News Releases

  • Print Printable Version

Wednesday, October 21, 2009

Media General Reports Third-Quarter 2009 Results; Includes Non-Cash Impairment Charge

RICHMOND, Va. – Media General, Inc. (NYSE: MEG) today reported a net loss for the third quarter of 2009 of $62.5 million, or $2.80 per share, including a pretax non-cash impairment charge of $84 million, compared with net income of $6.1 million, or 27 cents per diluted share, in the 2008 period.

Income from continuing operations, adjusting for the above impairment charge and applying a 39 percent tax rate, was $4.4 million, or 20 cents per share, compared with $5.7 million, or 25 cents per share in the prior year. The impairment charge and tax benefit in the quarter are discussed below.

Media General’s third-quarter 2009 results included gains of $1.9 million associated with an insurance recovery, $910,000 from a favorable tax ruling related to the sale of SP Newsprint, and $2 million from implementing a final freeze on a retirement plan, partially offset by a $2.2 million expense from stock-based compensation plans due to an increase in the price of the company’s common stock in the quarter.  The 2008 third quarter included a $500,000 gain associated with an insurance recovery and a $1 million reduction in the previously recognized loss on the sale of SP Newsprint.

“The 18 percent decline in total revenues in the third quarter represents a sequential improvement from the 20 percent decrease in the second quarter of 2009.  The improvement is made more notable when we consider that last year’s third quarter included $12.5 million in Olympics revenues as well as $6 million more in Political revenues,” said Marshall N. Morton, president and chief executive officer.  “Nonetheless, the advertising environment in the third quarter remained challenging, and we experienced lower Classified, Local and National revenues overall.  On the other hand, newspaper circulation revenues increased 11 percent as a result of rate increases, and renewed emphasis on subscription sales after Labor Day is yielding encouraging results.  Cable and satellite retransmission fees were $4.2 million in this year’s third quarter compared to just under $1 million last year,” Mr. Morton said.

“We were pleased with the results of our initiatives to expand the array of products and services we provide via digital media, including online and mobile.  Digital Media revenues in the third quarter increased 2 percent from the prior year and represented 8 percent of total advertising revenues.  Local digital revenues increased 25 percent from a year ago, reflecting the success of new online-only sales initiatives.  Unique visitors increased nearly 30 percent in the quarter,” Mr. Morton said.

“Total operating costs decreased 18 percent from last year’s third quarter, excluding the impairment charge and insurance gains.  Lower expenses were mostly attributable to a 17 percent decrease in compensation expense and a 54 percent decline in newsprint expense,” he said.

Media General had 770 fewer full-time equivalent employees this year than last year.  By the end of 2009, a furlough program will have included a total of 15 days per employee, including four days in the fourth quarter.  Newsprint consumption was down 36 percent, from both lower volumes and conservation efforts, such as our Web-width reductions, and newsprint prices dropped 27 percent from a year ago.

“As we enter the fourth quarter, we are seeing signs of strengthening in advertiser spending.  While we do not expect to fully replace the $23.4 million of Political revenues we generated in last year’s fourth quarter, we believe that Local and National advertiser spending patterns are firming somewhat, especially on the broadcast side.  September produced the smallest revenue decline we’ve seen all year, down 12 percent.

“Also encouraging are signs that the Tampa and Providence markets have stabilized.  Looking to next year, we anticipate a lift from an improving economy and the promise of Political and Olympics revenues.  Media General is well positioned to benefit from an economic recovery,” he said.

Market Segments
Effective at the beginning of the third quarter of 2009, Media General changed its management structure from three platform-based divisions to five geographic market segments and a sixth segment that includes the company’s interactive advertising services and certain other operations.  This new structure better focuses all operations on serving customers across multiple media platforms.  Included with this news release are statements that provide the market structure results for the first two quarters of 2009, for all four quarters and full-year 2008, and for full-year 2007.

Virginia/Tennessee segment profits in the third quarter were $10.7 million, a 2 percent decrease from a year ago.  Revenues of $48 million declined 14.7 percent. The segment benefited from stronger local sales in several regions, and the decline in Political revenues was less significant than in other markets.  Segment expenses decreased 19 percent. 
Florida segment profits were $524,000, a 56.5 percent decrease from the prior year.  Total revenues were $36.5 million, down 22.7 percent, mostly the result of recession-induced soft advertising.  In addition, WFLA had $2 million in Political revenues and $2.7 million in Olympics revenues last year.  Expenses decreased 22 percent from last year.

Mid-South segment profits were $5.5 million, an 11.9 percent decrease.  Revenues were $35.5 million, a 13.8 percent decrease.  The 2008 third quarter included $1.2 million in Political revenues and $2.1 million in Olympics revenues.  Expenses decreased 14.8 percent.

