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Media General Reports First-Quarter 2014 Results

Friday 02. May 2014 - Net operating revenue increased 16% to $144 million, compared to combined net operating revenue of $124 million in the first quarter of 2013

Broadcast cash flow (BCF) increased 38% to $45.9 million, compared to combined BCF of $33.3 million in the first quarter of 2013; BCF margin in the current quarter was 32%, compared to 27% in the prior year
Additional $10 million of operating synergies identified as a result of the company’s merger and integration with Young Broadcasting
On March 21, 2014, Media General and LIN Media announced plans to merge and create the second-largest pure-play local broadcast television company in the United States; subject to various approvals, this merger is expected to close in early 2015
Media General, Inc. (NYSE: MEG), a local broadcast television and digital media company, today reported first-quarter 2014 results.
Media General’s president and chief executive officer George L. Mahoney said, “Today we report the first full quarter for the combined Media General and Young Broadcasting, which merged on November 12, 2013. It was an outstanding quarter.”
Comparing first-quarter 2014 results to the first quarter of 2013 as adjusted for the combined company, Mr. Mahoney said, “Our net operating revenue increased 16% from last year and reflects growth in all of our revenue categories. Core local and national gross time sales increased 4.6%. Automotive and telecommunications advertising increased 20% and 50%, respectively, compared to last year. Our stations generated significant revenues during the Sochi Winter Olympics and the NCAA March Madness basketball tournament. Political revenues of $4.4 million were more than five times last year’s level, as we benefited especially from the race in Florida’s 13th congressional district, near Tampa. Also, retransmission consent revenues grew nearly 50%, and digital media revenues rose 33%,” said Mr. Mahoney. “Broadcast Cash Flow increased 38%, primarily as a result of our strong revenue growth, and operating income increased 87%, excluding merger-related expenses in the current quarter. Adjusted EBITDA nearly doubled to $39.3 million compared with $23.2 million last year,” he said.
“The new credit facilities that became effective on our merger with Young Broadcasting have enabled us to lower annualized combined cash interest costs from $75 million to $39 million. Interest expense in the first quarter was just under $10 million, compared with a combined $21.4 million last year. This lower interest expense, combined with revenue growth in the first quarter, enabled us to generate strong free cash flow and repay $36 million of debt. Our net leverage at the end of the first quarter was 4.23x,” said Mr. Mahoney.
“On the operational front, we have embarked on a new initiative to identify and capture additional cost savings by adopting broadcast industry best practices. Today, we are announcing another $10 million of annualized cost synergies to be captured by the end of the year. This is in addition to the initial operating and financial synergies we announced at the time of the merger with Young. We will continue to seek out efficiencies and expect to be in a position to announce more savings later this year,” said Mr. Mahoney.
“On March 21, 2014, we also announced plans to merge with LIN Media in a transaction that will more than double the size of Media General and create the second-largest pure-play local television company in the United States. Scale matters in this industry, and our rapid growth creates the opportunity to further increase shareholder value,” said Mr. Mahoney. The merger with LIN Media is expected to be immediately accretive on a free cash flow per share basis and should be completed in early 2015, subject to regulatory approvals, the approval of Media General and LIN Media shareholders and other customary closing conditions.
GAAP Results for First-Quarter 2014
On November 12, 2013, Media General, Inc. and New Young Broadcasting Holding Co., Inc. (the former Young company) were combined in an all-stock merger transaction. The merger was accounted for as a reverse acquisition. For financial reporting purposes only, Young is the acquirer and the continuing reporting entity. Consequently, the consolidated financial statements of Media General, Inc., the legal acquirer and the continuing public corporation in the transaction, include the operating results for only Young for the three months ended March 31, 2013.
This news release first discusses GAAP results for the first quarter of 2014. The company has appended Supplemental Combined Company Information to this press release. A discussion of these “As Adjusted” first-quarter results follows the GAAP discussion.
