Newspaper & Mailroom

Media General Reports Second-Quarter 2013 Results

Monday 12. August 2013 - -- Total gross revenues, excluding Political, increased 4.7% -- Political revenues of $1 million compared with $7.5 million in 2012 -- Broadcast Cash Flow was $27.5 million compared with $20.5 million in 2011 (last odd-numbered year); BCF margin was 34% vs. 29% in 2011 -- Merger with Young Broadcasting progressing; completion expected in late third or early fourth quarter

Media General, Inc. (NYSE: MEG), a local broadcast television and digital media company, today reported second-quarter operating income of $5 million, compared with $17 million in the second quarter of 2012. The year-over-year decrease was due in large part to two significant expenses in the second quarter: $7.2 million of merger-related expenses and $3.7 million of additional expense, due to the effect of a higher stock price on stock-based compensation plans, reflected in the Incentive Compensation component of “Corporate and Other Expenses.” Additionally, the current quarter included only $1 million of Political revenues, compared with $7.5 million in the same period last year.
Net loss in the second quarter was $16 million, or 59 cents per share, compared with a net loss of $146 million, or $6.48 per share, in the prior year, which included a loss of $132 million related to the divestiture of discontinued operations, mostly newspapers.
Total station revenues in the second quarter were $82 million, compared to $83 million in the prior year, net of agency commissions. As expected, Political revenues in this odd-numbered year decreased 86%. Cable and satellite retransmission revenue increased 38%, and Digital revenues grew 17%.
George L. Mahoney, president and chief executive officer of Media General, said, “Our stations are doing a good job this year replacing last year’s robust Political revenues with new revenue initiatives and business development programs. Additionally, our largest category, automotive advertising, grew 5.5% in the second quarter. Station revenues also reflected higher retransmission revenue this year and growth in Digital revenues. Station expenses increased 4.6%, due to additional network affiliation fees and expenses for revenue initiatives. We were especially pleased to see our stations increase Broadcast cash flow to 34%, compared to the last odd-numbered year 2011, a key initiative for us. Core corporate expense in the second quarter decreased 41% from last year, reflecting our major corporate restructuring following the sale of our newspapers,” said Mr. Mahoney.
“Our merger with Young Broadcasting is progressing smoothly, and we expect to complete the transaction in the late third or early fourth quarter of this year. We are very happy with the terms of a new credit agreement, announced on August 5, which will be in place following the completion of the merger. We refinanced the combined debt of Media General and Young at a significantly lower cost of capital. Cash interest will be approximately $39 million annually as a result of the new credit agreement, based on current LIBOR rates, a savings of $36 million over the two companies’ current standalone annual cash interest expense of approximately $75 million. The new Media General will be on even stronger footing than anticipated, and we’re delighted with our gathering momentum,” said Mr. Mahoney.
In the second quarter of this year, Core Local and National revenues increased approximately 1%. Local gross time sales were $46 million and decreased 1.9% from last year. National gross time sales were $25 million and increased 5.6%. Media General’s largest advertising category, automotive, grew 5.5%. Other major advertising categories that increased in the current year were furniture, home improvement, medical, entertainment and telecommunications. Major advertising categories that decreased in the second quarter were professional services, restaurants, retail and corporate.
Station production expenses increased 1.8%, mainly due to an increase in affiliate fees. Station selling, general and administrative expenses increased 8.6%, due to merit increases and to two expenses that also had revenue offsets: sales incentive trips and additional revenue-share associated with increased Digital revenues.
Core Corporate expense in the second quarter was $4.2 million, compared with $7.2 million last year, reflecting the elimination of 75 corporate staffing positions last year following the sale of the company’s newspapers.
Total interest expense in the second quarter of $19.5 million decreased 10% from last year due primarily to lower average outstanding principal. Noncash tax expense of $1.9 million compared with $3.4 million last year.
EBITDA from continuing operations (income before interest, debt modification and extinguishment costs, taxes, and depreciation and amortization), adjusted for merger-related expenses, was $18 million compared with $24 million in the second quarter of 2012. Higher operating costs combined with lower revenues due to the relative absence of Political caused the year-over-year decrease.
Guidance
Media General provided the following guidance:
Political revenues for the full year 2013 are expected to be approximately $6 million, an increase from the company’s prior guidance of $5 million.
Retransmission revenues for the full year 2013 are expected to increase approximately 47% from 2012.
In the third quarter of 2012, Political revenues were $19.6 million, and revenues from the Summer Olympics were $15.5 million. Total station revenues in the third quarter this year will decrease due to the near absence of these revenues. Core Local and National broadcast gross time sales, excluding Olympics revenues, are expected to increase in the mid-to-high single digits. Retransmission revenues are expected to increase approximately 43%, compared with the third quarter of 2012.