First-Quarter Conference Call Remarks
April 12, 2006 at 11:00 AM Eastern

by Marshall N. Morton, President and Chief Executive Officer, Reid Ashe, Executive Vice President and Chief Operating Officer, John Schauss, Vice President - Finance and Chief Financial Officer, and Lou Anne J. Nabhan, Vice President, Corporate Communications

Welcome from Lou Anne Nabhan

Thank you and good morning everyone. Welcome to Media General’s First-Quarter Conference Call and Webcast.

Earlier today, Media General issued a press release announcing earnings for the first-quarter and a press release announcing revenues for the month of March. Both press releases have been posted on our Web site. The comments from today’s conference call also will be posted on our Web site immediately following the call.

Today’s presentation contains forward-looking statements, which are subject to various risks and uncertainties. They should be understood in the context of the company’s publicly available reports filed with the SEC. Media General’s future performance could differ materially from its current expectations.

Our speakers today are Marshall Morton, president and chief executive officer; Reid Ashe, executive vice president and chief operating officer; and John Schauss, vice president-finance and chief financial officer. We will begin with Marshall.

Remarks from Marshall Morton

Thank you, Lou Anne, and good morning ladies and gentlemen.

Our first-quarter net income of $6.7 million, or 28 cents per share, declined 28% from last year, excluding last year’s FCC license accounting change. The decrease from the prior year was primarily due to lower profit in the Publishing Division and to a non-cash stock option expense of $1.6 million (pretax).

Total revenues for the quarter increased nearly 4%, including a 3.3% increase in the Publishing Division, a 3.6% increase in the Broadcast Division, and a 36.3% increase in the Interactive Media Division. We were pleased with this top-line growth, which reflected the underlying strength of our markets as well as our revenue development initiatives.

Publishing Division revenue growth for the first quarter of 2006 showed solid sequential improvement over the last two quarters of 2005. Newspaper advertising revenue increased 4.8%, driven by Classified advertising growth, up 11.2% over last year, and a 1.5% increase in Retail revenue. The year-over-year decline in Publishing profit reflected expense increases for salaries and benefits, newsprint, circulation and postage. Newsprint pricing in the current quarter was $582 per ton compared with $496 per ton in the prior year.

Broadcast Division profit increased 3.9% and reflected healthy growth in both Local and National time sales. The Broadcast Division benefited in the first quarter from Super Bowl coverage on its three ABC affiliates, the Winter Olympics on its five NBC affiliates, the NCAA basketball tournament on its 16 CBS affiliates, and from continued implementation of its new revenue development building blocks and from effective inventory management. As expected, there was minimal Political advertising in the first quarter.

The Interactive Media Division generated strong revenue growth, especially in online Classifieds, and also in National advertising.

Interest, corporate and intangibles amortization expenses were all in line with expectations and increased only nominally over last year.

We were disappointed by the performance of our investment in SP Newsprint in the first quarter, although we anticipate a significant improvement in the second quarter, when we expect our share of their results to exceed $3 million, compared to last year’s income of $611 thousand. This improvement mainly reflects higher newsprint prices offset partially by higher energy costs.

I’ll now ask Reid to discuss the details of our divisional operating performance for the first quarter. John will follow Reid with comments on below-the-line items and our financial position.

Remarks from Reid Ashe

Thank you, Marshall. I’ll start with the Publishing Division. To recap, total Publishing revenues for the quarter increased 3.3%, and newspaper advertising revenues increased 4.8%. This growth was driven primarily by increased Classified advertising, especially real estate, higher Retail revenues, and by our internal initiatives for new revenue development, including cross-selling and new products.

Expense increases, however, offset the revenue gains in the period. Profit declined 6.1%, excluding $89,000 in equity income in last year’s results from our 20% interest in the Denver Post, which we divested in June 2005.

Classified advertising revenues increased $5.8 million, or 11.2%, due mostly to strength in real estate. Including online advertising, our total Classified revenues increased 12.3% for the quarter.

Real estate linage for our three metros increased 43.6% in the aggregate, including increases of 88.3% at The Tampa Tribune, 27.5% at the Richmond Times-Dispatch, and 2.8% at the Winston-Salem Journal. Factors driving the robust growth in Tampa include a slowing housing market that keeps properties on the market longer, new construction and condominium conversions.

Employment linage at the three metros increased nominally. The Tampa Tribune had a 7.2% decline in help-wanted advertising, although revenue increased 9% because of more local and non-agency business, which carries a higher rate. Employment linage at the Richmond Times-Dispatch was up 1.9%, and revenue increased 7.2%. Employment linage for the Winston-Salem Journal increased 14.3%, while revenue increased only 4.7% because of lower national employment advertising this year, which carries a significantly higher average rate.

In total, automotive linage was down 15% for the three metros, including declines of 13.4% at The Tampa Tribune, 18.5% at the Richmond Times-Dispatch, and 14.7% at the Winston-Salem Journal.

Retail revenues for the quarter increased $800,000 or 1.5%. The increase came primarily from The Tampa Tribune and its associated daily newspapers, from our Northern Virginia newspapers, and from The (Charlottesville) Daily Progress.

