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First-Quarter Conference Call Remarks
Thursday, April 28, 2014, 11:00 am EDT

by George L. Mahoney, president and chief executive officer; James F. Woodward, senior vice president, finance and chief financial officer, and Lou Anne J. Nabhan, vice president, corporate communications

Welcome from Lou Anne Nabhan

Thank you and good morning.  Welcome to Media General’s First-Quarter 2014 Conference Call and Webcast.

Earlier today, we announced first-quarter 2014 results.  The press release is on our website.  A transcript of the comments from today’s call will be posted immediately after the call, and a replay also will be available.

Today’s presentation contains forward-looking statements, which are subject to various risks and uncertainties.  They should be understood in the context of the company’s publicly available reports filed with the SEC, including the section on Risk Factors.  Media General’s future performance could differ materially from its current expectations.

Our speakers today are George Mahoney, president and chief executive officer, and Jim Woodward, senior vice president-finance and chief financial officer.  I’ll now turn the presentation over to George.

Remarks from George Mahoney

Thank you, Lou Anne. Good morning everyone, and thank you for tuning in.

Today we report the first full quarter for the combined Media General and Young Broadcasting, which merged on November 12, 2013.  I’m going to compare first-quarter 2014 results to the first quarter of 2013 as adjusted for the combined company.

Net operating revenue increased 16% to $144 million and reflects growth in all of our revenue categories.  We did very well with the Sochi Winter Olympics on our 9 NBC stations and with the NCAA basketball tournament on our 12 CBS stations. 

Political revenues were very strong in the quarter, at $4.4 million.  We benefited in particular from the just-completed special election in Florida’s 13th congressional district, near Tampa – it was considered by many to be a bellwether for the fall.  The Associated Press reported that a total of $11 million was spent on the race, as the Democrats tried very hard to win this long-held Republican district.

Retransmission revenues in the first quarter increased nearly 50%, and digital revenues rose 33%.

Operating income, excluding merger-related expenses in the current quarter, increased 87% from last year.

Broadcast cash flow increased 38% to $45.9 million, compared to $33.3 million in the first quarter of 2013.  Our broadcast cash flow margin was 32%, up from 27% last year.

EBITDA nearly doubled to $39.3 million, compared with $23.2 million last year.

In addition to higher revenues in the quarter, we benefited from the financing synergies we realized when we merged with Young.  The new credit facilities that became effective upon the completion of the merger 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.

As promised, the merger is enabling Media General to generate strong free cash flow.  We’ve repaid $36 million of debt this year.

Additionally, as we’ve continued our Young-merger integration efforts, we’ve identified further significant cost savings.  We’re announcing today an additional $10 million of operating synergies, which include corporate, shared services and other operating cost savings.  This is on top of everything we have discussed previously. 

These significant new savings will come principally from restructuring corporate and shared services functions.  Approximately 45 positions are involved.  We began implementing the restructuring last week and it will be completed before the end of this year.  We’ll realize the full impact of these synergies in 2015.  As our integration efforts continue, we expect to find and announce more 2014 synergies.

As we progress in our tenure as a pure-play broadcaster, and as we combine with other successful broadcasting companies, we’re deepening our understanding of industry best practices, and we’re incorporating them rapidly into our business model.  The basic tenet is to be as thin as possible at the corporate level and to focus increasingly at the local, station level, closer to the customer, so that we can be nimble and even more responsive to our communities.  Our approach will contribute to increased margins.   

Before turning the presentation over to Jim Woodward, I want to provide some additional detail on our 2014 revenue accomplishments to date and our opportunities for the balance of this year. 

As I mentioned, we got off to a great start in Q1 with the Sochi Winter Olympics. Our NBC stations generated $11.6 million from the Games, nearly a 50% increase from the 2010 Winter Olympics, when these same stations generated $7.8 million of revenues.

Particularly with an eye to the just-completed congressional race in Florida’s 13th district, and the seven battleground states where we have stations, we expect a strong Political performance this year. 

