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Article by DailyStocks_admin    (12-16-08 06:57 AM)

Filed with the SEC from Dec 04 to Dec 10:

Media General (MEG)
Hedge fund Harbinger Capital Partners Master Fund I and its affiliates have reduced their combined stake to about 2.3 million shares (10.38%) from the 2.59 million (11.67%) that they had reported owning on Nov. 26.

BUSINESS OVERVIEW

Media General, Inc., is an independent, publicly owned communications company situated primarily in the Southeast with interests in newspapers, television stations, and interactive media. The Company employs approximately 6,900 people on a full or part-time basis. The Company’s businesses are somewhat seasonal; the second and fourth quarters are typically stronger than the first and third quarters.

The Company owns 25 daily newspapers and more than 150 other publications, as well as 23 television stations. The Company also operates more than 75 online enterprises. The Company has placed significant emphasis on convergence. Convergence combines the unique strengths of newspapers, television, and the Internet to enable the Company to better gather and present news and information to its readers, viewers, and users and on behalf of its advertisers. These efforts were initiated in the Tampa market, where The Tampa Tribune , WFLA-TV and TBO.com share the Company’s News Center facility and work side by side to provide the most comprehensive news, information and entertainment in that market. The success of this initial venture led the Company to expand convergence to five additional markets in the Southeast where it operates market-leading newspapers, television stations, and Web sites in contiguous regions.

On December 18, 2007, the Federal Communications Commission (FCC) adopted a revised media ownership rule regulating the common ownership of a newspaper and a television station in the same market. The FCC amended the existing 32-year old absolute ban on newspaper/broadcast cross-ownership by crafting a rule that would presumptively allow a newspaper to own one television station or one radio station in the 20 largest markets, subject to certain limitations. The rule would also consider such combinations in other markets subject to certain public interest showings including the provision of local news by the television station, again subject to certain limitations. These new cross-ownership regulations modify the existing ban that has remained in place as a result of a stay imposed by the United States Court of Appeals for Third Circuit in 2003. In addition, the FCC announced that it would grant permanent waiver to the existing newspaper/broadcast combinations that were grandfathered in conjunction with the 1975 rule and that in certain instances involve one newspaper and one broadcast property in the same market. As a result of these actions, the FCC granted permanent waivers to the Company’s convergence partnership in Tampa and its newspaper-television combinations in the following television markets: Columbus, Georgia; Florence – Myrtle Beach, South Carolina; Panama City, Florida; and Tri-Cities (Tennessee and Virginia). The Company’s newspaper-television partnership in Roanoke/Lynchburg/Danvill e, Virginia does not require an FCC waiver.

While the Company is gratified that the FCC has provided permanent waivers to the stations operating in five of its convergence markets, the Company will continue to press for cross-ownership relief in all markets, regardless of size.

Industry Segments

The Company operates in three significant industry segments. For financial information related to these segments see pages 39 and 40 of the 2007 Annual Report to Stockholders, which are incorporated herein by reference. These segments are Publishing, Broadcast, and Interactive Media. Additional information related to each of the Company’s significant industry segments is included below.

Publishing Business

The newspaper publishing industry in the United States comprises hundreds of public and private companies ranging from large national and regional companies, publishing multiple newspapers across many states, to small privately held companies publishing one newspaper in one locality. The Company is one of the largest publicly held newspaper publishing companies in the United States based on circulation and publishes more daily newspapers in the Southeast than any other company. Moreover, the Company is third in total circulation in its chosen southeastern area of focus.

All of the Company’s newspapers compete for circulation and advertising with other newspapers published nationally and in nearby cities and towns and for advertising with magazines, radio, broadcast and cable television, the Internet and other promotional media. All of the newspapers compete for circulation principally on the basis of content, quality of service and price.

The primary raw material used by the Company in its publishing operations is newsprint, which is purchased at market prices from various Canadian and United States sources, including SP Newsprint Company (SPNC), in which the Company presently owns a one-third equity interest. SPNC has mills in Dublin, Georgia, and Newberg, Oregon, with a combined annual capacity in excess of one million short tons. The publishing operations of the Company consumed approximately 106,000 short tons of newsprint in 2007. Management of the Company believes that sources of supply under existing arrangements, including a commitment to purchase 35,000 short tons from SPNC, will be adequate in 2008.

In January 2008, SPNC announced that it had entered into an agreement with certain affiliates of White Birch Paper Company to be acquired. The acquisition, which is subject to regulatory approval, is expected to close during March or April of 2008. For additional information regarding the sale, see page 37 of the Annual Report to Stockholders.

In June 2005, the Company sold its 20% ownership in The Denver Post Company (Denver), parent company of the Denver Post, to MediaNews Group, Inc. For additional information regarding the sale, see page 37 of the Annual Report to Stockholders.

