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Media General Reports Fourth-Quarter 2008 Results; Includes Non-cash Impairment Charge

Posted on: Thursday, 29 January 2009, 06:46 CST

RICHMOND, Va., Jan. 29 /PRNewswire-FirstCall/ -- Media General, Inc. (NYSE: MEG) today reported a net loss for the fourth quarter of 2008 of $85.5 million, or $3.86 per diluted share, including a non-cash pre-tax impairment charge of $130.4 million ($83.1 million after-tax). This compares to net income in 2007 of $9.6 million, or 43 cents per diluted share. The impairment charge and a tax valuation allowance that affected the quarter are discussed in more detail below.

Excluding the impairment charge, the tax valuation allowance, and $6.1 million of pre-tax severance expense, fourth-quarter income from continuing operations was $8.6 million, or 39 cents per diluted share. This compares to income from continuing operations, also adjusted for severance expense, in 2007 of $10.2 million, or 46 cents per diluted share.

Media General's fourth-quarter results reflected a decrease in divisional operating profits, the majority of which was in the Publishing segment, as a result of lower advertising revenues. Partially offsetting lower divisional profits were lower corporate expense, decreased intangibles amortization and reduced interest expense in 2008. Also affecting the quarterly comparisons were the absence of an insurance recovery, and losses and a write-down related to SP Newsprint, both of which were present in the 2007 results.

Total operating costs in the fourth quarter decreased 7.1 percent, excluding the impairment charge in 2008 and an insurance recovery in 2007, compared with the prior year. Lower costs reflect the aggressive actions the company has taken to improve the efficiency and effectiveness of its operations.

"The Publishing Division's lower fourth-quarter results were due to the continuation of the declining economic trends that we have experienced all year, particularly in Florida," said Marshall N. Morton, president and chief executive officer. "In the Broadcast Division, strong Political revenues largely offset lower National and Local transactional sales.

"The Interactive Media Division generated revenue growth of 10 percent, which was driven by strong holiday sales on our new online coupon and shopping Web site DealTaker.com, and a 43 percent increase in Local advertising. Our total online audience growth continued in the fourth quarter, driven significantly by continuous news offerings on all sites. Page views were up 10.1 percent, visitor sessions increased 23.2 percent and unique visitors rose 30.1 percent," Mr. Morton said.

Publishing Division

Publishing Division profit for the quarter, excluding severance charges, decreased 57.2 percent from the prior year. Total revenues decreased 16.8 percent, and advertising revenues declined 20.1 percent.

Excluding Florida, total Publishing revenues decreased 14.8 percent. Revenues declined 16.8 percent in Virginia and 15 percent in North Carolina. In Alabama, revenues decreased only 5.2 percent, as the Classified decline was not as sharp as in other markets. In South Carolina, where revenues declined just 3.9 percent, advertising from a weekly newspaper acquired March 31, 2008, helped to partially offset the total spending decline.

Classified advertising revenues in the fourth quarter of 2008 were below the prior year by $14.2 million, or 37.6 percent, driven by shortfalls in all markets, but most significantly in the company's three metro newspaper markets. In the metro markets, employment revenues decreased 60 percent, real estate revenues were down 50 percent, and automotive revenues declined 46 percent. Legal Classified revenues increased due to real estate foreclosure listings.

Retail advertising revenues declined $7.7 million, or 12 percent, due to lower spending across most markets. National revenues decreased $1 million, or 10.9 percent, mostly reflecting decreases in the national automotive and telecommunications categories in all markets. Circulation revenues increased $915,000, or 5.7 percent, reflecting Daily single-copy price and home-delivery rate increases in most markets early in 2008.

Excluding severance expense from both years and some one-time costs incurred in 2008 as the division reduced its number of printing sites, Publishing Division expenses declined $7.7 million, or 7.2 percent, for the quarter. Salary expense was down 11.7 percent as the result of workforce reductions. Newsprint expense increased 1.5 percent as a result of higher newsprint cost, which was nearly offset by a 25.6 percent decrease in consumption. The average price per ton increased $185, or 36.3 percent, over the 2007 fourth quarter. For the year, however, newsprint expense was down 10.4 percent despite a 13.5 percent price increase as a result of the company's newsprint conservation program.

