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FOR IMMEDIATE RELEASE
Thursday, November 6, 2014

Media General Reports Third-Quarter 2014 Results

  • Net operating revenue increased 21% to $160.2 million compared to combined company (Media General and Young) net operating revenue of $132.6 million in the third quarter of 2013. Operating income more than doubled to $35.2 million compared to combined company operating income of $17.1 million in the third quarter of 2013.
  • Broadcast Cash Flow (BCF) increased 53% to $61.1 million compared to combined BCF of $40 million in the third quarter of 2013; BCF margin in the current quarter was 38% compared to 30% in the prior year.
  • EBITDA as adjusted increased 79% to $55.4 million compared to combined EBITDA as adjusted of $30.9 million in the third quarter of 2013.
  • Free Cash Flow of $30.3 million compared to a combined deficit of $3.4 million in the third quarter of 2013.

RICHMOND, VA – Media General, Inc. (NYSE: MEG), a local broadcast television and digital media company, today reported third-quarter 2014 results. 

“Our strong year-over-year growth in the third quarter of all key financial metrics further demonstrates the value of our merger with Young Broadcasting last November,” said George L. Mahoney, president and chief executive officer of Media General. “Comparing the results of the combined company, net operating revenue increased 21%. This growth reflected higher political, retransmission, digital and local advertising revenues along with our purchase of WHTM in Harrisburg on September 1."

“Our $21.4 million of political revenue in the third quarter is attributable to our presence in many key markets where U.S. Senate and state gubernatorial races were very competitive. We additionally were pleased to see local advertising revenues grow 2% in the third quarter including WHTM, while, as expected, national advertising revenues decreased from last year. Weak automotive advertising was the primary driver of an approximate 10% decrease in national revenues."

“Our net revenue growth, combined with expense management, drove increases in Broadcast Cash Flow, which was up 53%; in adjusted EBITDA, which increased 79%; and in Free Cash Flow, which was $30 million this year compared to a $3.4 million deficit in last year’s third quarter,” said Mr. Mahoney. 

GAAP Results for Third-Quarter 2014

On November 12, 2013, Media General, Inc. and New Young Broadcasting Holding Co., Inc. 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 September 30, 2013. This news release first discusses GAAP results for the third quarter of 2014 compared to 2013. The company has appended Supplemental Combined Company Information to this press release. A discussion of these “As Adjusted” third-quarter results follows the GAAP discussion.

In the third quarter of 2014, net income attributable to Media General was $13.4 million, or 15 cents per diluted share, based on weighted-average diluted common shares outstanding of 89 million. Net income attributable to Media General in the third quarter of 2013 was $4.5 million, or 7 cents per diluted share, based on weighted-average diluted common shares outstanding of 60.2 million. In accordance with GAAP, the presentation of “net income attributable to Media General” does not include the results of WXXA-TV or WLAJ-TV.

Also, net operating revenue in the third quarter of 2014 was $160.2 million compared to $54.1 million in the prior year. Total operating costs in the third quarter of 2014 were $125.0 million compared to $45.2 million in the prior year. Operating income in the third quarter of 2014 was $35.2 million compared to $8.9 million in the prior year. 

Non-GAAP Results for the Third-Quarter (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 third quarter of 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 adjusted for the combined company.

Net operating revenue increased 21% to $160.2 million compared to $132.6 million in the third quarter of 2013.

Local gross time sales increased 2% to $76.4 million compared to $74.9 million in the third quarter of 2013. Local automotive advertising was nominally below the third quarter of 2013. Major local advertising categories that increased included healthcare, home improvement and telecommunications, while categories showing declines included restaurant and grocery.

National gross time sales decreased 10% to $34.3 million compared to $38.1 million in the third quarter of 2013. National automotive advertising declined double digits compared to the third quarter of 2013. Other major national advertising categories that decreased included telecommunications, legal and entertainment, while categories showing increases included financial, healthcare and grocery.

Core advertising (local and national gross time sales combined) declined 2% year over year.

Political gross time sales were $21.4 million compared to $2.5 million in the third quarter of 2013. Media General stations benefited in particular from U.S. Senate races in North Carolina, Iowa, Louisiana, Georgia, and South Dakota and from gubernatorial races in Florida, Rhode Island and Wisconsin.