North Carolina segment profits were $1.4 million, a 63.3 percent decrease.  Revenues were $18.9 million, a 27.1 percent decline.  The North Carolina television stations were impacted by the absence of $1 million in Political revenues and $2.3 million in Olympics revenues from last year.  Segment expenses declined 20.7 percent.

Ohio/Rhode Island segment profits were $2.5 million, a 46.5 percent decrease from last year.  Total revenues decreased 22.7 percent.  The current quarter results reflected $1.5 million less in Political revenues than last year and the absence of $5 million of revenues from the Olympics.  Operating expenses decreased 12.7 percent.

The Advertising Services and Other segment profits increased 84 percent from last year.  Most of the improvement was generated by and Blockdot.’s revenues increased 21.2 percent, reflecting increased traffic and visitors buying from merchant sites, driven by marketing and sales initiatives. Blockdot’s revenues increased 29 percent, also driven by sales initiatives.

Despite a rise in stock price, weaker-than-expected revenues, combined with the change in management structure, which made impairment testing more granular, led the company to perform a third-quarter impairment test.  That test resulted in an $84 million pretax charge, including $66 million of goodwill and $18 million of FCC licenses, network affiliation agreements, and certain publishing licenses. 

Income Taxes
Due to the company’s net-deferred tax asset position, required valuation allowance and intra-period tax allocation rules, the tax benefit of $16.7 million on income from continuing operations for the quarter had an unusual relationship to the pretax loss.  Through nine months, in addition to any period-specific items, the tax benefit on continuing operations was limited to the amount of income tax expense that was attributable to discontinued operations and other comprehensive income items which, in combination with the amounts recorded through the first six months of the year, resulted in a 21.6 percent tax rate for the third quarter.

Other results
Corporate expense declined 44.8 percent, reflecting cost containment actions and a final freeze on a retirement plan.  Acquisition intangibles amortization decreased 40.6 percent, as certain intangible assets were written down as part of previous impairment charges.  Interest expense was approximately $525,000 higher than the prior year, due to higher marginal interest rates, offset in large part by lower average debt levels. 

Debt at the end of the third quarter was $706 million, compared with $712 million at the end of the second quarter of 2009 and $730 million as of the beginning of the year.

EBITDA (income (loss) from continuing operations before interest, taxes, depreciation and amortization) was a deficit of $51.7 million, including the non-cash impairment charge, compared with $36.3 million in the 2008 period.  After-Tax Cash Flow, which would not include the impairment charge, was $17.3 million, compared with $22.6 million in the prior year’s quarter.  Capital expenditures in the third quarter of 2009 were $3.6 million, compared with $6.8 million in the prior-year period.  Free Cash Flow (After-Tax Cash Flow minus capital expenditures) was $13.6 million, compared with $15.8 million in the prior-year period.

Media General provides the non-GAAP financial metrics EBITDA from continuing operations, 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.

Conference Call and Webcast
The company will hold a conference call with financial analysts today at 11 a.m. ET.  The conference call will be available to the media and general public through a limited number of listen-only dial-in conference lines and via simultaneous Webcast.  To dial in to the call, listeners may call 1- 800-901-5247 about 10 minutes prior to the 11 a.m. start.  The participant passcode is “Media General.”  Listeners may also access the live Webcast by logging on to and clicking on the “Live Webcast” link on the homepage about 10 minutes in advance.  A replay of the Webcast will be available online at beginning at 2 p.m. today.  A telephone replay is also available, beginning at 2 p.m. today and ending at 2 p.m. on October 28, 2009, by dialing 888-286-8010 or 617-801-6888, and using the passcode 10949244.

Forward-Looking Statements
This news release contains forward-looking statements that are subject to various risks and uncertainties and should be understood in the context of the company’s publicly available reports filed with the Securities and Exchange Commission.  Media General’s future performance could differ materially from its current expectations.

About Media General
Media General is a leading provider of news, information and entertainment across multiple media platforms, serving consumers and advertisers in strong local markets, primarily in the Southeastern United States.  Media General’s operations are organized in five geographic market segments and a sixth segment that includes the company’s interactive advertising services and certain other operations. The company’s operations include 18 network-affiliated television stations and associated Web sites, 21 daily newspapers and associated Web sites, more than 200 specialty publications that include weekly newspapers, and niche publications targeted to various demographic, geographic and topical communities of interest.  Many of the company’s specialty publications have associated Web sites.  Media General operates three interactive advertising services companies:  Blockdot, which specializes in interactive entertainment and advergaming technologies;, a coupon and shopping Web site; and NetInformer, a leading provider of wireless media and mobile marketing services.

View tables

Investor Contact:
Lou Anne Nabhan
(804) 649-6103

Media Contact:
Ray Kozakewicz
(804) 649-6748