Business News

Media General Reports First-Quarter 2008 Results

Monday 21. April 2008 - Media General, Inc. (NYSE:MEG) today reported a net loss for the first quarter of 2008 of $20.3 million, or 91 cents per diluted share, which included 47 cents per share related to the company's plans to sell five television stations.

This compares with a net loss of $6.5 million, or 27 cents per diluted share, in the first quarter of 2007. The loss from continuing operations in the first quarter of 2008 was $9.8 million, or 44 cents per diluted share.

The loss from discontinued operations is primarily related to the sale of the company’s ABC station in Lexington, Ky., including allocated goodwill, which was announced on March 7. The company expects that loss to be largely offset by an anticipated gain later in the year on the sale of its CW station in Jacksonville, Fla., which is progressing. The sales of the five stations are expected to generate total proceeds of $100 million to $105 million, which will be used to further reduce debt by $60 million to $65 million after considering estimated taxes to be paid.

“Media General’s lower first-quarter results were largely attributable to continued weak revenues, especially in the Publishing Division, driven substantially by the impact of the deep housing-induced recession in Florida on our Tampa operations,” said Marshall N. Morton, president and chief executive officer. “A 9.5 percent reduction in Publishing Division operating expenses in the quarter could not fully offset that division’s revenue shortfalls. Consistent with our March 31 announcement, Media General continues to implement aggressive actions to better align expenses at our Florida properties with the current business environment. On April 14, for example, our Florida Communications Group, which includes all of our Tampa properties, announced a voluntary separation program. Approximately one-half of the 1,300 employees there are eligible to consider the opportunity, although fewer than that will act on it. In addition, all of our newspapers continue to make significant efforts to reduce newsprint consumption, which led, in part, to an 18 percent decline in newspaper consumption in the first quarter.

“Comparing our Florida results to those of other states where we operate underscores the unfavorable impact of Florida on our overall results,” said Mr. Morton. “Revenues in Florida were down 29.5 percent in the first quarter. In contrast, revenues declined 11.1 percent in Virginia, 7.3 percent in North Carolina, and in the other states where we have publishing operations, namely Alabama and South Carolina, revenues were down 4.6 percent. Excluding Florida revenues from the division’s first quarter, total Publishing revenues decreased less than 10 percent.

“In the Broadcast Division, we generated more than $4 million in Political revenues in the first quarter, partially offsetting lower Local and National transaction time sales. Our television stations are experiencing soft advertiser spending across a number of markets and key categories, including automotive, entertainment and furniture. Also, as announced on March 31, each of our stations is implementing further cost-reduction initiatives and pursuing additional new business development opportunities. The Broadcast Division also is deferring until later in the year all capital expenditures that are not critical to on-air operations,” he said.

“The Interactive Media Division experienced solid growth in Local and Regional/National advertising, and revenues from the Yahoo!HotJobs partnership helped mitigate the decrease in Classified revenues,” Mr. Morton said. “Page views and visitor sessions for the first quarter rose 12.6 percent, and 23.2 percent, respectively, driven in large part by our “Web-First” approach to local news in all markets. Our aggressive “Web-First” initiative is helping drive audience to our Web sites as evidenced by TBO.com in Tampa, which generated a 28 percent increase in page views in the first quarter.”

Publishing Division

Publishing Division profit for the quarter decreased 56.4 percent, total revenues decreased 16.7 percent, and newspaper advertising revenues declined 19.1 percent. Excluding Florida operations, Publishing Division profit declined 24 percent in the quarter.

Classified advertising revenues in the first quarter were below last year’s quarter by $13.9 million, or 27.9 percent, driven mostly by shortfalls in the Tampa market. For the company’s three metro markets, real estate revenues were down 40 percent, employment revenues decreased 37 percent, and automotive revenues declined 34 percent.

Retail advertising revenues declined $5.9 million, or 10.8 percent, primarily due to lower spending in Tampa in the department store, home furnishings, and home improvement categories. National revenues decreased $2.1 million, or 21 percent, as a result of lower spending in the telecommunications, travel and automotive categories in the Tampa market. Circulation revenues decreased $900,000, or 5.1 percent, reflecting Daily and Sunday net-paid circulation volume declines.

Publishing Division expenses, excluding severance costs from the first- quarter of 2007, declined $1.1 million, or 9.5 percent for the quarter, reflecting significant decreases in newsprint expense, salaries, and benefits. Newsprint expense decreased 23.3 percent as a result of both lower prices and lower consumption. The average price per ton decreased $36 from the 2007 quarter. Salaries and benefits declined mostly due to actions implemented in 2007 in response to the weakening revenue environment.

Broadcast Division

Broadcast Division profit for the quarter was nominally ahead of the prior-year’s same quarter as a result of expenses decreasing 1.4 percent. The expense reduction was achieved mostly through lower spending for discretionary categories, such as promotion, research and travel. Salaries increased only 1.5 percent, primarily the result of keeping open positions unfilled.

Total Broadcast revenues decreased 1.2 percent. Gross time sales declined about $2.5 million, or 3.1 percent. Local time sales declined $2.2 million, or 4.4 percent. Lower spending in the furniture store, fast food and automotive categories was partially offset by higher health care advertising. National time sales decreased $4.4 million, or 14.6 percent. Categories showing decreases for the quarter included automotive and entertainment, while drug stores and fast food increased.

Total Political revenues of $4.4 million compared with $340,000 in the 2007 quarter. The current quarter’s revenues were generated from presidential campaign spending in South Carolina, Florida, Georgia, Alabama, Ohio and Rhode Island, as well as gubernatorial primary spending in North Carolina, U.S. Congressional primary races in Mississippi and Kentucky, and issue spending in Florida and Ohio.

Interactive Media Division

Interactive Media Division revenues of $7.7 million decreased $259,000, or 3.3 percent, over the 2007 quarter, due to lower Classified revenues and lower sales in the advergaming business. Local revenues increased 28.5 percent as the result of continued growth in banners and sponsorships and increased direct sales. National/Regional revenues grew 43.2 percent, due to a greater focus on national networks, particularly at TBO.com in Tampa. Classified advertising was down 15.4 percent as lower newspaper advertising volumes, especially help-wanted, had an unfavorable impact on the company’s Web sites. The division’s quarterly loss of $2.7 million compared with a loss of $630,000 in the 2007 quarter.

Other results

Interest expense decreased by $2.7 million, due mainly to lower interest rates, but aided by lower debt levels.

EBITDA (income from continuing operations before interest, taxes, depreciation and amortization) in the first quarter of 2008 was $14.2 million, compared with $23.9 million in the 2007 period. After-Tax Cash Flow was $8.5 million compared with $12.7 million in the prior year. Capital expenditures in the first quarter of 2008 were $8 million compared with $19.5 million in the prior-year period. The capital spending plan for 2008 has been reduced from $45 million to $25 million. Free Cash Flow for the quarter (After-Tax Cash Flow minus capital expenditures) was $559,000, compared with a deficit of $6.8 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.