We all know the Republicans want to reclaim the Senate.  Four of the open Senate seat races nationally are in states where we have stations.  These open seats are: Saxby Chambliss’ in Georgia, Tom Harkin’s in Iowa, Carl Levin’s in Michigan and Tim Johnson’s in South Dakota.  In our markets, we also have key races to unseat Mary Landrieu in Louisiana, Kay Hagan in North Carolina, Mark Warner in Virginia and Lamar Alexander in Tennessee.  Both Senate seats in South Carolina are up for re-election.  We have three stations in that state.

And, of course, the gubernatorial races are expected to be very competitive in Florida, Iowa, Michigan, Ohio, Rhode Island, South Dakota and Wisconsin.

Media General historically has benefited because of our stations’ strategic locations in battleground states.  Our position is now enhanced with the addition of Young’s stations.  We think that’s worth noting as we enter the busy part of this political year. 

I also want to recognize our stations’ continuing success in providing their communities with excellent news and information.  Two of our stations have won Emmy awards so far this year, and not all Emmy competitions have concluded.  Last week, the Regional Edward R. Murrow awards were announced, and 10 Media General stations won a total of 19 Murrows.  We’ve also fared very well this year in the awards competitions sponsored by the Associated Press, by state broadcaster associations, and by others that celebrate excellent journalism.

Local is our business.  It’s also our heritage.  It’s gratifying to see our stations performing so well and being recognized for their great work.  It’s how we form bonds with our communities so that, among other things, we’re top of mind when there is news or information that people need to know.  So, to connect the dots, the awards I’ve mentioned are exactly the types of things that drive audience, ratings and revenue.

And now we’ll hear from our CFO, Jim Woodward.   

Remarks from James Woodward

Thank you, George. 

Let me first note that, as I explained on our last earnings call, the Young merger was accounted for as a reverse acquisition.  Consequently, the GAAP financials in our press release this morning include only Young operating results for 2013 first quarter.

Also in the press release, we included for 2013 Supplemental Combined Company Information.  This combined information simply adds together the results of legacy Media General and legacy Young without any adjustments.  My comments are going to compare the 2014 first quarter to the 2013 combined results.

I’m going to recap a bit of what George reported, and I’ll add further details on the first quarter as well. 

Net operating revenue of $124 million increased to $144 million or 16% and reflected growth in all revenue categories -- local and national gross time sales, political time sales, retransmission revenue and digital.

Local gross time sales increased 5.9% to $76.4 million, and National gross time sales 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.

Political gross time sales were $4.4 million, compared to $879,000 last year.

Retransmission revenues increased 49% to $34 million.

Digital revenue increased 33% to $5.4 million.

Total operating costs were $124.7 million, which included $4.8 million of merger-related expenses, and depreciation and amortization was higher by $5.7 million in the current quarter due to the effects of purchase accounting resulting from the Young merger.  Excluding those two amounts, total operating costs increased by less than 3%.  Expense growth also included higher network compensation and increases for salaries and benefits.

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. 

As George reported, we’ve identified $10 million of annualized cost savings from restructuring corporate and shared services functions.  While we will realize savings in 2014 from the restructuring, the full impact on a run-rate basis will not be until 2015.  Of the $10 million, approximately half is in corporate expense and the balance is part of station operating expense.

Capital expenditures in the first quarter were $2.5 million and were mostly for HD news sets, equipment upgrades and replacements, building improvements and vehicles.  Capital expenditures for the full year are still expected to be $41 million, as we complete the build-out of HD at our stations and investment in enhancing our news gathering and production capabilities.

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.

Net leverage as of March 31, 2014, as defined in our credit agreement, was 4.23x, based on adjusted pro forma trailing eight-quarter average EBITDA of $206.5 million.

And, now I’ll turn it back to George.

Remarks from George Mahoney

Thank you, Jim.  I’d like to provide one update and then close with some comments about our merger with LIN Media.  After that, we’ll move to Q&A.