Broadcast Business

The Broadcast Television Division operates 23 network-affiliated television stations in the United States. The Company has initiated a plan to divest WMBB in Panama City, Florida, KALB/NALB in Alexandria, Louisiana, and WNEG in Toccoa, Georgia. The divestitures are expected to occur in the first half of 2008. For additional information, see pages 35 and 36 of the Annual Report to Stockholders.

The primary source of revenues for the Company’s television stations is the sale of commercial time to national and local advertisers and political candidates. Additionally, the Company’s Professional Communications Systems operating unit derives revenue from the sale and integration of broadcast equipment to third parties including other broadcasters, corporate and governmental enterprises, and colleges and universities.

The Company’s television stations compete for audience and advertising revenues with other television and radio stations, cable programming channels, and cable television systems as well as magazines, newspapers, the Internet and other promotional media. A number of cable television systems and direct-to-home satellite companies (which operate generally on a subscriber payment basis) are in business in the Company’s broadcasting markets and compete for audience by presenting broadcast television, cable network, and other program services. The television stations compete for audience on the basis of program content and quality of reception, and for advertising revenues on the basis of price, share of market and performance.

In the third quarter of 2006, the Company acquired four NBC stations; WNCN in Raleigh, North Carolina, WCMH in Columbus, Ohio, WJAR in Providence, Rhode Island and WVTM in Birmingham, Alabama. In the third and fourth quarters of 2006, the Company sold four CBS stations; KWCH in Wichita, Kansas, and its three satellites, WIAT in Birmingham, Alabama, KIMT in Mason City, Iowa, and WDEF in Chattanooga, Tennessee. For additional information regarding the acquisition and dispositions, see page 36 of the Annual Report to Stockholders.

The television broadcast industry has largely implemented the transition from analog to digital technology in accordance with a mandated conversion timetable established by the Communications Act and the FCC. In February 2006, President Bush signed into law the Digital Television Transition and Public Safety Act setting February 17, 2009, as the deadline for completion of the transition from analog to digital television broadcasting. The law requires the FCC to terminate the licenses for all full-power analog television stations on February 18, 2009. The Company’s television stations, with the exception of its satellite stations, have substantially transitioned to digital technology. The Company is in the process of completing the final stages of digital channel assignment in several markets and expects to achieve full compliance by the FCC mandated deadline.

Interactive Media Business

The Interactive Media Division (IMD), which was launched in January 2001, operates in conjunction with the Publishing and Broadcast Divisions to provide online news, information and entertainment to its customers without geographic restrictions. The Division comprises more than 75 interactive enterprises, as well as a minority investment. In July 2005, the Division acquired Blockdot, Inc., a Dallas-based advergaming and game development firm. The Division focuses on the following areas of the interactive business: improving content, driving viewership, and increasing advertising and game production revenue. As the Internet is both a medium and a marketplace, direct online sales are increasing because of expanded viewership and enhanced content. While some of the Division’s online enterprises were profitable in 2007, the Division’s results were adversely affected by the decline in classified volume experienced by the Publishing Division. In contrast, Blockdot’s advergaming business experienced tremendous growth in 2007. The Division expects that it will be moderately profitable in 2008 due in large measure to continued success at Blockdot.

Among the online enterprises included in the Interactive Media Division, each of the Company’s daily newspapers and television stations is affiliated with a Web site featuring content complementary to but increasingly more expansive than its published products or its television offerings. Online revenues are derived primarily from advertising, which includes various classified products as well as banner and sponsorship advertisements. The most successful revenue initiatives have involved classified products placed on the Company’s Web sites; these products represented approximately forty percent of the Division’s revenues in 2007. The majority of these revenues are derived from upsell arrangements under which customers pay an additional fee to have their classified advertisement placed online simultaneously with its publication in the newspaper. Revenue generated from Blockdot’s advergaming business grew substantially in 2007, accounting for more than twenty percent of the Division’s revenues in 2007.

In December 2006, the Company entered into a strategic alliance with Yahoo! Inc., joining a national consortium of over 20 media companies representing more than 500 newspapers to deliver classified advertising to consumers. In 2007, the Company worked with Yahoo! to transition the online career sections of its 25 daily newspapers to a Yahoo!HotJobs-driven platform. Now that the implementation is complete, a large portion of the career-related advertising sold through its daily newspaper Web sites is also posted on Yahoo!HotJobs, which gives the ads increased visibility to career seekers across the country. The Division is also proceeding with the launch of an ad serving platform which will provide Yahoo! users the ability to access local content provided by the Division’s daily newspaper Web sites. The Division expects that Yahoo!’s search capabilities and advertising reach coupled with the Division’s local content will result in increased traffic and advertising revenue for both parties.

