Media General Reports Third-Quarter 2013 Results

-- Core Local and National gross time sales increased 7.6%, excluding the impact of 2012 Summer Olympics revenue
-- Political revenue was $1 million this year, compared with a record $19.6 million in the 2012 third quarter
-- Special Shareholders Meeting to approve merger with Young Broadcasting set for November 7, 2013

PR Newswire

RICHMOND, Va., Oct. 31, 2013 /PRNewswire/ -- Media General, Inc. (MEG), a local broadcast television and digital media company, today reported third-quarter operating income of $8.2 million, compared with $22.5 million in the third quarter of 2012, mostly reflecting the near absence of last year's record Political and Olympics revenues. The current-quarter operating income also included $1.2 million of merger-related expenses. 

A net loss in the third quarter of $14.6 million, or 53 cents per share, compared with a net loss of $30.3 million, or $1.34 per share, last year.  The current year net loss included $1.2 million of merger-related expenses, while the prior-year net loss included $17.3 million of debt modification and extinguishment costs and losses totaling $11.9 million, net of tax, related to discontinued newspaper and advertising services operations.  

George L. Mahoney, president and chief executive officer of Media General, said, "Consistent with our guidance, Core Local and National gross time sales increased 7.6% in this year's third quarter, excluding the impact of 2012 Summer Olympics advertising revenue. Digital revenue in the quarter grew 21% this year, an acceleration over the solid growth rates we achieved in the first half of the year.

"Our retransmission revenues in the third quarter were $13.2 million, compared with $9.4 million last year, an increase of 41%," said Mr. Mahoney.  "Although this figure was impacted somewhat as a result of the absence, beginning on July 1, of a planned increase in the rates paid by DISH, we're very pleased with this growth.

"Moreover, total operating costs decreased by approximately $1 million, or 1.3%, in this year's third quarter. This decrease reflected a $4.3 million reduction in corporate and other expenses, partially offset by a $2.3 million increase in station operating costs and $1.2 million of merger-related expenses. Broadcast cash flow in the current quarter increased 21% from the preceding odd year of 2011, to $23 million this year, compared with $19 million in the third quarter of 2011, and our broadcast cash flow margin also improved over the same period in 2011," said Mr. Mahoney.

"Media General looks forward to completing our merger with Young Broadcasting. We've worked actively with Young management for the past several months to ensure a smooth transition. On November 7, 2013, we will hold a Special Shareholders Meeting to consider and vote on matters necessary to complete the merger. Assuming the FCC has approved our license transfers before our shareholders meeting, we plan to close the transaction very shortly thereafter," said Mr. Mahoney.

Station net revenue in the third quarter was $78.5 million, compared to $93.8 million in the prior year. Political revenues in the third quarter were $1 million, compared with $19.6 million in 2012. Gross Olympics revenue in the third quarter of 2012 was $15.5 million, of which $10.3 million was incremental.  

Local gross time sales this year were $43.7 million, compared with $47.4 million last year, including the Olympics impact. National gross time sales this year were $22.9 million, compared with $24.9 million last year, including the Olympics impact. Core gross time sales (Local and National combined) were $66.6 million this year, compared with $61.9 million last year, excluding the impact of the incremental 2012 Olympics revenues, representing an increase of 7.6%. 

Station production expenses rose 1.6% in the third quarter, due primarily to increased network affiliate fees, including reverse compensation. Station selling, general and administrative expenses increased 8.3% in the third quarter, due to merit increases and to two expenses that had revenue offsets:  sales incentive trip expenses and additional revenue-share expense associated with the growth in digital revenues.

Corporate and other expenses decreased by $4.3 million, or 35%, in the third quarter of 2013, mostly due to the absence of a $3.3 million severance charge recorded in the third quarter of 2012 and savings resulting from the elimination of 75 corporate positions in the second half of 2012. The savings were partially offset by the impact of a rising stock price on stock-based compensation plans.  Core corporate expenses were $4 million this year, compared to $5.6 million last year, a 28% decrease, attributable to last year's corporate staff restructuring.

Total interest expense in the third quarter of $20 million was flat to last year. Noncash tax expense of $2.5 million compared with $3.4 million last year.