Broadcast Division

Excluding severance expense from both years, Broadcast Division profit for the 2008 quarter of $24.3 million was 2.6 percent above last year's fourth quarter. Political revenues totaled $23.4 million and were generated mainly from Presidential campaign spending in Florida, North Carolina, Ohio and Virginia; U.S. congressional races in Ohio, North Carolina, Mississippi and South Carolina; state elections in Ohio; and issue spending in Ohio, Florida, North Carolina and Mississippi.

Broadcast expenses decreased more than 10 percent, excluding severance, due to reduced salary expense from workforce reductions, other cost containment initiatives and lower costs of goods sold at a broadcast equipment subsidiary.

Total Broadcast revenues declined $6.6 million, or 7 percent, and gross time sales declined $6.2 million, or 6.4 percent, due to weak economic conditions in most markets. Local time sales declined $14.9 million, or 25.6 percent, and National time sales decreased $10.6 million, or 30.6 percent. Lower automotive spending was the main factor for the decreases in both categories.

Interactive Media Division

An operating loss for the Interactive Media Division of $1.6 million compared with a loss of $2.6 million in the prior year, which included an investment write-down. Total division revenues increased 10 percent in the 2008 quarter. Current-year results benefited from a strong profit contribution by DealTaker.com, an online shopping Web site that Media General acquired on March 31, 2008, and a 43 percent increase in local online revenues on the company's local media Web sites. These revenue increases, however, were partially offset by recession-driven declines in Classified and National advertising of 24.5 percent and 37 percent, respectively. The performance of Blockdot, an advergaming and branded entertainment business, was also below the prior year as customers cut advertising budgets.

Non-cash Impairment and other results

As with much of the rest of the U.S., economic conditions in the company's markets continued to decline in the fourth quarter of 2008. Additionally, the market's perception of the value of media stocks remains negative. As a result of these factors, the company recognized a pre-tax non-cash impairment charge of $130.4 million, primarily to write-down the value of FCC licenses and network affiliation agreements in the Broadcast Division to their estimated fair values.

Interest expense decreased by $3.8 million, or 26 percent, primarily due to lower average debt levels. Debt at the end of the fourth quarter was $730 million, down from $750 million at the end of the third quarter and from $898 million at the beginning of the year.

The effective tax rate for the quarter was a 28.6 percent tax benefit on the company's pre-tax loss compared to a 40.3 percent tax expense on pre-tax income in 2007. The decline in the tax rate was due primarily to $7.5 million of a tax valuation allowance that related to continuing operations.

EBITDA (income from continuing operations before interest, taxes, depreciation and amortization) in the current quarter was a deficit of $92 million due to the impairment charge, compared with $46 million in the 2007 period. After-Tax Cash Flow, excluding the non-cash items, was $22.2 million compared with $26.9 million in the prior year. Capital expenditures in the fourth quarter of 2008 were $12.3 million compared with $23 million in the prior-year period. Free Cash Flow, excluding non-cash items, for the quarter (After-Tax Cash Flow minus capital expenditures) was $9.9 million compared with $3.9 million in the prior-year period, reflecting declines in both operating income and capital spending.

Media General provides the non-GAAP financial metrics EBITDA from continuing operations, After-Tax Cash Flow excluding non-cash items, and Free Cash Flow excluding non-cash items. 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 2:30 p.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 1-866-362-5158 about 10 minutes prior to the 2:30 p.m. start. The participant passcode is "Media General." Listeners may also access the live Webcast by logging on to 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 4:30 p.m. today. A telephone replay is also available, beginning at 4:30 p.m. today and ending at 1 p.m. on February 5, 2009, by dialing 888-286-8010 or 617-801-6888, and using the passcode 70081667.

About Media General

Media General is a leading provider of local news, information and entertainment over multiple media platforms. The company serves markets primarily in the Southeastern United States. Media General publishes 24 daily newspapers, including The Tampa Tribune, Richmond Times-Dispatch, and Winston-Salem Journal; and community newspapers in Virginia, North Carolina, Florida, Alabama and South Carolina; plus approximately 275 weekly newspapers and other targeted publications. The company owns and operates 19 network-affiliated television stations that reach approximately 30 percent of the television households in the Southeast and nearly 9 percent of those in the United States. The company's interactive media operations include Web sites and portals that are associated with each of its newspapers and television stations as well as with many specialty publications, and two growing interactive advertising services companies, Blockdot, Inc. and DealTaker.com.