The Company’s online enterprises compete for advertising, as well as for users’ discretionary time, against newspapers, magazines, radio, broadcast and cable television, other Web sites and other promotional media. These Web sites compete for users principally on the basis of content relevance and accessibility, and for advertisers primarily on viewer demographics and the innovative means in which advertising is delivered. Blockdot, through its advergaming production, also competes for advertising by providing major consumer product brands a unique method to deliver their message.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

OVERVIEW

Media General is an independent, publicly owned communications company situated primarily in the Southeast with interests in newspapers, television stations and interactive media.

The Company’s fiscal year ends on the last Sunday in December.

RESULTS OF OPERATIONS

The Company recorded net income of $6.1 million and a net loss of $546.3 million in the third quarter and first nine months of 2008, respectively, as compared to net income of $2.5 million and $1.1 million in the equivalent periods of 2007. In order to facilitate comparisons of results, several factors merit separate mention. Challenging business conditions and the market’s perception of the value of media company stocks prompted the Company to perform an interim impairment test as of the end of the second quarter. As a result of this testing, the Company recorded impairment charges related to goodwill in the Publishing Division of $512 million, FCC licenses in the Broadcast Division of $198 million, network affiliation agreements in the Broadcast Division of $67 million, trade names in the Broadcast Division of $0.5 million, and investments and assets held for sale of $4.4 million, resulting in an after-tax non-cash impairment charge of $532 million. For a more complete discussion regarding this impairment charge, see Note 3 of this Form 10-Q. Additionally, a loss was recorded in the first quarter related to the divestiture of certain television stations. At the end of 2007, the Company classified three of its stations as discontinued operations, including KALB/NALB in Alexandria, Louisiana, WMBB in Panama City, Florida, and WNEG in Toccoa, Georgia, and recorded an after-tax loss of $2 million. Before the close of 2008’s first quarter, two additional stations—WTVQ in Lexington, Kentucky, and WCWJ in Jacksonville, Florida—met the criteria for discontinued operations and were classified accordingly, resulting in an additional after-tax loss of $11.3 million. This first quarter charge was due primarily to an expected loss upon the sale of WTVQ; that sale was completed in the second quarter. In the third quarter, the Company completed the sale of KALB/NALB and WMBB; subsequent to the end of the third quarter, the sale of WNEG was finalized. The Company also consummated the sale of SP Newsprint in the second quarter of 2008 and increased the year-end pre-tax loss it originally recorded in 2009 by $1.6 million in the year to date; see Note 5 for a more complete discussion. In an effort to better align its costs with the current business environment, the Company implemented a cost-reduction plan which included a voluntary and non-voluntary separation program. This workforce reduction was largely in response to a general economic downturn and, particularly, to the deep housing-induced recession in the Florida market. It resulted in pre-tax severance costs of $4.8 million in 2008, virtually all of which occurred in the second quarter. Further, the Company recognized an additional $3.3 million pre-tax gain related to the insurance settlement in the first nine months of 2008 from a fire at the Company’s Richmond Times-Dispatch printing facility that occurred in the second quarter of 2007.

In the year to date, the Company’s adjusted loss of $3.5 million (as shown in the previous chart) reflected a $4.6 million negative swing from the first nine months of $1.1 million in 2007. The largest factor impacting these results was a 17% decrease in Publishing Division revenues in the year to date which, despite strong reductions in operating expenses (excluding severance and costs related to consolidation of printing facilities), caused the Division’s operating profits in the first nine months of 2008 to be less than half of those in the equivalent 2007 period. Partially offsetting this downturn in year-over-year divisional results were: a 27% decrease in interest expense in the year to date (due to lower interest rates and decreased average debt levels), the absence of $8.8 million of operating losses related to SP Newsprint, and a $3.7 million increase in fixed asset gains.

In the third quarter, many factors contributed to a $4.1 million rise in income from continuing operations. Divisional results, as well as corporate expense, reflected the reversal of approximately $5 million of pretax profit-sharing expense which had been accrued earlier in the year, as the Company no longer expects to meet the established threshold for payment within the plan based on nine months of actual results combined with projections for the remaining three months of 2008. Other items impacting third-quarter results included: a 33% decrease in interest expense due almost equally to lower interest rates and decreased average debt levels, a $2 million rise in fixed asset gains, and a $5.9 million improvement in SP Newsprint related items. As discussed in Note 5, in 2008 the adjustment of certain post-closing issues provided $1 million of income in the third quarter which also benefited from the absence of $4.9 million of operating losses recorded in the third quarter of 2007. Conversely, divisional operating profits were down 16% due to significantly decreased Publishing revenues which resulted in a 53% decline in that Division’s profits. Publishing Division revenues were down in all advertising categories and continue to be substantially impacted by the recession in the Tampa Bay region.

