

Local

$                    33,900

$                    36,777

(7.8)%

$                  105,746

$                  116,719

(9.4)%

National

5,550

5,686

(2.4)%

16,944

19,055

(11.1)%

Classified

18,118

20,441

(11.4)%

56,787

64,238

(11.6)%

Circulation

16,218

17,634

(8.0)%

50,340

52,244

(3.6)%

Printing/Distribution

3,293

3,011

9.4 %

9,864

9,146

7.9 %

Broadcast revenues (gross)

Local

$                    41,230

$                    39,594

4.1 %

$                  125,883

$                  117,885

6.8 %

National

22,265

19,851

12.2 %

67,608

61,341

10.2 %

Political

9,659

1,524

    NM

17,700

2,485

   NM

Cable/Satellite (retransmission) fees

4,820

4,226

14.1 %

14,111

11,740

20.2 %

Digital revenues

Local

$                      3,696

$                      3,017

22.5 %

$                    10,293

$                      8,296

24.1 %

National

932

835

11.6 %

2,606

2,479

5.1 %

Classified

2,425

2,160

12.3 %

7,014

6,375

10.0 %

Advertising Services

3,455

4,409

(21.6)%

11,817

12,355

(4.4)%

1 Starting in 2010, most print products formerly within Advertising Services & Other are being managed in their respective geographic market or have  been discontinued.

 "NM" is not meaningful.

Media General, Inc.

Non-GAAP Financial Metrics

Thirteen Weeks Ending

Thirty-Nine Weeks Ending

September 26,

September 27,

September 26,

September 27,

(Unaudited, in thousands)

2010

2009

2010

2009

Loss from continuing operations

$          (10,657)

$          (60,380)

$          (31,686)

$     (68,359)

Interest

17,015

10,489

53,927

31,718

Taxes

5,288

(16,670)

14,940

(27,625)

Depreciation and amortization

13,204

14,881

40,602

45,256

EBITDA from continuing operations

$            24,850

$          (51,680)

$            77,783

$     (19,010)

Loss from continuing operations

$          (10,657)

$          (60,380)

$          (31,686)

$     (68,359)

Taxes *

5,288

(16,670)

14,940

(27,625)

Non-cash impairment charge

-

84,220

-

84,220

Depreciation and amortization

13,204

14,881

40,602

45,256

After-tax cash flow

$              7,835

$            22,051

$            23,856

$       33,492

After-tax cash flow

$              7,835

$            22,051

$            23,856

$       33,492

Capital expenditures

6,808

3,647

15,604

11,625

Free cash flow

$              1,027

$            18,404

$              8,252

$       21,867

* The Company's income tax expense in 2010 is non-cash in nature and has been added back accordingly.

See 2009 Form 10-K for further discussion.

Operating income adjusted for impairment, insurance gain, and freeze on retirement plan

(Unaudited, in thousands)

Thirteen Weeks Ending September 27, 2009

Operating income (loss)

$     (67,683)

Non-cash impairment charge

84,220

Gain on insurance recovery

(1,915)

Freeze on retirement plan

(2,049)

Operating income adjusted for impairment, insurance gain, and freeze on retirement plan

$       12,573

Operating expenses adjusted for impairment, insurance gain, and freeze on retirement plan

(Unaudited, in thousands)

Thirteen Weeks Ending September 27, 2009

Total operating expenses

$     225,691

Non-cash impairment charge

(84,220)

Gain on insurance recovery

1,915

Freeze on retirement plan

2,049

Operating expenses adjusted for impairment, insurance gain, and freeze on retirement plan

$     145,435

Percentage change from previous year

4.4%

SOURCE Media General, Inc.



RELATED LINKS

http://www.mediageneral.com