FOR IMMEDIATE RELEASE
Thursday, July 13, 2006
Media General Reports Second-Quarter 2006 Results
RICHMOND, Va. – Media General, Inc. (NYSE: MEG) today reported net income for the second quarter of 2006 of $20.2 million, or 85 cents per diluted share, up 6.2 percent from income of $19 million, or 80 cents per diluted share, in the same period of last year, excluding a gain on the sale of the company’s investment in The Denver Post. Including that Denver gain, the company reported net income of $38.4 million, or $1.61 per diluted share, in the second quarter of 2005.
Total revenues in the second quarter of 2006 increased 3.3 percent, including increases of 4.2 percent in newspaper advertising, 2.9 percent in Broadcast time sales and 33.4 percent in Interactive Media Division revenues.
As previously announced, four Broadcast television stations, along with three satellite stations, are being divested, and have been accounted for as discontinued operations for all periods presented and, as such, are not included in the Broadcast Division’s operating income. Additionally, amortization and depreciation of these assets has ceased.
“Media General’s year-over-year profit improvement in the second quarter, excluding last year’s Denver gain, was primarily attributable to improved below-the-line items, especially the excellent performance of SP Newsprint. Equity income from the company’s investment in SP Newsprint increased by $3.9 million to $4.6 million. Price improvement offset increased energy and raw material costs to produce SP Newsprint’s profit growth,” said Marshall N. Morton, president and chief executive officer. “This increase more than offset $1.6 million in non-cash stock option expense and higher interest expense.
“In the Publishing Division, new revenue initiatives helped to bolster a 3.1 percent Retail advertising increase. Strong real estate advertising linage was the primary driver of a 7.4 percent increase in Classified advertising for the quarter,” Mr. Morton said. “A surge in election campaign spending in several markets helped our Broadcast Division generate $4.1 million in Political advertising, offsetting some softness in Local and National spot sales,” he said.
“The Interactive Media Division’s continued strong growth in revenues reflected solid increases in all categories, driven by robust online Classified advertising and higher National/Regional spending,” he said. “Growth in our Web sites continued as page views and visitor sessions increased 14 percent and 18 percent, respectively.
“The revenue growth in all three divisions reflected our continued focus on launching new products and services, creating a dynamic Internet presence, and strengthening our traditional products, while maintaining our emphasis on expense management,” Mr. Morton said.
Publishing Division profit for the quarter, excluding the impact of Denver in last year’s results, declined 0.5 percent. Total division revenues of $150.9 million were up 3 percent.
Classified advertising revenues in the quarter increased $3.9 million, or 7.4 percent, and mostly reflected strength in the real estate category.
At The Tampa Tribune, Classified revenues increased 16.3 percent, led by the real estate category, which more than doubled. The real estate rise more than offset decreases of 7.2 percent and 37.7 percent, respectively, in the help-wanted and automotive categories. At the Richmond Times-Dispatch, Classified revenues increased 3.3 percent, including increases of 44.9 percent in real estate advertising and 7 percent in help-wanted advertising. These improvements offset a 31.2 percent decline in automotive advertising. At the Winston-Salem Journal, Classified revenues declined 5.1 percent. A 3.7 percent increase in real estate advertising could not offset decreases of 1.9 percent and 15.4 percent, respectively, in help-wanted and automotive advertising. Community Newspapers in the aggregate saw a 3.7 percent increase in Classified revenues.
Help-wanted linage in the second quarter at the company’s three metro newspapers was down 5.4 percent and revenue decreased by 1.1 percent. Increases in linage of 1.9 percent at the Richmond Times-Dispatch and 2.3 percent at the Winston-Salem Journal could not offset an 18.4 percent decrease at The Tampa Tribune, which mostly reflected lower Classified display advertising. A 43.4 percent increase for real estate linage at the three metros more than offset soft automotive linage, which was down 20.8 percent.
Retail revenues in the second quarter increased $1.7 million, or 3.1 percent, and included revenues from new product initiatives. The Tampa Tribune and its associated daily newspapers had a 2.1 percent increase in retail revenues for the quarter, resulting from increased spending in the grocery store and home improvement categories as well as several new revenue initiatives and the addition of a Spanish-language weekly newspaper. At the Richmond Times-Dispatch, Retail revenues increased 1.4 percent, reflecting higher spending in the department store, drug store, grocery store and home improvement categories. The Winston-Salem Journal generated a 7.5 percent increase from greater local account advertising and increases in the department store and home improvement categories. Retail revenues at the company’s Community Newspapers rose 3.6 percent as most markets posted increases, led by Central Virginia and North Carolina.