PUBLISHING

Operating income for the Publishing Division decreased $11.7 million and $38.1 million in the third quarter and first nine months of 2008 from the equivalent prior-year periods despite cost reduction measures which appreciably mitigated a decline in revenues of 18% and 17% in the quarter and year-to-date periods. The Division’s Tampa operations were responsible for about half of the overall revenue decreases as the Company’s largest market has been adversely impacted by a housing-induced recession in Florida. As shown in the following chart, Classified advertising fell farthest from the year-ago period as employment, automotive and real estate advertising declined in virtually all markets. Retail revenues were down due to lower advertising levels in the department store, home furnishing and entertainment categories. National revenues experienced declines as a result of weak spending levels in the telecommunications and automotive categories.

As previously mentioned, the revenue decline was most pronounced in the Tampa market, and the Company has reacted to this challenging advertising environment by implementing aggressive actions to improve performance and to better align expenses at its Florida properties with that market’s current economic conditions. This included a workforce reduction which was initiated in the second quarter as well as further cost reduction initiatives.

In addition, the Division continues to make concerted efforts to reduce its newsprint consumption and to rigorously manage discretionary spending. The Division’s 2008 operating expenses included pretax charges of approximately $3.9 million which were comprised of severance costs and expenses associated with the consolidation of certain printing facilities. Excluding these costs, Publishing Division operating expenses decreased a substantial 10% and 9% in the quarterly and year-to-date periods of 2008 over the equivalent prior-year periods due primarily to reduced compensation expense. Compensation expense declined due to the combination of several factors, including: the elimination of some positions at nearly all newspapers, the third-quarter reversal of profit-sharing expense accrued earlier in the year, favorable medical experience, and decreased retirement plan expense. Despite higher average newsprint prices per short ton of $117 and $39 in the quarter and year to date, newsprint costs were down $.5 million and $6.2 million in these same periods due to reduced consumption as a result of newspaper redesigns, lower advertising linage, decreased circulation volumes, and concerted conservation efforts.

BROADCAST

In the third quarter and first nine months of 2008, Broadcast operating income was up $3.5 million and $.4 million compared to the equivalent periods a year ago due to reduced operating expenses which more than offset a $1.3 million and $7.1 million drop in revenues in those same periods. Despite robust Political advertising and Summer Olympic advertising, Broadcast revenues declined as National and Local time sales experienced soft advertiser spending across several markets as well as in a number of key categories. National revenues fell 20% and 17% in the quarter and year to date from the prior year due to weak advertising levels primarily in the automotive and telecommunications categories. Local time sales decreased nominally in the third quarter and dropped approximately 2% in the first nine months of the year on reduced spending in the automotive and furniture categories. Conversely, Political time sales approached five times the prior-year level in the quarter and nearly five and one-half times the prior-year level in the first nine months of 2008 due to strong spending associated with the presidential campaigns, U.S. congressional races, and issue spending in certain states. The following chart illustrates comparative advertising time sales by categories as discussed above.

The Broadcast Division’s $4.8 million and $7.5 million decrease in operating expenses in the third quarter and first nine months of this year from the equivalent periods in 2007 was achieved partially through controlled discretionary spending in areas such as sales incentives and travel. Additionally, compensation decreased 10% in the third quarter and 2% in the first nine months of 2008 because of several factors including: positions held open or eliminated, the third-quarter reversal of profit-sharing expense accrued earlier in the year, and favorable medical experience. The Division remains vigilant in its efforts to seek cost-reductions, to align expenses with the current business climate and to pursue attractive new business development opportunities.

INTERACTIVE MEDIA

At the beginning of the second quarter in 2008, the Company acquired DealTaker.com , an online social shopping portal that provides coupons and bargains to its users. DealTaker.com generated revenues of $1.8 million and $3.4 million in the third quarter and first nine months of 2008 and produced operating profits of more than a million in each quarter. Additionally, in the third quarter of 2007, the Division took a $2.3 million write-down of an investment in a company that produces interactive entertainment. For purposes of the remainder of this discussion and for the chart that follows, investments and results of DealTaker.com are excluded.