EBITDA from continuing operations (income before interest, debt modification and extinguishment costs, taxes, and depreciation and amortization), adjusted for merger-related expenses, was $15.4 million compared with $28.5 million in the third quarter of 2012.

Media General provides the non-GAAP financial metrics: Broadcast cash flow, EBITDA from continuing operations, as adjusted for merger-related expenses, After-tax cash flow from continuing operations, and free cash flow. 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 has been included in this news release.

Conference Call and Webcast
The company will hold a conference call with investors today at 11:00 a.m. ET. To dial in to the call, investors may call 877-261-8992 about 10 minutes prior to the 11:00 a.m. start. The participant passcode is 35902606.

All others may access a live webcast by visiting www.mediageneral.com 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 www.mediageneral.com beginning at 2:00 p.m. today. A telephone replay will also be available, beginning at 4:30 p.m. on October 31, 2013, and ending at 11:59 p.m. on November 7, 2013, by dialing 888-843-7419 or 630-652-3042 and using the passcode 35902606.

Cautionary Statements Regarding Forward Looking Statements
Certain information reflected above constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Media General or the combined company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such information is based upon current assumptions and expectations. There can be no assurance that Media General will achieve the results reflected in its guidance or the proposed combination or contemplated refinancing will occur as currently contemplated, or at all, or that the expected benefits from the transaction will be realized on the timetable currently contemplated, or at all. A list and description of important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements are specified in Media General's Registration Statement on Form 424(b)3 filed with the Securities and Exchange Commission on October 7, 2013, Annual Report on Form 10-K for the year ended December 31, 2012 and Quarterly Report on form 10-Q for the quarter ended June 30, 2013 under headings such as "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Other unknown or unpredictable factors could also have material adverse effects on Media General's or Young's performance or achievements. In light of these risks, uncertainties, assumptions and factors, the forward-looking events discussed in this press release may not occur. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the filing of this document with the SEC. Media General undertakes no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless required by law.

Additional Information
On October 7, 2013, Media General filed with the Securities and Exchange Commission (SEC) a Form 424(b)3, which includes a proxy statement/prospectus relating to Media General's proposed combination with New Young Broadcasting Holding Co., Inc. (Young). In addition, Media General will file with the SEC other information and documents concerning the combination and the businesses of Media General and Young. WE URGE INVESTORS TO REVIEW THE PROXY STATEMENT/PROSPECTUS AND OTHER INFORMATION TO BE FILED WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. These documents are available without charge on the SEC's web site at www.sec.gov and on Media General's web site www.mediageneral.com. INVESTORS SHOULD READ THE PROXY STATEMENT/PROSPECTUS CAREFULLY BEFORE MAKING ANY VOTING OR INVESTMENT DECISIONS. Media General and its directors and executive officer may be deemed to be participants in the solicitation of proxies of Media General shareholders in connection with the proposed combination. Investors may obtain more detailed information regarding the names, affiliations and interests of Media General's directors and executive officers by reading Media General's Form 424(b)3 and the proxy statement/prospectus included therein.

About Media General
Media General, Inc., is a leading provider of news, information and entertainment across 18 network-affiliated broadcast television stations and their associated digital media and mobile platforms. The company's stations serve consumers and advertisers in strong local markets, primarily in the Southeast. Media General's television stations include affiliations with NBC (8), CBS (8), ABC (1) and CW (1). One-third of the company's stations operate in the Top 50 markets in the United States. Media General's stations reach more than one-third of TV households in the Southeast and more than 8% of U.S. TV households. Media General entered the television business in 1955 when it launched WFLA-TV in Tampa, Florida, as an NBC affiliate.

On June 6, 2013, Media General (MEG) and privately held New Young Broadcasting Holding Co., Inc., both local broadcast television and digital media companies, announced a definitive agreement to combine the two companies in an all-stock merger transaction. The new company will retain the Media General name and will remain headquartered in Richmond, Va. Upon completion of the merger, the Young stations will be subsidiaries of Media General. The new company will own or operate 31 network-affiliated television stations across 28 markets, reaching approximately 16.5 million, or 14%, of U.S. TV households. The network affiliations will include CBS (12), NBC (9), ABC (7) Fox (1), CW (1) and MNT (1).  Sixteen of the 31 stations are located in the Top 75 DMAs.