Our Tampa area properties had a 3.4% increase in Retail revenues, resulting from increased preprints as well as improvements in the home furnishings and medical categories.

At the Richmond Times-Dispatch, Retail revenues declined 2%, due to losses in the department store and home furnishings categories, as well as losses from a major grocery store that filed bankruptcy last year.

The Winston-Salem Journal posted a 1.2% increase in Retail revenues, which resulted from more advertising from local accounts.

Retail revenues at our Community Newspapers in the aggregate were even with last year.

National advertising in the quarter declined $1 million, or 8.6%. At The Tampa Tribune, National revenues were down 3.7% because of lower telecommunications and national automotive advertising. At the Richmond Times-Dispatch, National revenues declined 10.7% because of lower telecommunications and utility advertising, and less use of color. The Winston-Salem Journal also was down for the quarter, by 14%, due to lower telecommunications and national automotive spending.

Primarily due to continuing efforts to change our wholesale rates to newspaper carriers, Circulation revenues for the quarter were down $1.1 million, or 4.8%. The change in wholesale rates accounted for one-half of the decline. There was also a corresponding expense decrease for this change. Daily and Sunday circulation for the quarter were down 1% and 2.1%, respectively.

Publishing Division expenses increased 5.7% for the quarter, mostly due to higher costs for salaries, benefits and newsprint.

Salary expense increased 3.7%, reflecting normal annual increases, and employee benefits expense increased 9.8%, mostly for retirement plan costs.

Newsprint expense increased 7.6% for the quarter, which reflected higher newsprint prices partially offset by reduced consumption. Consumption decreased 2,890 tons, or 8.2%, mostly because of our change to lighter basis weight newsprint. A February 1 price increase of $40 per tonne is taking hold slowly, and the Publishing Division expects to benefit from the delay in the second quarter.

Let’s now turn to the Broadcast Division. Profit improved by 3.9% as revenue growth more than offset expense increases.

Time sales for the first quarter increased 7.3%, driven by growth in Local and National time sales. Categories showing the strongest growth for the quarter were telecommunications, services, medical and home improvement, while the automotive, specialty stores and financial categories were weaker than last year.

Local time sales, excluding Political, increased $3.1 million, or 6.8%. This growth primarily reflected our stations continued emphasis on new business development initiatives. Local advertising categories showing the largest gains in the quarter included telecommunications, home improvement and medical. The automotive category was about even with last year and continued as the largest single category for local time sales.

National time sales, excluding Political, increased $2.1 million, or 8.8%. Categories with the largest increases for the quarter included services, telecommunications and medical. National time sales growth also reflected our success in selling advertising during the Winter Olympics. The national automotive category declined nearly 6% from last year and continued as the largest single category for national time sales.

Political revenues were $247,000 compared with $323,000 last year and reflected lower issue spending and a lack of candidate image campaigning leading into the primary elections.

Total Broadcast Division expenses for the quarter increased 3.5%, mostly due to payroll and benefits and production costs.

Payroll costs increased 2.2% due largely to merit increases and sales commissions on new business. Employee benefits expense rose 10%, mostly due to higher retirement plan costs.

Production costs increased 5% for the quarter. This increase included higher electricity expense for new HD digital transmitters. Our HDTV digital conversion projects also drove Broadcast depreciation expense 20% higher for the quarter.

Now, let’s turn to the Interactive Media Division, which is comprised mainly of the web sites that are associated with our newspapers and televisions stations plus our computer games business.

For the quarter, the division’s operating loss of $800,000 was slightly ahead of the first quarter of 2005. Revenues of $6.2 million increased 36.3% over last year.

All significant revenue categories exceeded the prior year, with the greatest dollar increases coming from Classified advertising, which exceeded the prior year by 31%. In addition to liner upsells from our newspapers, we generated a significant increase from additional upsell products such as our “Top” branded products. Top Jobs and Top Homes each contributed to the strong growth, while Top Autos fell slightly.

Online Local advertising increased 2.5%, with growth in banners and retail displays. National online revenue more than doubled as a result of an intensified sales focus on this category.

Our Blockdot acquisition is increasing the number of clients for its advergaming products. During the quarter, Blockdot introduced new games for Baskin-Robbins, the Do-It-Yourself Network, and GlaxoSmithKline.

I will now turn our presentation over to John.

Remarks from John Schauss

Thank you, Reid. Let me begin with the below-the-line items for the quarter, as shown in the Business Segments table of our press release.

Interest expense increased slightly compared to the 2005 quarter, due to higher rates.

Our share of SP Newsprint’s operating results was income of $172 thousand compared to income of $447 thousand in the year-ago quarter. The decline was due to higher energy costs partially offset by increases in newsprint pricing.

Acquisition intangibles amortization increased $162 thousand, or 3.4%, due to the acquisitions in 2005 of the Blockdot advergaming business and two weekly newspapers in the Richmond market.

Corporate expense increased $301 thousand compared with the ‘05 quarter, due mainly to increased retirement plan expense and higher salary expense attributable to filling previous vacant positions.