Per GAAP, in the first quarter of 2014, net income attributable to Media General was $5.4 million, or 6 cents per diluted share, based on weighted-average diluted common shares outstanding of 88.7 million. Net income attributable to Media General in the first quarter of 2013 was $3.1 million, or 5 cents per diluted share, based on weighted-average diluted common shares outstanding of 60.2 million. The current quarter results included merger-related expenses of $4.8 million. In accordance with GAAP, the presentation of “net income (loss) attributable to Media General” does not include the results of WXXA-TV or WLAJ-TV.
Also per GAAP, net operating revenue in the first quarter of 2014 was $143.9 million, compared with $50 million in the prior year. Total operating costs in the first quarter of 2014 were $124.7 million, compared with $43 million in the prior year. Operating income in the first quarter of 2014 was $19.3 million, compared with $7.1 million in the prior year.
Total debt outstanding decreased to $881.4 million on March 31, 2014, compared with $917 million on December 31, 2013, reflecting consolidated debt repayments of $35.6 million.
Retirement and postretirement plans liabilities decreased to $107.7 million on March 31, 2014, compared with $155.3 million on December 31, 2013, reflecting a $45 million cash contribution to the company’s pension plan in early 2014.
Non-GAAP Results for First-Quarter 2013 (As Adjusted Combined Company)
The appended Supplemental Combined Company Information includes an “As Adjusted” column, which provides financial information for the combined company for the first-quarter 2013. The purpose of the “Adjustments” column is to include legacy Media General revenues and expenses. No other adjustments have been made to the supplemental financial information, which is purely informational and does not purport to be indicative of what would have happened had the merger occurred as of the beginning of the period presented, nor is it indicative of results that may occur in the future, nor does it include any of the synergies of the combined company.
All 2013 results in the discussion below are as adjusted for the combined company.
Net operating revenue of $124 million increased 16% to $144 million in the first quarter of 2014. This increase reflected growth in all revenue categories, including local and national gross time sales, political time sales, retransmission consent and digital media.
Local gross time sales of $72.1 million increased 5.9% to $76.4 million in the first quarter of 2014. National gross time sales of $33.5 million increased 1.8% to $34.1 million in the first quarter of 2014. Core growth included significant increases in several advertising categories, such as 20% in automotive and 50% in telecommunications, as well as healthy increases in healthcare and entertainment. Advertising was very strong during the Sochi Winter Olympics on the company’s nine NBC stations and during the NCAA March Madness basketball tournament on the company’s 12 CBS stations.
Political gross time sales of $879,000 increased to $4.4 million in the first quarter of 2014. Political revenues in the current quarter were buoyed especially by strong spending in the very competitive race in Florida’s 13th congressional district, near Tampa.
Retransmission revenues of $22.8 million increased 49% to $34 million in the first quarter of 2014.
Digital gross time sales of $4.1 million increased 33% to $5.4 million in the first quarter of 2014.
Total operating costs of $111.2 million compared to $124.7 million in the first quarter of 2014, which included $4.8 million of merger-related expenses, and depreciation and amortization was $5.7 million higher this year due to the effects of purchase accounting resulting from the Young merger. Excluding those amounts, total operating costs increased by less than 3% year over year.
Corporate and other expense of $10.1 million decreased 35% to $6.6 million in the first quarter of 2014, the result of lower stock-based compensation, due to the change in the company’s stock price, and lower legacy benefit costs, as a result of the previously discussed pension contribution.
Operating income of $12.8 million increased to $19.3 million in the first quarter of 2014. Excluding merger-related expenses in the current quarter, operating income increased 87%.
Broadcast Cash Flow of $33.3 million increased 38% to $45.9 million in the first quarter of 2014, primarily as a result of growth in all major revenue categories in the current quarter.
Media General provides the non-GAAP financial metrics of broadcast cash flow, EBITDA as adjusted, after-tax cash flow, free cash flow and the Supplemental Combined Company Information. The company believes these metrics are alternative measures used in peer comparison and by lenders, investors, financial analysts and rating agencies 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 is included in this news release.