| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
Note 9: Other
Revenue recognition
Advertising revenue is recognized when advertisements are published or aired, or when related advertising services are rendered. Subscription revenue is recognized on a pro-rata basis over the term of the subscription. Newsprint revenue is recognized upon shipment of newsprint.
Depreciation and amortization
Plant and equipment are depreciated, primarily on a straight-line basis, over their estimated useful lives which are generally 40 years for buildings and range from 3 to 20 years for machinery and equipment. Depreciation deductions are computed by accelerated methods for income tax purposes. Internal use software is amortized on a straight-line basis over its estimated useful life, not to exceed 5 years.
Excess of cost over fair value of net identifiable assets of acquired businesses through 1970 (approximately $32 million) is not amortized unless there is evidence of diminution in value; such excess cost incurred after 1970 is being amortized by the straight-line method over periods not exceeding 40 years. FCC licenses and other intangibles are being amortized by the straight-line method over periods ranging from 3 to 40 years. Amortization of the excess of cost over fair value of net identifiable assets of acquired businesses and FCC licenses and other intangibles was $34.1 million, $34.3 million and $31.1 million in 1999, 1998 and 1997, respectively.
The Company periodically evaluates the carrying value of long-lived assets, including intangible assets, to determine whether there are any impairment losses. If indicators of impairment are present in long-lived assets used in operations, and future cash flows are not expected to be sufficient to recover the assets’ carrying amount, an impairment loss would be charged to expense in the period identified.
Interest
In 1999, 1998 and 1997, the Company’s interest expense from continuing operations was $46.6 million, $62.6 million and $60.7 million, respectively, which is net of $1.5 million of interest costs capitalized for 1997. Interest payments made during 1999, 1998 and 1997, net of amounts capitalized, were $50.9 million, $65.3 million and $62.2 million, respectively. In 1999, the Company earned interest income of $9.4 million on investments primarily in prime-rated commercial paper. This amount is included in Other, net on the Consolidated Statements of Operations.
Cash, cash equivalents and short-term investments
Cash in excess of current operating needs is invested in various short-term instruments carried at cost that approximates fair value. Those short-term investments having an original maturity of three months or less are classified in the balance sheet as cash equivalents.
Derivatives
From time to time the Company enters into interest rate swap agreements, which are not held for trading purposes, to manage interest cost and risk associated with variable interest rates. The Company uses the accrual method to account for all interest rate swap agreements. Realized gains or losses on termination of interest rate swaps, where the underlying debt has not been terminated, are deferred and amortized over their remaining original terms as an adjustment to interest expense. Amounts which are due to or from interest rate swap counterparties are recorded as an adjustment to interest expense in the periods in which they accrue.
Inventories
Inventories, principally raw materials, are valued at the lower of cost or market. The cost of raw material used in the production of newsprint is determined on the basis of average cost. The cost of newsprint inventories is determined on the first-in, first-out method.
Other current assets
Other current assets included program rights of $13.6 million and $12.6 million at December 26, 1999, and December 27, 1998, respectively.
Accrued expenses and other liabilities
Accrued expenses and other liabilities consisted of the following:
|
(In thousands) |
1999 |
1998 |
|||||||||
|
|
|||||||||||
|
Payroll |
$ |
15,355 |
$ |
21,577 |
|||||||
|
Program rights |
12,839 |
20,317 |
|||||||||
|
Unearned revenue |
14,566 |
19,691 |
|||||||||
|
Other |
32,430 |
44,462 |
|||||||||
|
|
|
||||||||||
|
Total |
$ |
75,190 |
$ |
106,047 |
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|
|
|||||||||||
Lease obligations
The Company rents certain facilities and equipment under operating leases. These leases extend for varying periods of time ranging from one year to more than twenty years and in many cases contain renewal options. Total rental expense amounted to $15.6 million in 1999, $14.2 million in 1998 and $12.3 million in 1997. Minimum rental commitments under operating leases with noncancelable terms in excess of one year are as follows: 2000 — $10.5 million; 2001 — $9.1 million; 2002 — $8.5 million; 2003 — $4.9 million; 2004 — $3.8 million; subsequent years — $11.4 million.
Concentrations of credit risk
Media General is a diversified communications company which sells products and services to a wide variety of customers located principally in the eastern United States. The Company’s trade receivables result primarily from its publishing, broadcast television and newsprint operations. The Company routinely assesses the financial strength of significant customers, and this assessment, combined with the large number and geographic diversity of its customer base, limits its concentration of risk with respect to trade receivables.
Comprehensive Income
In 1999, the Company adopted SFAS No. 130, Reporting Comprehensive Income. This statement requires presentation of comprehensive income and its components in the financial statements (see Consolidated Statements of Stockholders’ Equity). The Company’s comprehensive income consists of net income and unrealized gains and losses on certain investments in equity securities.
Earnings per share
The following chart is a reconciliation of the numerators and the denominators of the basic and diluted per-share computations for income from continuing operations before extraordinary item, as presented in the Consolidated Statements of Operations.