The Interactive Media Division’s (IMD) operating loss increased $.6 million in 2008’s third quarter and $4.6 million in the first nine months of 2008 from the comparable prior-year periods. In the quarter, a 9% reduction in revenues was partially offset by a small decrease in operating expenses. While the online group (all online operations associated with newspapers and television stations) held relatively steady in quarter-over-quarter comparisons, profits at the company’s advergaming business, Blockdot, dropped. In the year to date, a 5.7% reduction in IMD revenues combined with increased operating expense created a loss significantly greater than in the first nine months of 2007 caused equally by the online group and Blockdot. A downward slide in Classified advertising (despite new revenues from the Company’s Yahoo! HotJobs relationship) was the result of lower volumes of advertising, particularly in Florida’s struggling economy, partially offset by price increases. Local online advertising generated a robust 29% and 35% increase in the third quarter and first nine months of 2008 over prior-year equivalent periods as banner advertising and sponsorships showed solid growth; National/Regional revenues fell 11% in the quarter due in large part to weakness in Florida, but rose 3% in the first nine months of the year on the strength of the first quarter. Blockdot’s revenues suffered a 32% and 25% decline in the third quarter and first nine months of 2008 compared to similar prior-year periods as the pace of advergaming sales reflected the sluggish economy. The following chart illustrates strong year-over-year growth in Local revenues, while National/Regional revenue growth tapered off in the third quarter. Online Classified advertising (still the largest source of divisional revenue) continues to suffer from the decline in volume at the Publishing Division.

IMD’s operating expenses were down $.3 million in the third quarter but up $3.1 million in the first nine months of 2008, predominantly the result of increased employee compensation expense due to additional staffing in key areas, offset by lower profit-sharing expense in the quarter. The infrastructure that was built initially in 2007 to support the Division’s growth initiatives remained in place this year, leading to these higher costs.

IMD remains focused on positioning itself for strong long-term growth, by increasing visitor and page-view growth, creating a dynamic online presence across all the Company’s websites, and generating revenue growth with a focus on expanded product offerings and attracting new customers. The “Web-First” approach to news reporting provides an immediate platform for breaking news and helps stimulate audience growth, as evidenced by a 33% increase in local pages views in the third quarter at the Company’s largest online operation, TBO.com in Tampa. The Division continues to seek opportunities to broaden its online product and services portfolio to meet the needs of its markets and its advertisers. The purchase of DealTaker.com represents a valuable new cash flow stream to the Division with margins of approximately 70% since the acquisition. Additionally, the Division’s strategic alliance with Yahoo! and a consortium of over 500 newspapers creates both content and distribution opportunities and provides more effective advertising solutions to customers.

INTEREST EXPENSE

Interest expense decreased $5.0 million in the third quarter from 2007’s same quarter due almost equally to a decrease in the Company’s average effective borrowing rate of 115 basis points (to 5.15%) and to an approximate $170 million decline in average debt levels. Interest expense declined $12.3 million in the year to date from the first nine months of 2007 due to a similar 115 basis point decrease in the Company’s average effective borrowing rate and to an approximate $80 million drop in average debt levels.

In the third quarter of 2006, the Company entered into three interest rate swaps (where it pays a fixed rate and receives a floating rate) to manage interest cost and cash flows associated with variable interest rates, primarily short-term changes in LIBOR, not to trade such instruments for profit or loss. These interest rate swaps are cash flow hedges with notional amounts totaling $300 million and maturities of either three or five years. Changes in cash flows of the interest rate swaps offset changes in the interest payments on the Company’s $300 million bank term loan. These swaps effectively convert the Company’s variable rate bank term loan to fixed rate debt with a weighted average interest rate approximating 6.4% at September 28, 2008.

INCOME TAXES

The Company’s effective tax rate on income from continuing operations, excluding the previously mentioned impairment charge, was 39.7% and 43.8% in the current quarter and first nine months of 2008, as compared to 35.8% and 33.8% in the equivalent prior-year periods, due primarily to the absence of the Alternative Fuels Credit previously generated by virtue of the Company’s investment in SP Newsprint as well as a relatively greater impact of unfavorable permanent items related to employee benefit plans.

LIQUIDITY

The Company generated net cash of $61.6 million from operating activities in the first nine months of 2008 and received proceeds of more than $135 million from the sale of several television stations and its investment in SP Newsprint. The Company purchased DealTaker.com and a small group of weekly newspapers (totaling $22.7 million), made capital expenditures of $19.2 million, paid dividends to stockholders of $15.8 million, contributed $10 million to its retirement plan, and repaid debt by $147.5 million. Based on the general economic environment and outlook, the Company has reduced its capital spending plans by postponing anticipated projects. Additionally, the Company announced a reduction in its fourth quarter dividend from $0.23/share to $0.12/share.

The Company has in place a $1 billion revolving credit facility and a $300 million variable-rate bank term loan facility (together the “Facilities”). The term loan is with essentially the same syndicate of banks that provides the Company’s revolving credit facility. At the end of the first nine months of 2008, there were borrowings of $450 million outstanding under the revolving credit facility and $300 million under the bank term loan. The Facilities have both interest coverage and leverage ratio covenants. These covenants, which involve debt levels, interest expense, and a rolling four-quarter calculation of EBITDA (a measure of cash earnings as defined in the revolving credit agreement), can affect the Company’s maximum borrowing capacity allowed by the Facilities (approximately $790 million at September 28, 2008). In the fourth quarter of 2007, the Company amended certain provision of its Facilities to increase the maximum leverage ratio covenant and reduce the minimum interest ratio covenant for a period of three fiscal quarters. The amendment also modified the circumstances under which certain subsidiary guarantees would be in place. The Company was in compliance with all covenants at quarter-end and expects to remain in compliance with its covenants going forward.