Media General, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS Thirteen Weeks Fifty-Two Weeks Ending Ending (Unaudited, in ------------------ ------------------ thousands except Dec. 28, Dec. 30, Dec. 28, Dec. 30, per share amounts) 2008 2007 2008 2007 ------------------------------------------------------------ Revenues $206,985 $234,990 $800,034 $898,776 Operating costs: Production 92,931 100,079 378,237 406,988 Selling, general and administrative 76,148 83,574 309,260 330,806 Depreciation and amortization 17,273 16,957 71,479 73,013 Goodwill and other asset impairment 130,383 --- 908,701 --- Gain on fire insurance recovery --- (17,604) (3,250) (17,604) ------------------------------------------------------------ Total operating costs 316,735 183,006 1,664,427 793,203 ------------------------------------------------------------ Operating income (loss) (109,750) 51,984 (864,393) 105,573 ------------------------------------------------------------ Other income (expense): Interest expense (10,650) (14,475) (43,449) (59,577) Impairment of and recovery (loss) on investments 167 (23,207) (4,419) (34,825) Other, net 218 331 979 1,126 ------------------------------------------------------------ Total other expense (10,265) (37,351) (46,889) (93,276) ------------------------------------------------------------ Income (loss) from continuing operations before income taxes (120,015) 14,633 (911,282) 12,297 Income taxes (34,355) 4,698 (288,127) 2,976 ------------------------------------------------------------ Income (loss) from continuing operations (85,660) 9,935 (623,155) 9,321 Discontinued operations: Income from discontinued operations (net of tax) 126 1,654 2,601 3,366 Loss related to divestiture of operations (net of tax) --- (2,000) (11,300) (2,000) ------------------------------------------------------------ Net income (loss) $(85,534) $9,589 $(631,854) $10,687 ============================================================ Net income (loss) per common share: Income (loss) from continuing operations $(3.86) $0.45 $(28.18) $0.41 Discontinued operations --- (0.02) (0.39) 0.06 ------------------------------------- Net income (loss) $(3.86) $0.43 $(28.57) $0.47 ===================================== Net income (loss) per common share - assuming dilution: Income (loss) from continuing operations $(3.86) $0.45 $(28.18) $0.41 Discontinued operations --- (0.02) (0.39) 0.06 ------------------------------------- Net income (loss) $(3.86) $0.43 $(28.57) $0.47 ===================================== ------------------------------------------------------------ Weighted-average common shares outstanding: Basic 22,166 22,168 22,113 22,656 Diluted 22,166 22,296 22,113 22,827 ------------------------------------------------------------ Media General, Inc. BUSINESS SEGMENTS (Unaudited, in Interactive thousands) Publishing Broadcast Media Eliminations Total --------------------------------------------------------------------- Quarter Ended December 28, 2008 Consolidated revenues $111,192 $87,482 $10,069 $(1,758) $206,985 ================================================== Segment operating cash flow $15,403 $27,889 $(1,149) $42,143 Recovery on investment 4 4 Depreciation and amortization (6,951) (6,267) (468) (13,686) -------------------------------------------------- Segment profit (loss) $8,452 $21,622 $(1,613) 28,461 ============================= Unallocated amounts: Interest expense (10,650) Recovery on investment 167 Acquisition intangibles amortization (2,902) Corporate expense (7,350) Goodwill and other asset impairment (130,383) Other 2,642 -------- Consolidated loss from continuing operations before income taxes $(120,015) ========= Quarter Ended December 30, 2007 Consolidated revenues $133,663 $94,054 $9,153 $(1,880) $234,990 ================================================== Segment operating cash flow $32,648 $28,791 $(688) $60,751 Write down of investment (1,357) (1,357) Depreciation and amortization (6,044) (5,233) (521) (11,798) -------------------------------------------------- Segment profit (loss) $26,604 $23,558 $(2,566) 47,596 ============================= Unallocated amounts: Interest expense (14,475) Equity in net loss of unconsolidated affiliates (21,850) Acquisition intangibles amortization (4,014) Corporate expense (8,537) Gain on fire insurance recovery 17,604 Other (1,691) ------ Consolidated income from continuing operations before income taxes $14,633 ======= Twelve Months Ended December 28, 2008 Consolidated