National advertising revenues for the quarter decreased $720,000, or 6.7 percent. The Richmond Times-Dispatch increased 10.4 percent, mainly due to higher oil company and insurance advertising. The Winston-Salem Journal was up 2.7 percent, primarily reflecting advances in telecommunications advertising. These increases were offset by a 14.5 percent decline at The Tampa Tribune, which resulted from lower spending in the telecommunications, automotive and utility categories.
Circulation revenues for the second quarter decreased $990,000, or 4.7 percent, nearly 40 percent of which was attributable to the continued roll-out of a change in wholesale rates to independent carriers at several newspapers. These rate changes also resulted in a dollar-for-dollar decrease in Circulation expenses. The rate change was completed at all of the company’s newspapers at the end of June 2006.
Publishing expenses increased 3.9 percent over the second quarter of 2005. Newsprint expense increased 7.4 percent, which reflected higher newsprint prices, partially offset by reduced consumption. The average price per ton increased $92 from the year-ago quarter. Salary expense increased 2.8 percent and depreciation and amortization was up 11.4 percent.
Broadcast segment profit for the quarter decreased 4.1 percent to $20.2 million. Broadcast total revenues grew $1.7 million, or 2.4 percent, to $74.3 million, driven by strong Political advertising revenues of $4.1 million, up from last year’s $515,000 in the same period.
Local time sales declined $350,000, or 0.7 percent, as a result of lower spending in the automotive and fast food categories, offset partially by increases in telecommunications and services advertising.
National time sales decreased $1.1 million, or 4.3 percent. Categories showing decreases for the quarter included corporate, fast food, entertainment, and home improvement, offset partially by increased telecommunications, services and automotive advertising.
The significant growth in Political revenues reflected strong campaign spending on gubernatorial, U.S. Senate, and state and local races in Florida, South Carolina, Alabama, and Georgia, as well as increased issue advertising.
Broadcast expenses for the quarter increased 5 percent. Excluding cost of goods sold related to its equipment subsidiary, Broadcast expenses for the quarter increased 4.1 percent. The increase reflected higher salaries and benefits, sales commissions on new business, other production costs, and depreciation.
Interactive Media Division revenues were a quarterly record of $6.5 million, up 33.4 percent over 2005. The growth reflected continued strong online Classified advertising, up 19.6 percent, and higher National/Regional revenues, up 54.3 percent. Additionally, Local revenues improved 20.9 percent as the result of continued growth in banner and Retail advertising. The division’s quarterly loss of $843,000 was an 11.9 percent improvement over 2005.
EBITDA (income before accounting change, interest, taxes, depreciation and amortization) in the second quarter of 2006 was $54.3 million, compared with $85.4 million in the 2005 period, which included a $33.3 million pre-tax gain from the Denver sale, or $19.4 million after tax. After-Tax Cash Flow in the second quarter of 2006 was $35.5 million compared to $53.6 million in the prior-year period, which included the after-tax gain on Denver. Free Cash Flow for the quarter (After-Tax Cash Flow minus capital expenditures) was $9.8 million, compared with $37 million in the prior-year period, which also included the after-tax Denver gain, and reflected a planned increase in capital expenditures in 2006.
Media General provides the non-GAAP financial metrics EBITDA, 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.
For the Publishing Division in the third quarter, the company expects revenue growth of 5 percent compared to last year as the company anticipates continued strength in Classified advertising, particularly real estate, in most markets. The company also expects to see gains in Retail advertising, reflecting continued growth from many new revenue initiatives.
For the Broadcast Division, total time sales are expected to increase approximately 60 percent, including the four NBC stations acquired on June 26, 2006. Political revenues are projected to be approximately $8.3 million.
Conference Call and Webcast
The company will hold an earnings 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 1-866-510-0704 about 10 minutes prior to the 11 a.m. start. Listeners may also access the live Webcast by logging on to www.mediageneral.com and clicking on the “Live Earnings Conference” link on the homepage about 10 minutes in advance. A replay of the Webcast will be available online at www.mediageneral.com beginning at 1 p.m. today. A telephone replay is also available, beginning at 1 p.m. and ending on July 20 at 1 p.m., by dialing 1-888-286-8010 or 617-801-6888, and using the passcode 99864261.
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 multimedia company operating leading newspapers, television stations and online enterprises primarily in the Southeastern United States. The company’s publishing assets include three metropolitan newspapers, The Tampa Tribune, Richmond Times-Dispatch, and Winston-Salem Journal; 22 daily community newspapers in Virginia, North Carolina, Florida, Alabama and South Carolina; and more than 150 weekly newspapers and other publications. The company’s broadcasting assets currently include 30 network-affiliated television stations that reach more than 33 percent of the television households in the Southeast and more than 10 percent of those in the United States. The company’s interactive media assets include more than 75 online enterprises that are associated with its newspapers and television stations. Media General also owns a 33 percent interest in SP Newsprint Company, a manufacturer of recycled newsprint.
Lou Anne Nabhan