The $1.8 million increase in the Other line item on the Business Segments table can be attributed mainly to the addition of stock option expense in 2006. The non-cash expense will be recognized throughout the year. The annual pretax impact will be approximately $6 million, which represents 16 cents per share.

The effective tax rate for the quarter was 37.6%, compared with 37% in the prior-year quarter.

Total debt at the end of the first quarter was $477 million and represented 34.2% of total capital. Our outstanding debt included $182 million in bank debt, $200 million in public debt, and $95 million in consolidated variable interest entity debt.

Capital expenditures for the first quarter were $18.7 million.

Of that amount, Publishing Division capital expenditures of $8.8 million were invested mainly in new press control equipment at the Richmond Times-Dispatch; renovation of the packaging area at The Tampa Tribune; the press projects at the Bristol Herald Courier, (scheduled to start production later this month) and the Lynchburg News and Advance; a new operations facility for the Opelika-Auburn News; and a new advertising system that, on completion, will serve all our newspapers and their web sites.

The Broadcast Division spent $8.1 million, primarily for the conversion to high-definition digital television and automated news production systems.

Expenditures by the Interactive Media Division were $777 thousand, mostly for a new content management system. Corporate capital expenditures were $1 million, mostly for information technology.

Also in the first quarter, we made a $15 million voluntary contribution to our pension plan.

EBITDA of $37 million compared with $39.3 million in the prior-year period and mostly reflected lower net income.

After-tax cash flow was $25.4 million, compared with $26.5 million in the year-ago period.

Free cash flow in the first quarter was $6.7 million, compared with $10.5 million in the 2005 first quarter, and reflected, as expected, an additional $2.7 million in capital spending in the current quarter.

And, now, I will turn the presentation back to Marshall.

Remarks from Marshall Morton

Thank you, John.

Before we move to Q&A, I’d like to comment first on the status of FCC proceedings regarding cross ownership and then on our second-quarter outlook.

On the FCC, Robert McDowell has been nominated for the fifth seat at the Commission, which would give Kevin Martin the working majority he needs to move forward with important items like the court-mandated review of the FCC's ownership rules. Mr. McDowell's nomination by the President was approved by the Senate Commerce Committee last month. There is currently a "hold" on Mr. McDowell's formal confirmation by the Senate, but we believe he will ultimately be confirmed.

In the meantime, Kevin Martin gave what I thought was a terrific speech at the Newspaper Association's meeting in Chicago at the beginning of the month. He clearly appreciates the importance of moving forward with a prompt review of the Commission's 26-year old newspaper/broadcast cross-ownership rule, and I was heartened to hear him say specifically that the Commission "should correct any imbalance in our rules, create a level playing field, and give newspapers the same opportunities other media enjoy." He also noted that news continues to be central to our everyday lives, and speaking of newspaper publishers, “No one is better situated to take advantage of all the technology -- from mobile technology to the Internet -- and deliver that information into the hands of readers whenever and wherever they want it."

As we're demonstrating every day, that's exactly what Media General is all about.

Now, let me comment on our outlook for the second quarter of 2006.

The Publishing Division expects advertising revenues to increase 5.5-6% over last year’s second quarter. Classified revenues will continue to be driven by the strength in real estate revenue, offset to some extent by continued weakness in automotive advertising. We expect new revenue initiatives to further bolster retail revenues, and we anticipate some improvement in national revenues. The revenue growth will be partially offset by higher expenses; however, Publishing segment profit in the second quarter is expected to increase over last year.

Our new printing press project in Bristol is essentially complete, and the first paper to be printed on the new press will be dated April 24. I visited the plant in March and am pleased to report that start-up has gone very well. We plan an official dedication and community open house on May 16.

The Broadcast Division expects time sales in the second quarter to increase approximately 5.5% over last year. The division expects National time sales growth of 3-3.5%, reflecting higher telecommunications, services and medical advertising, while Local time sales are expected to increase 0.5%-1%. We believe the automotive sector will continue to be soft for both Local and National time sales.

Political revenues will begin to ramp up in the second quarter and are expected to be approximately $3 million. However, Political billings are not yet meeting our projections for primary campaigns and issue advertising.

Overall, the Broadcast Division’s current revenue growth expectations for the second quarter are not as strong as anticipated in the budgeting cycle, so segment profit is likely to decrease compared with the second quarter of 2005. The division is working to implement cost reductions that would bring expenses more in line with its new expectations for revenue growth.

We look forward to completing the purchase of four NBC stations, as we announced last week. We are very pleased to add the key Raleigh/Durham, North Carolina market to our Southeastern footprint, and to be able to upgrade our presence in Birmingham. We also will benefit from adding two high-quality stations in growing larger market DMAs, Columbus, Ohio and Providence, Rhode Island. The acquisition will immediately and significantly improve our Broadcast Division operating margin and drive meaningful growth in its revenues and segment cash flow. Accretion to Media General’s free cash flow will also be immediate and significant.

In 2005, the gross revenue of these stations, which is before commissions, was approximately $120 million. Net revenue, which is what would be reported externally, was approximately $103 million.

That concludes our formal remarks, and, now, we will be pleased to take your questions.

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