FOR IMMEDIATE RELEASE
Tuesday, July 15, 2003
Media General Reports Second-Quarter Results
RICHMOND, Va. – Media General (NYSE:MEG) today reported second-quarter net income of $17.5 million, or 75 cents per diluted share, compared with $16.3 million, or 70 cents per diluted share, in the second quarter of 2002.
"Media General's second-quarter results were somewhat better than our expectations, mostly due to a stronger than anticipated month of June for our Publishing Division, " said J. Stewart Bryan III, chairman and chief executive. "We believe that the second-quarter increase of 3 percent in Publishing advertising revenues is an early sign of recovery. The absence of significant political spending this year had an unfavorable impact on the Broadcast Division's results, and we continue to experience hesitation on the part of national television advertisers because of the weak economy and flat consumer spending.
"Excellent cost control efforts by both the Publishing and Broadcast divisions helped mitigate the effect of the generally soft revenue environment. For the second quarter, Publishing expenses were down 4 percent compared to its original budget and Broadcast expenses were down 6 percent compared to its budget," said Bryan.
Total revenues of $212 million were essentially even with last year's second quarter. Segment operating profit totaled $50.3 million, compared with $53 million last year. Segment operating cash flow was $62.5 million, compared with $66.5 million in the second quarter of 2002.
Publishing Division revenues of $135 million were 2.4 percent above the second quarter of 2002. Some markets, especially Richmond, Tampa and Northern Virginia, experienced strong improvement, while economic conditions have been slower to recover in several community markets.
Retail revenues decreased 3.5 percent for the quarter. Soft department store advertising drove the decline. Preprints increased 12.3 percent and helped offset some of the retail ROP shortfall. Classified revenue increased 0.6 percent, as strong automotive and real estate classified advertising continued to offset weak employment advertising. National advertising increased 19.5 percent. The Tampa Tribune exceeded its prior year's national revenues by 26.2 percent based on stronger telecommunications and automotive advertising. Circulation revenue rose 0.7 percent, led by The Tampa Tribune's 3.3 percent daily and 1.3 percent Sunday growth - the result of its strategic growth plan.
Publishing operating expenses were $4.1 million, or 4.2 percent, higher than the second quarter of 2002. The increase reflects comparisons against a quarter in which expenses had dropped significantly below 2001 levels, mostly due to favorable newsprint pricing. Newsprint expense increased 12.6 percent due to both higher prices and increased consumption and represented more than a third of the total expense increase. Salary expenses increased 2.4 percent due to annual merit increases and higher sales commissions, offset somewhat by the lower employment levels resulting from a hiring freeze. Discretionary spending reductions also helped offset rising costs.
Publishing segment profit of $31.7 million was down slightly from last year. Segment results include our 20 percent interest in The Denver Post, which generated income of nearly $300,000 this year, compared with a loss of about $200,000 last year.
Broadcast Division revenue in the quarter declined 4.6 percent to $74 million from last year, reflecting a $4 million drop in political revenues in the second quarter of 2003.
Local ad revenues rose 5.6 percent, reflecting gains in automotive, furniture and healthcare advertising. National advertising declined 1.5 percent. Political revenues totaled $880,000.
Broadcast profits for the quarter were $20 million compared with $22.4 million last year. Total divisional expenses declined 2.1 percent, reflecting lower costs of goods sold associated with equipment sales and a reduction in programming costs. Despite the hiring freeze, payroll and benefits costs for the quarter increased slightly due to merit pay raises and higher healthcare and retirement costs.
The Interactive Media Division recorded a loss of $1.3 million, a 9.6 percent improvement over last year's second-quarter loss of $1.5 million. The division's revenues were 23 percent better than last year, due in large part to the continuing success of classified upsell arrangements with Media General newspapers. Value-added services also contributed to classified advertising growth.
The company's share of SP Newsprint's results was a loss of $1.6 million, a meaningful improvement from last year's $3.1 million loss. Interest expense was 33 percent less than the second quarter of 2002 due to lower borrowing costs and lower debt outstanding.
EBITDA (income before cumulative effect of change in accounting principle and before interest, taxes, depreciation and amortization) in the second quarter of 2003 was $52.2 million, compared with $55.2 million in the 2002 period. Free cash flow (after-tax cash flow minus capital expenditures) was $27.7 million, the same as in the prior-year period.
Outlook
"Looking forward to the third quarter, in the Publishing Division, we are projecting revenue growth of about 4 percent, compared to last year's third quarter, coming mainly from improvement in preprint and retail. In Broadcast, it's more difficult to provide a forward perspective. For the month of July, we are pacing behind last year's third quarter. Local revenue pacings are slightly ahead and national revenue pacings are running about 10 percent behind a year ago," said Bryan.
"Another area where it is difficult to provide a forward perspective is newsprint pricing. It appears that $30-35 of the spring increase is holding, and some producers have announced another $50 per metric ton increase for August 1. This makes it difficult at present to estimate SP Newsprint's results for the third quarter.
"As of today, analyst estimates for Media General for the third quarter range from 44 cents to 58 cents per share, and the consensus is 52 cents. Currently, we would expect to be below consensus, and depending on how business unfolds for the Broadcast Division and SP Newsprint, we could be at the lower end of the range. We will provide updated guidance as the quarter progresses," Bryan said.
Additionally, the new accounting interpretation (FIN 46) relating to Variable Interest Entities is effective as of the beginning of the third quarter. Upon adoption, Media General will begin to consolidate certain entities that lease real estate to the company and currently expects to record a cumulative effect change in accounting principle charge of approximately 35 cents per share. The cumulative effect amount is not included in the above outlook.
Conference Call
Media General will discuss second-quarter results during a conference call and webcast today at 9:30 a.m. ET. To listen to the webcast, log on to www.mediageneral.com and click on the "Live Earnings Conference" link at the top of the home page. A replay will be available from 2 p.m. today until midnight on Tuesday, July 22, at the same Web address.
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 an independent, publicly owned communications company situated primarily in the Southeast with interests in newspapers, television stations, interactive media and diversified information services. The company's publishing assets include The Tampa Tribune, the Richmond Times-Dispatch, the Winston-Salem Journal and 22 other daily newspapers in Virginia, North Carolina, Florida, Alabama and South Carolina, as well as nearly 100 other periodicals and a 20 percent interest in The Denver Post. Media General's 26 network-affiliated television stations reach more than 30 percent of the television households in the Southeast, and nearly 8 percent of those in the United States. The company's extensive interactive media offerings include more than 50 online enterprises. Media General also has a 33 percent interest in SP Newsprint Co., which operates newsprint mills in Dublin, Ga., and Newberg, Ore.
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Consolidated Statements of Operations
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Consolidated Balance Sheets
EBITDA, After-Tax Cash Flow And Free Cash Flow
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