revenues $443,334 $324,689 $38,668 $(6,657) $800,034 ================================================== Segment operating cash flow $61,512 $87,246 $(3,498) $145,260 Recovery on investments 14 14 Depreciation and amortization (27,697) (25,463) (1,867) (55,027) -------------------------------------------------- Segment profit (loss) $33,815 $61,783 $(5,351) 90,247 ============================= Unallocated amounts: Interest expense (43,449) Impairment of and net loss on investments (4,419) Acquisition intangibles amortization (13,670) Corporate expense (36,837) Gain on fire insurance recovery 3,250 Goodwill and other asset impairment (908,701) Other 2,297 ----- Consolidated loss from continuing operations before income taxes $(911,282) ========= Twelve Months Ended December 30, 2007 Consolidated revenues $531,506 $338,384 $35,883 $(6,997) $898,776 ================================================== Segment operating cash flow $115,131 $87,582 $(815) $201,898 Net write down of investments (3,433) (3,433) Depreciation and amortization (25,095) (24,242) (1,849) (51,186) -------------------------------------------------- Segment profit (loss) $90,036 $63,340 $(6,097) 147,279 ============================= Unallocated amounts: Interest expense (59,577) Equity in net loss of unconsolidated affiliates (31,392) Acquisition intangibles amortization (17,003) Corporate expense (37,856) Gain on fire insurance recovery 17,604 Other (6,758) ------ Consolidated income from continuing operations before income taxes $12,297 ======= Media General, Inc. CONSOLIDATED BALANCE SHEETS Dec. 28, Dec. 30, (Unaudited, in thousands) 2008 2007 ------------------------------------------------------ ASSETS Current assets: Cash and cash equivalents $7,142 $14,214 Accounts receivable-net 102,583 133,863 Inventories 12,035 6,676 Other 38,888 52,083 Assets of discontinued operations 11,881 106,958 ------------------ Total current assets 172,529 313,794 ------------------ Investments in unconsolidated affiliates - 52,360 Other assets 41,308 65,686 Property, plant and equipment - net 453,679 475,028 FCC licenses and other intangibles - net 245,266 646,677 Excess of cost over fair value of net identifiable assets of acquired businesses 421,470 917,521 ------------------ Total assets $1,334,252 $2,471,066 ====================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $41,378 $32,676 Accrued expenses and other liabilities 86,352 101,817 Liabilities of discontinued operations 2,969 5,521 ------------------ Total current liabilities 130,699 140,014 ------------------ Long-term debt 730,049 897,572 Deferred income taxes - 311,588 Other liabilities and deferred credits 318,277 208,885 Stockholders' equity 155,227 913,007 ------------------ Total liabilities and stockholders' equity $1,334,252 $2,471,066 ====================================================== Media General, Inc. EBITDA, After-tax Cash Flow, and Free Cash Flow Thirteen Fifty-Two Weeks Ending Weeks Ending -------------------------------------- Dec. 28, Dec. 30, Dec. 28, Dec. 30, (Unaudited, in thousands) 2008 2007 2008 2007 -------------------------------------------------------------------------- Income (loss) from continuing operations $(85,660) $9,935 $(623,155) $9,321 Interest 10,650 14,475 43,449 59,577 Taxes (34,355) 4,698 (288,127) 2,976 Depreciation and amortization 17,273 16,957 71,479 73,013 -------------------------------------------------------------------------- EBITDA from continuing operations $(92,092) $46,065 $(796,354) $144,887 ========================================================================== Income (loss) from continuing operations $(85,660) $9,935 $(623,155) $9,321 Non-cash impairment charge, net of tax 83,054 - 615,137 - Non-cash tax valuation allowance 7,527 - 7,527 - Depreciation and amortization 17,273 16,957 71,479 73,013 -------------------------------------------------------------------------- After-tax cash flow excluding non- cash items $22,194 $26,892 $70,988 $82,334 ========================================================================== After-tax cash flow $22,194 $26,892 $70,988 $82,334 Capital expenditures 12,274 23,014 31,517 78,142 -------------------------------------------------------------------------- Free cash flow excluding non-cash items $9,920 $3,878 $39,471 $4,192 ==========================================================================

SOURCE Media General, Inc.

Source: PR Newswire

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