The credit market crisis is causing some customers to severely reduce or temporarily suspend advertising in order to conserve their cash. In this environment, it is difficult to confidently project future operating performance. This uncertainty coupled with a tightness of the Company’s debt covenants has led to discussions with the Company’s banking group. The Company anticipates these discussions will lead to an amendment of the Facilities. As these discussions are ongoing, the final form of the amendment is not known but will likely involve higher interest expense, lower commitment levels, and relaxed covenant requirements.

As of the end of the third quarter, the Company had completed the sales of WTVQ, WMBB and KALB/NALB. Subsequent to the close of the third quarter, the Company completed the sale of WNEG. It anticipates signing an agreement for the sale of WCWJ in the fourth quarter. When the divestitures of all five stations are complete, the Company expects their sales to generate proceeds of $100 million to $105 million which, after considering estimated taxes, will be used to reduce debt by approximately $60 million to $65 million in total. The Company believes that internally generated funds provided by operations, together with the unused portion of the Facilities as well as the proceeds generated by the sales of SP Newsprint and certain broadcast stations, provide it with the flexibility to manage working capital needs, pay dividends and finance capital expenditures.

OUTLOOK

The Company expects the fourth quarter to reflect trends similar to those which have been present throughout much of 2008, including a challenging advertising environment, a depressed economy in the Company’s largest market (Tampa), increased competition from numerous and expanding media sources, and rising newsprint prices. In light of economic conditions, the Company took aggressive actions to better align expenses with the current revenue environment including workforce reductions, performance improvement initiatives, product innovation acceleration, and vigilant management of discretionary spending. Additional steps are currently being considered. The Broadcast Division should continue to experience strong Political advertising as the presidential election rapidly approaches. The Interactive Media Division expects DealTaker.com to build on the excellent results it has generated since its second-quarter acquisition and it expects Blockdot to show improvement. Additionally, the consummation of the sale of WNEG, the anticipated sale of the final television station currently classified in discontinued operations, and the reduction of the Company’s dividend are also expected to allow the Company to further reduce debt.

* * * * * * * *

Certain statements in this quarterly report that are not historical facts are “forward-looking” statements, as that term is defined by the federal securities laws. Forward-looking statements include statements related to accounting estimates and assumptions, expectations regarding credit facilities, acquisitions and dispositions, the impact of cost-containment measures, staff reductions, the Internet, newsprint prices, the Yahoo! agreements, debt compliance, general advertising levels and political advertising levels. Forward-looking statements, including those which use words such as the Company “believes,” “anticipates,” “expects,” “estimates,” “intends,” “projects,” “plans,” “may” and similar words, are made as of the date of this filing and are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by such statements.

Some significant factors that could affect actual results include: the effect of the credit crisis on advertising demand, interest rates or energy prices, the availability and pricing of newsprint, changes to pending accounting standards, health care cost trends, a natural disaster, the level of political advertising, the performance of acquisitions, and regulatory rulings and laws.

CONF CALL

Lou Anne Nabhan

Good morning everyone. Welcome to our conference, which is also being webcast. Earlier today as I hope you’ve seen, we announced our third quarter 2008 results and out September revenues. Both press releases have been posted on our website and the comments from today 's call will also be posted after we finish.

Today’s presentation does contain forward-looking statements which are subject to various risks and uncertainties. It should be understood in the context of the company's publically available reports filed with SEC. Our future performance could differ materially from current expectations.

Our speakers today are Marshall N. Morton, President and Chief Executive Officer, Reid Ashe, Executive Vice President and Chief Operating Office, and John Schauss, Vice President Finance and Chief Financial Officer. Let me now turn the presentation over to Marshall.

Marshall N. Morton

Thank you, Lou Ann. Good morning everyone. For the third quarter, we reported earnings from continuing operations of $5.8 million or $0.26 per diluted share a $4.1 million increase from the prior year. The increase came mainly from improved broadcast and interactive media profitability, lower interest expense and the absence this year of SP Newsprint related operating losses. Broadcast division results reflected the benefit of strong Olympics and political advertising.

Interactive media division results reflected an excellent performance by our new online coupon and shopping business, DealTaker.com as well as the absence of last year’s investment write down. Significantly lower publishing process constrained the overall increase.

Included in our third quarter results was the reversal of profit sharing expense that had been accrued earlier in the course of 2008. The reversal totaled approximately $5 million prĂŞt-ax and was spread across all three operating segments and corporate expense. Based on forecasted results, we do not anticipate paying performance-related incentive compensation for 2008 either.