Contact Media General
Media General maintains extensive company information on its website www.mediageneral.com. The company's media and investor contact is Lou Anne J. Nabhan, Vice President-Corporate Communications, lnabhan@mediageneral.com or 804-887-5120.

 

Media General, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS 



Three Months
 Ending (1)


Nine Months
 Ending (1)


September 30,


September 23,


September 30,


September 23,

(Unaudited, in thousands except per share amounts)

2013


2012


2013


2012












Station revenue (less agency commissions)

$          78,489


$            93,752


$      234,448


$     251,064












Operating costs:









Station production expenses

31,973


31,458


95,388


92,359


Station selling, general and administrative expenses

23,300


21,505


69,055


63,473


Corporate and other expenses

7,833


12,093


24,621


31,604


Depreciation and software amortization

5,516


5,533


16,673


17,124


Amortization of intangible assets

441


442


1,323


2,196


Net loss (gain) related to fixed assets

10


218


78


(32)


Merger-related expenses

1,218


---


8,389


---



Total operating costs

70,291


71,249


215,527


206,724

Operating income

8,198


22,503


18,921


44,340












Other income (expense):









Interest expense

(9,960)


(9,497)


(28,781)


(41,410)


Interest expense - related party

(10,379)


(10,723)


(30,297)


(15,618)


Debt modification and extinguishment costs

---


(17,318)


---


(35,415)


Other, net

42


40


(132)


452



Total other expense

(20,297)


(37,498)


(59,210)


(91,991)












Loss from continuing operations before income taxes

(12,099)


(14,995)


(40,289)


(47,651)












Income tax expense

2,517


3,406


7,725


10,223












Loss from continuing operations

(14,616)


(18,401)


(48,014)


(57,874)

Discontinued operations:









Loss from discontinued operations (net of tax)

---


(1,038)


(413)


(10,588)


Loss related to divestiture of discontinued operations (net of tax)

---


(10,894)


(30)


(142,591)

Net loss

$         (14,616)


$           (30,333)


$       (48,457)


$    (211,053)












Net loss per common share:









Loss from continuing operations

$             (0.53)


$               (0.81)


$           (1.74)


$          (2.56)


Discontinued operations

---


(0.53)


(0.02)


(6.79)

Net loss per common share - basic and diluted

$             (0.53)


$               (1.34)


$           (1.76)


$          (9.35)












Weighted-average common shares outstanding:









Basic and diluted

27,762


22,593


27,570


22,570












(1)  Starting with the full-year 2013, Media General's fiscal year is a conventional calendar year (January 1 – December 31). Previously, the company's fiscal year ended on the last Sunday in December, a newspaper industry practice.  Results for 2013 are for the three and nine calendar months ended September 30, 2013.  Results for 2012 are for the thirteen and thirty-nine week periods ended September 23, 2012.

 

Media General, Inc.

CONSOLIDATED BALANCE SHEETS











September 30,

December 31,

(Unaudited, in thousands)


2013

2012







ASSETS










Current assets:





Cash and cash equivalents


$            15,415

$             36,802


Accounts receivable - net


58,667

58,486


Other


18,798

18,493


Assets of discontinued operations


-

670



Total current assets 


92,880

114,451







Other assets


50,563

45,462







Property, plant and equipment - net


160,353

166,105







Goodwill and other intangibles - net


446,080

447,403

Total assets


$          749,876

$           773,421







LIABILITIES AND STOCKHOLDERS' DEFICIT










Current liabilities:





Accounts payable


$            11,920

$             11,669


Accrued expenses and other liabilities


44,200

64,362


Liabilities of discontinued operations


-

467



Total current liabilities 


56,120

76,498







Long-term debt


296,459

295,721







Long-term debt - related party


291,934

257,466







Retirement, postretirement, and postemployment plans

232,650

242,309







Deferred income taxes


68,091

58,865







Other liabilities and deferred credits


21,811

18,786







Stockholders' deficit


(217,189)

(176,224)

Total liabilities and stockholders' deficit


$          749,876

$           773,421

 

SUPPLEMENTAL INFORMATION









Media General, Inc.

