Business News

Media General Reports Third-Quarter 2008 Results

Friday 17. October 2008 - Media General, Inc. (NYSE:MEG) today reported net income in the third quarter of 2008 of $6.1 million, or 28 cents per diluted share, compared with net income in the 2007 third quarter of $2.5 million, or 11 cents per diluted share.

Excluding discontinued operations, consisting of five television stations that have been or will be sold, income from continuing operations was $5.8 million, or 26 cents per diluted share. This compares with income from continuing operations of $1.6 million, or 7 cents per diluted share, from the same period in 2007. Total company revenues of $193.7 million in the third quarter of 2008 decreased 10.9 percent from the same period in 2007.

Media General’s higher third-quarter results primarily reflected a 24.5 percent increase in Broadcast Division profits, lower interest expense and the absence this year of operating losses from SP Newsprint, which was divested on March 31, 2008. The 2008 quarter also reflected improved results from the Interactive Media Division. Included in the third quarter was the reversal of approximately $5 million of pretax profit-sharing expense accrued earlier in 2008. This action was based on actual results for the first nine months and the company’s projections for the remaining three months. The reversal was spread across all three operating segments and corporate expense. Total operating costs in the third quarter decreased 9.5 percent compared with the prior year, reflecting the benefit of aggressive actions to reduce workforce and cut other costs. In 2008, the company had $2 million more of fixed asset gains in selling, general and administrative expense than in 2007.

“The prolonged weakened economy and unfavorable business climate have created far more challenges than we anticipated and continued to deeply impact our operating results in the third quarter, particularly the Publishing Division,” said Marshall N. Morton, president and chief executive officer. “In reaction, we have accelerated our response to a changing marketplace through product innovation and aggressive expense management.

“In the third quarter, our Broadcast Division generated Political revenues of $7.5 million, an amount that reflected stronger spending by presidential and U.S. Congressional campaigns,” Mr. Morton said. “We also generated $12.5 million in Summer Olympics advertising, which partially offset a decline in Local and National time sales.

“The Interactive Media Division reported a 9 percent increase in revenues, which was driven by a strong performance by DealTaker.com, and a 29 percent increase in Local advertising. The partnership with Yahoo!HotJobs generated $1.7 million in revenues in the quarter, helping to mitigate a 12 percent decrease in Classified revenues. Our online audience growth continued in the third quarter, driven significantly by our continuous news offerings on all sites. Page views were up 14.5 percent, visitor sessions increased 23.9 percent and unique visitors rose 30.8 percent,” Mr. Morton said.

Publishing Division

Publishing Division profit for the quarter was $10.3 million compared with $22 million in the 2007 third quarter. Total revenues decreased 18.2 percent, and newspaper advertising revenues declined 21.5 percent.

Excluding Florida, where Publishing revenues were down 28.3 percent in the quarter, total Publishing revenues decreased 13.6 percent. Revenues declined 16.4 percent in Virginia and 11.4 percent in North Carolina. The opening of several new department stores in Alabama in 2008 helped to hold the overall decline in this market to 4.3 percent. In South Carolina, where revenues declined just 2.9 percent, advertising from a weekly newspaper acquired earlier this year helped to partially offset the total spending decline.

Classified advertising revenues in the third quarter were below last year’s quarter by $14.8 million, or 33.1 percent, driven by shortfalls in all markets, particularly Tampa. For the company’s three metro markets, employment revenues decreased 47.4 percent, real estate revenues were down 46.4 percent, and automotive revenues declined 42.7 percent.

Retail advertising revenues declined $6.7 million, or 12.5 percent, primarily due to lower spending in the Tampa market in the department store, home furnishings, and entertainment categories. National revenues decreased $1.8 million, or 20.1 percent, as a result of lower spending in the telecommunications and automotive categories in the Tampa market. Circulation revenues were even for the quarter, reflecting Daily single-copy price increases in most markets on September 1 and home-delivery rate increases earlier in the year in some markets.

Excluding severance from both years, Publishing Division expenses declined 9.9 percent for the quarter driven by an 11 percent decline in salaries, reflecting savings from staff reductions, benefits and profit sharing. Newsprint expense decreased 3.9 percent as a result of lower consumption, which was down 21.4 percent. The average price per ton increased $117, or 22.2 percent, from the 2007 third quarter.

Broadcast Division

Broadcast Division profit for the quarter of $17.7 million increased 24.5 percent from last year’s equivalent period. Political revenues of $7.5 million and Olympics revenues of $12.5 million largely offset weak National transactional sales. Expenses decreased 6.8 percent. The division’s significant number of cost reduction measures, along with savings for benefits and profit sharing, led to a 9.9 percent reduction in salary and benefit expenses for the third quarter compared with last year.

Total Broadcast revenues declined $1.3 million, or 1.5 percent. Gross time sales declined $775,000, or less than one percent. Local time sales declined just $210,000, or 0.4 percent. Lower spending in the automotive and furniture store categories was partially offset by higher medical, fast food and telecommunications advertising. National time sales decreased $6.5 million, or 19.7 percent. Categories showing decreases for the quarter included automotive, telecommunications and corporate. Weak economic conditions in the Tampa market continue to hamper WFLA’s performance.

Political revenues increased by $5.9 million over the 2007 quarter and were generated from presidential campaign and issue spending in Florida, Ohio, North Carolina, Mississippi, Tennessee and Virginia, and U.S. Congressional races in Ohio, Mississippi, Georgia, Virginia and South Carolina.

Interactive Media Division

The Interactive Media Division had a quarterly loss of $336,000 compared with a loss of $1 million in the 2007 third quarter, excluding a $2.3 million write-down of an investment in 2007. The division generated revenues of $10.4 million, up 9 percent, reflecting a 29 percent increase in Local advertising and strong revenues from DealTaker.com, acquired March 31, 2008.

Local revenues increased as the result of continued focus on direct sales, increased staffing and training. This resulted in a growth in banners and sponsorships. National/Regional revenues decreased 11 percent, due to softer advertising from national agencies, particularly at TBO.com in Tampa.

A decline in advergaming revenues in the quarter at Blockdot reflected a slower pace of incoming projects, as a result of the weaker economy, compared with the same 2007 period.

Other results

Interest expense decreased by $5 million, or 33 percent, due almost equally to lower average interest rates and lower average debt levels. Debt at the end of the third quarter was $750 million, down from $830 million at the end of the second quarter and from $898 million at the beginning of the year. With the current-year sale of SP Newsprint, the $4.9 million of operating losses recorded in 2007 were absent in the current quarter. SP impact in this year’s third quarter produced income of $1 million, reflecting favorable adjustment to certain post-closing liabilities.

EBITDA (income from continuing operations before interest, taxes, depreciation and amortization) in the third quarter of 2008 was $36.4 million, compared with $34 million in the 2007 period. After-Tax Cash Flow was $22.6 million compared with $19.5 million in the prior year. Capital expenditures in the third quarter of 2008 were $6.8 million compared with $17.3 million in the prior-year period. Free Cash Flow for the quarter (After-Tax Cash Flow minus capital expenditures) was $15.8 million, up from $2.1 million in the prior-year period.

Media General provides the non-GAAP financial metrics EBITDA, After-Tax Cash Flow, and Free Cash Flow. The company believes these metrics are useful in evaluating financial performance and 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.