You’ll recall we’d determined earlier this year to move our KRON television station in San Francisco to some vacant space in the KGO building, also in the city.  And so we listed the present KRON space for sale.  I’m happy to report that the real estate market in San Francisco is very hot, and we’ve signed a contract to sell the KRON property even more quickly than we’d thought, and at a better price than we’d imagined.  I’m working under some confidentiality restrictions here, but it’s fair to say that we’ll close with the undisclosed buyer in an all-cash transaction on May 5, and that we’re receiving substantially more than the $20 million price at which we’d marketed the property.  And, the gain from the transaction is sheltered by our NOLs, so all of this affords a second-quarter opportunity to pay down debt at an accelerated level.  I should add that we expect to physically move KRON’s operations to the KGO space in the fourth quarter this year, and the terms of the sale allow us to remain in our present space on Van Ness, rent-free, until that time. 

Now, on LIN.  We’ve said consistently that we would be an acquirer in our industry’s continuing consolidation, and that is indeed the case.  Our merger with LIN will create the second-largest company in the United States focused solely on local TV.

Our combined revenues are more than $1.2 billion. 

The LIN merger will add even more geographic and network diversity and economies of scale. Our presence in Political battleground states also increases, with the addition of stations in Iowa, Michigan, Ohio, Virginia and Wisconsin.  I explained earlier why that’s especially important.

As with Young, Media General and LIN have very similar cultures and a core focus on providing excellent local content.  We both provide top-rated local news, and we both also produce a number of successful local lifestyle programs.

Our prospects for digital media growth are particularly exciting. Together we have $150 million of pro forma digital revenues, and our combined Digital Media business will be the largest and most diversified in the industry. A major advantage of the merger is the ability to scale LIN’s Digital offerings across Media General’s local markets and together also to grow the national footprint for the business.

The Media General-Young merger was a game changer for both companies. Our merger with LIN also will be transformational for our company. It’s a terrific, blockbuster transaction.

Most importantly, for stockholders the transaction will be immediately accretive to free cash flow per share.

The LIN merger is expected to close in early 2015.  It has been approved by the Media General and LIN Board of Directors. It remains subject to the approval of the shareholders of both companies and to regulatory approvals.  As we’ve said previously, we expect to swap or sell certain stations in overlap markets to address regulatory considerations.

And now we’ll be pleased to take your questions.



This communication is not a solicitation of a proxy from any shareholder of Media General, Inc. (“Media General”) or LIN Media LLC (“LIN Media”). In connection with the Agreement and Plan of Merger by and among Media General, Mercury New Holdco, Inc., (“Media General Holdings”), LIN Media and the other parties thereto (the “Merger”), Media General, Media General Holdings and LIN Media intend to file relevant materials with the SEC, including a Registration Statement on Form S-4 to be filed by Media General Holdings that will contain a joint proxy statement/prospectus. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THESE MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT MEDIA GENERAL, LIN MEDIA, MEDIA GENERAL HOLDINGS AND THE MERGER. The Form S-4, including the joint proxy statement/prospectus, and other relevant materials (when they become available), and any other documents filed by Media General, Media General Holdings and LIN Media with the SEC, may be obtained free of charge at the SEC’s web site at The documents filed by Media General and Media General Holdings may also be obtained for free from Media General’s Investor Relations web site ( or by directing a request to Media General’s Investor Relations contact, Lou Anne J. Nabhan, Vice President, Corporate Communications, at (804) 887-5120.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.


Media General and LIN Media and their respective executive officers and directors may be deemed to be participants in the solicitation of proxies from the security holders of either Media General or LIN Media in connection with the Merger. Information about Media General’s directors and executive officers is available in Media General’s definitive proxy statement, dated March 14, 2014, for its 2014 annual meeting of shareholders. Information about LIN Media’s directors and executive officers is available in LIN Media’s definitive proxy statement, dated April 7 2014, for its 2014 annual meeting of shareholders. Other information regarding the participants and description of their direct and indirect interests, by security holdings or otherwise, will be contained in the Form S-4 and the joint proxy statement/prospectus regarding the Merger that Media General Holdings will file with the SEC when it becomes available.

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