Retransmission revenues increased 51% to $35.3 million from $23.4 million in the third quarter of 2013. 

Digital gross time sales increased 35% to nearly $7 million compared to $5.2 million in the third quarter of 2013.

Total operating costs of $125 million compared to $115.5 million in the third quarter of 2013. Total operating costs increased 4%, excluding the higher depreciation and amortization this year due to purchase accounting for the Young merger, and merger-related expense and corporate severance in both years along with our purchase of WHTM on September 1.

Station operating expenses were $54.7 million compared to $49.9 million in the third quarter of 2013. The increase was primarily attributable to higher programming fees paid to the networks and one month of station operating expense for WHTM.

Selling, general and administrative expenses were $39.4 million compared to $37.5 million in the third quarter of 2013. The increase was attributable to third party expense directly related to the increase in digital time sales along with one month of expense in 2014 for WHTM.

Corporate and other expenses decreased 24% to $5.5 million compared to $7.3 million in the third quarter of 2013 due to Young merger synergies, lower pension and postretirement costs and lower incentive compensation expense.  The Directors’ Deferred Compensation Plan was amended in April 2014, which eliminated mark-to-market accounting for these awards as of that date.  In the third quarter of 2013, an approximate $3 increase in Media General’s stock price caused a $2 million increase in incentive compensation expense.  Additionally, the prior year amount included a reversal of an accrued liability of $1.8 million related to a former Young contract.

Depreciation and amortization was of $15.6 million was $5.2 million higher than last year’s $10.4 million predominantly due to the effects of purchase accounting resulting from the Young merger.

Merger-related expenses in the current year were $3.6 million compared to $4.5 million last year. Corporate severance expense was $275,000 compared to $630,000 in the prior period.

Operating income of $35.2 million compared to $17.1 million in the third quarter of 2013. 

Interest expense was $9.8 million this year compared to $22.3 million in last year’s third quarter.

Income tax expense of $11.5 million compared to $5.4 million in the prior year and was mostly non-cash in both years.

Broadcast Cash Flow (BCF) increased 53% to $61.1 million compared to combined BCF of $40 million in the third quarter of 2013; BCF margin in the current quarter was 38% compared to 30% in the prior year.

EBITDA as adjusted increased 79% to $55.4 million compared to combined EBITDA as adjusted of $30.9 million in the third quarter of 2013.

Free Cash Flow of $30.3 million compared to a combined deficit of $3.4 million in the third quarter of 2013. Capital expenditures in the current period were $10.3 million compared to $6.7 million last year.

Total debt outstanding was $906.2 million at September 30, 2014. Net leverage at the end of the third quarter was 4.2x.

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.

Merger with LIN Media
On March 21, 2014, Media General announced plans to merge with LIN Media in a transaction that will more than double the size of Media General. Following an amendment to the agreement in August, on October 6, 2014, at separate meetings, the shareholders of the two companies approved the proposed merger. Media General and LIN Media entered into a proposed consent decree with the Department of Justice and received early termination of the Hart-Scott-Rodino waiting period for the proposed merger on October 31, 2014.  The transaction remains subject to the approval of the Federal Communications Commission and certain third-party consents. Media General expects the transaction to close in the fourth quarter of 2014.

About Media General
Media General, Inc. is a leading local television broadcasting and digital media company, providing top-rated news, information and entertainment in strong markets across the U.S. The company owns or operates 32 network-affiliated broadcast television stations and their associated digital media and mobile platforms, in 29 markets. These stations reach 17.5 million or nearly 15% of U.S. TV homes. Seventeen of the 32 stations are located in the top 75 designated market areas. Media General first entered the local television business in 1955 when it launched WFLA in Tampa, Florida, as an NBC affiliate. The company subsequently expanded its station portfolio through acquisition. In November 2013, Media General and Young Broadcasting merged, combining Media General’s 18 stations and Young’s 13 stations. In September 2014, Media General acquired WHTM-TV in Harrisburg, PA.

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Contact
Lou Anne J. Nabhan
Vice President-Corporate Communications
804-887-5120
lnabhan@mediageneral.com