Selected Revenue Categories










Three Months Ending



Nine Months Ending



September 30,

September 23, 



September 30,

September 23, 


(Unaudited, in thousands)

2013

2012

% Change


2013

2012

% Change

Local (gross)

$              43,737

$              47,370

(7.7)%


$            131,456

$            136,690

(3.8)%

National (gross)

22,886

24,872

(8.0)%


68,200

69,309

(1.6)%

Political (gross)

1,049

19,568

(94.6)%


2,595

33,224

(92.2)%

Cable/Satellite (retransmission)

13,196

9,356

41.0 %


40,026

27,718

44.4 %

Digital (local website revenues)

3,192

2,649

20.5 %


8,513

7,178

18.6 %

























Broadcast Cash Flow










Three Months Ending



Nine Months Ending


September 30,

September 23, 

September 25,


September 30,

September 23, 

September 25,

(Unaudited, in thousands)

2013

2012

2011


2013

2012

2011









Operating income

$                8,198

$              22,503

$                4,783


$              18,921

$              44,340

$              10,128

Add:  








  Corporate and other expenses

7,833

12,093

7,082


24,621

31,604

24,070

  Merger-related expenses

1,218

---

---


8,389

---

---

  Depreciation and software amortization

5,516

5,533

5,811


16,673

17,124

17,399

  Amortization of intangible assets

441

442

1,314


1,323

2,196

3,940

  Net loss (gain) related to fixed assets

10

218

(137)


78

(32)

236

  Amortization of broadcast film rights

2,702

2,616

4,360


8,168

7,754

13,732

Less:  








  Payments for broadcast film rights

2,691

2,610

3,961


8,009

7,654

13,404

Broadcast cash flow

$              23,227

$              40,795

$              19,252


$              70,164

$              95,332

$              56,101









Station revenue (less agency commissions)

$              78,489

$              93,752

$              66,076


$            234,448

$            251,064

$            202,730









Broadcast cash flow margin

30%

44%

29%


30%

38%

28%

 

SUPPLEMENTAL INFORMATION









Media General, Inc.

EBITDA as adjusted, After-tax Cash Flow, and Free Cash Flow 













Three Months Ending

Nine Months Ending





September 30, 

September 23,

September 30, 

September 23,

(Unaudited, in thousands)

2013

2012

2013

2012









Loss from continuing operations

$             (14,616)

$             (18,401)

$             (48,014)

$             (57,874)

Interest

20,339

20,220

59,078

57,028

Debt modification and extinguishment costs

-

17,318

-

35,415

Depreciation and software amortization

5,516

5,533

16,673

17,124

Amortization of intangible assets

441

442

1,323

2,196

Taxes


2,517

3,406

7,725

10,223

Merger-related expenses

1,218

-

8,389

-









EBITDA from continuing operations,





  as adjusted for merger-related expenses

$              15,415

$              28,518

$              45,174

$              64,112

















Loss from continuing operations

$             (14,616)

$             (18,401)

$             (48,014)

$             (57,874)

Taxes *

2,517

3,406

7,725

10,223

Depreciation and software amortization

5,516

5,533

16,673

17,124

Amortization of intangible assets

441

442

1,323

2,196









After-tax cash flow from continuing operations

$               (6,142)

$               (9,020)

$             (22,293)

$             (28,331)









After-tax cash flow from continuing operations

$               (6,142)

$               (9,020)

$             (22,293)

$             (28,331)

Capital expenditures

4,411

3,010

11,788

7,263









Free cash flow 

$             (10,553)

$             (12,030)

$             (34,081)

$             (35,594)

*

The Company's income taxes are non-cash in nature and have been added back accordingly.


See 2012 Form 10-K for further discussion.


















Corporate and other expenses













Three Months Ending

Nine Months Ending





September 30, 

September 23,

September 30, 

September 23,

(Unaudited, in thousands)

2013

2012

2013

2012

Corporate (excluding depreciation and amortization)

$                4,010

$                5,556

$              12,562

$              19,932

Corporate severance

-

3,319

(29)

3,445

Legacy benefit costs

666

808

1,986

2,167

Incentive compensation (including stations)

2,688

1,506

9,415

4,349

Gain on legal settlement

(70)

-

(845)

-

Other operating expenses

539

904

1,532

1,711

Corporate and other expenses

$                7,833

$              12,093

$              24,621

$              31,604

 

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