Total operating costs for the third quarter decreased 9.5% compared with the prior year, reflecting the benefit of the aggressive actions we have taken to reduce our work force and cut other costs. We also had $2 million more of fixed asset gains this year than we did last year.

Since the beginning of 2007, we have reduced FTEs by approximately 750, removing approximately $40 million of annualized costs. We saw some savings in 2007 and expect to net about 40% of that of that amount for the full year 2008. We’ll benefit fully from these actions in 2009.

Total company revenues for the third quarter of $194 million were down 11% from the same period last year, mostly the result of decreased revenues in our publishing segment. In our broadcast segment, strong summer Olympics and political advertising revenues in the third quarter mostly offset the impact of weak transactional business especially on the national side.

Total broadcast revenues were down 1.5%. Summer Olympics advertising on our eight NBC stations generated revenues of just under $13 million. Some anticipated advertising packages were not played and our stations aggressively sold Olympics packages to local advertisers.

Political advertising revenues in the third quarter totaled $7.5 million. These revenues mostly came from robust Presidential campaign and issue spending in Florida, Ohio, North Carolina, Virginia, and Mississippi. On the state level, our markets have eight active Senate races. The most intense battle should be for Elizabeth Dole's seat in North Carolina, Trent Lott’s recently opened seat in Mississippi, and the seat being vacated by John Warner in Virginia. I will now ask Reid to provide more details on the performance of our three operating divisions in the quarter.

O. Reid Ashe Jr.

Thanks, Marshall. For the third quarter, publishing division profit was $10.3 million compared with $22 million a year ago. The decrease was chiefly due to an 18% decline in total revenues partially offset by an 11% decline in expenses. Essentially all newspapers experienced revenue declines in the quarter. The largest shortfall as expected was in our Florida markets where revenues were down 28% from last year. Revenue declines in other markets included Richmond down 18%, Winston Salem down 10% and the community newspaper group as a whole down 12%. Classified advertising revenue decreased 33% in the quarter.

The largest shortfall occurred in Florida followed by Richmond. Of the three Metro markets combined, employment revenues were down 47%, real estate revenues declined 46% and automotive revenues decreased 43%. Retail revenue decreased 13% reflecting weakness in several categories especially department stores and home furnishings. National revenue declined 20% mainly reflecting lower spending by telecommunications advertisers.

Circulation revenue in the quarter reversed the downward trend and was even with last year owing to increases in home delivery and single copy prices and a decrease in discount programs.

Publishing expenses in the quarter excluding severance in both years decreased 10%. Salaries expense was down 11% from last year excluding severance. FTEs for the quarter relative to last year decreased by more than 500 were 12.5%. Other large expense savings were in benefits including profit sharing and other departmental expenses.

Newsprint expense declined 4% as a result of reduced consumption partially offset by higher average prices. Consumption decreased by 5,270 tons or 21% due to the impact of lower business volume plus the benefit of an existent conservation effort. The price per short ton increased by $117 or 22% in the quarter, resulting in an unfavorable price variance of $2.3 million.

Our newspapers continue to significantly reduce newsprint consumption. Many have redesigned or combined sections and have illuminated less essential content. Four of our community print sites representing four community dailies and a number of weeklies, have trimmed their page width to 11 inches. All of our other newspapers have scheduled to follow with reduction in 2009.

For 2008, we expect to cut newsprint expense 9% despite a 15% increase in price.

Turning now to the broadcast division, profits of nearly $18 million were 25% ahead of last year’s third quarter. Local advertising revenues were close to the prior year level while national revenues were down 20% due in large part to lower spending by automotive and telecommunications advertising.

Media General’s time sales performance has exceeded that of the television industry year-to-date. According to the television bureau of advertising’s monthly group survey through August, that is the latest reporting period, industry time sales decreased 4.3% compared with Media General’s 2.8% decline.

Broadcast expenses in the third quarter decreased by 7%. Reduced salaries and benefits combined with lower cost of goods sold at our studio design and equipment subsidiary and other cost containment efforts were combined to produce the savings.

Interactive media division while cash flow positive in the quarter reported a small loss of $336,000. This compared with a $1 million loss in the same period last year not counting a $2.3 million write down of an Internet investment last year.

DealTaker.com, our new coupon and shopping site was the largest component of the improvement. Total interactive revenues increased 9% compared with last year. Local or online advertising was 29% ahead of last year while national declined 11%. Our Yahoo partnership helped to mitigate a decline in online-classified advertising, which was down only 12%.

Operating expenses were virtually unchanged from the same period a year ago. We continue to move aggressively to grow our online audience and revenues. Continuous news initiative that we launched a year ago has paid large dividends and attracting new audience. Page views in our local news sections are up nearly 32%. The growth is even higher in our two largest markets. Richmond is up 38% and Tampa is up more than 50%. Unique visitors to our websites are up 18%.

We are also boosting traffic to our new and improved entertainment and things to do section. Ad inventory in these sections is in especially high demand. We are getting better at monetizing traffic at the same time we are creating more traffic to monetize. We are persuading more of our online [inaudible] advertisers to buy 30-day listings instead of 7-day runs. Whereas 15% of our online job listings ran for 30 days in March, more than 70% are taking the longer run now.

We continue to take full advantage of our Yahoo partnership, not just with Hot Jobs, but also with Yahoo display and we are exploiting the strength of other national internet partners including the real estate site Zillow.

We continue to focus on new product development aimed at serving new customers. We will be unrelenting in our pursuit of new audience and advertisers. Now I will turn the presentation over to John.

John A. Schauss

Thank you Reid. Let me comment first below the line items in the quarter. Interest expense was 33% below last year’s third quarter due to both a reduction in average debt outstanding and a reduction in average interest rates. We expect interest expense for the full year will be approximately $44 million compared with $60 million for full year 2007 as a result of our delevering plan and lower interest rates.

The sale of our interests in SP Newsprint on March 31 eliminated the equities earnings volatility we experienced in the past from that investment.

In the third quarter of 2007, we recorded nearly $5 million of operating losses related to our former ownership in SP. This year we had income of $1 million from favorable adjustments to certain post closing liability.

Next, I would like to briefly discuss capital expenditure. As we stated previously, we paired that to almost most essentially spending for the time being. In the third quarter, capital spending was approximately $6.8 million compared with $17.3 million in the third quarter of 2007.

The publishing division invested $4.3 million mainly on upgrades that created higher efficiency for printing operations in Richmond and Winston Salem. The investments we have made in printing operations in the past few years have enabled us to consolidate the number of newspaper printing sites. We have gone from 25 sites to 12 in the last 10 years.

The broadcast division spent $1.2 million mainly for the final phases of construction for our new Myrtle Beach studio facility, an upgrade to our central traffic operation and the centralized graphics hub here in Richmond.

Interactive media division and corporate expenditures were approximately $1.3 million primarily for information technology. That [inaudible] into the third quarter with $750 million down from $830 million at the end of the second quarter and from $898 million at the beginning of the year. This reduction in debt reflects additional asset sales.

Yesterday, we were pleased to complete the sale of the fourth of five stations we are divesting. The sale of our last station, a CW affiliate in Jacksonville, Florida, continues to progress. We continue to expect to realize proceeds from sales of all five stations of $100 to $105 million. The proceeds have been and will be used to reduce debt. The total reduction is expected to be $60 to $65 million after tax.

As we announced in late September, the board reduced our quarterly dividend to $0.12 per share, which will allow for approximately $2.5 million of additional debt reduction this year compared to the previous dividend level.

The long-term relationship we have with our banking consortium is strong and we keep our lender banks well informed about strategic initiatives. In light of recent economic events, we have considered in prudent to engage in a dialogue with them to ensure that the borrowing agreements we have in place provide us adequate flexibility in the foreseeable future. We fully expect that our discussions will result on debt agreement modifications that will provide us with the flexibility that we desire at a cost that will be manageable.

And now I will turn it back to Marshall.

Marshall N. Morton

Thanks John. As the fourth quarter unfolds, we are closely watching the placement of political advertising on our television stations. Because our stations are top rated, we hold the market advantage in garnering significant proportion of the dollars placed in our market. We expect to generate more than $20 million from political revenues in the fourth quarter.

One cautionary note is that political billings for our broadcasters this year are less robust than in some prior election years, because soft national and local transactional sales have kept inventory more open, thus, removing upward pressure on rates. This year’s weak economy and unfavorable business climate have created far more challenges than anyone anticipated, as you all well know.

As a company, we recognize the need to continue adapting to the changing marketplace. We have the significant advantage of an early understanding of the strength of the Internet, the importance of customer focus, and the power of multi-media across three major platforms. We’ve accomplished much with new products and smarter expense reduction.

Nonetheless, we recognize the need to do more and we’re accelerating our response to the change we’re seeing in our business. I’m confident we can do that based on the many successes we’ve already achieved.

Three years ago, we were working to have 5% of our revenues in new products. Today, we’re very close to 10%. We got there by being quick to acknowledge that the customer’s in charge; and that we’re an information company, not simply a publisher or a broadcaster. We must continue to push away from the past and maintain a customer centric bias to our thinking and our execution.

Audience and market are our source of revenue, profit, and growth. In some cases, the customer’s going to pull us into the future, but we’re also going to anticipate customer needs and provide solutions they haven’t yet thought possible. We’re research driven, we know our local market, and our people are innovative, that’s the winning combination for the long term.

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