Fourth-Quarter Conference Call Remarks
January 27, 2005 at 2:00 PM Eastern

by J. Stewart Bryan III, Chairman and CEO, Marshall N. Morton, Vice Chairman and Chief Financial Officer, Reid Ashe, President and Chief Operating Officer, and Lou Anne J. Nabhan, Vice President, Corporate Communications

Welcome from Lou Anne Nabhan

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

Earlier today, Media General issued four press releases. We announced earnings for the fourth-quarter and full-year 2004, revenues for the month of December, a 5% increase in our quarterly dividend, and a management succession plan. All four 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 first speaker today is Stewart Bryan, chairman and chief executive officer.

Remarks from Stewart Bryan Thank you, Lou Anne, and good afternoon ladies and gentlemen. We appreciate your interest in Media General’s performance and outlook.

Media General reported excellent results for the 2004 fourth-quarter and the full-year, capped by a strong performance in December. We were pleased to attain these results while operating in an economy that never gained the full momentum we all had hoped for earlier in the year.

For the full year, our performance reflected an outstanding contribution by the Broadcast Division and a very solid contribution by the Publishing Division. We also benefited from improved results from our interest in SP Newsprint and from lower interest expense.

Consolidated revenues for the year were 7.5% above 2003. Income from continuing operations for the year was $80 million, or 36% above 2003, after excluding an accounting change and the results of operations that were sold in 2003.

The Broadcast Division reported profit growth for the year of 38.5%. The growth was mostly attributable to unprecedented political advertising revenues. Spending on U.S. Senate races, the presidential campaign, and issues advertising yielded a record $38 million in political advertising revenues for Media General stations.

The Publishing Division’s profit increased 5.8% for the year. The growth was attributable to a robust increase in Classified advertising revenues that were up $14.5 million, or 8.5%, for the year. Our Classified revenue growth was mostly the result of increased employment advertising, but automotive and real estate contributed as well.

We are especially pleased that both the Publishing and Broadcast divisions have continued to perform well above the growth averages for their respective industries.

As Lou Anne said earlier, today we announced a management succession plan. On July 1, 2005, Marshall Morton will succeed me as chief executive officer and also assume the title of president. I will continue to serve as chairman of Media General.

The board and I have been planning this transition for the past few years. While I will continue to be actively engaged in setting Media General’s strategy and business direction, I am extremely pleased to hand off the duties of chief executive officer to Marshall. He and I have worked side-by-side for the past 15 years as we refocused Media General and implemented our growth strategies of Southeast focus, clustering and convergence.

After July 1, I look forward to the opportunity to devote more time to personal interests, travel and my family.

Media General is fortunate to have a breadth and depth of experienced and talented management at all levels of the company. We are delighted to have Reid Ashe as our very able chief operating officer, and John Schauss, our treasurer, who will become chief financial officer on July 1. In addition, we have three strong and effective division presidents. Our directors have complete confidence in our management team and its ability to continue to lead Media General’s growth.

Let me now ask Reid to discuss divisional operating performance for the fourth quarter.

Remarks from Reid Ashe

Thank you, Stewart. I will start with the Broadcast Division. Segment operating profits for the fourth quarter increased $11.2 million, or 50.2%, compared with the 2003 fourth quarter. Segment operating cash flow rose 42%.

Profit growth for the quarter is largely the result of increased time sales, up 22.5%, from gains in political billings and strong local transactional sales, partially offset by a decline in national transactional sales.

Political revenues for the quarter were $20.5 million, compared with $3.5 million last year. The increase reflected spending for U.S. Senate campaigns in South Carolina, Florida, North Carolina and Georgia; presidential campaign spending in Florida, Alabama and Iowa; and issue spending in Florida.

As you would expect, some of our normal transactional advertising was crowded out by the flood of political bookings. Local time sales, excluding political, increased 3%, reflecting higher services, fast food, and specialty store advertising. Our stations continued to focus on new business development and effectively managing and pricing our spot inventory.

National time sales, excluding political, were down 4.9%, reflecting soft department store and telecommunications advertising.

Media General television markets showing the strongest growth for the quarter were Tampa, Spartanburg, Mobile, Florence, Greenville, NC, Panama City and Birmingham. These markets all benefited in particular from U.S. Senate and presidential campaign spending and issue advertising.

Broadcast Division total expenses for the fourth quarter rose 10.6%. Higher payroll costs were attributable to salary increases, employment growth, sales commissions and incentive bonus accruals associated with improved revenues. We also recorded higher cost of goods sold, stemming from improved third party equipment sales. In addition, retirement plan costs rose compared to the prior-year quarter, and promotional spending increased in connection with the November sweeps.

The November ratings books were good for us overall; 13 of our stations gained ground in the ratings, 10 were even, and only 3 were down.

Now, let’s turn to the Publishing Division.

In the quarter, Publishing Division operating profits were up $3 million, or 7.6%, from the 2003 quarter. Segment operating cash flow increased 5.2%.

Total publishing revenues for the fourth quarter were 4.2% higher than the 2003 fourth quarter, and newspaper advertising revenue increased by 4.8%. Including online revenues from our newspaper web sites, total publishing revenues were up 4.8%, and advertising revenues increased 5.5%.

Classified advertising drove most of our growth for the quarter. It was up over 2003 by 9.8%. Also contributing were continued gains in preprint revenue, which increased 2.5% for the quarter. Other advertising, where we record color charges and advertising in the Sunday comics, was up 23%. Continued softness in retail advertising, as well as very weak national advertising, offset a portion of the increases.

The Tampa Tribune reported robust revenue growth for the quarter, up 6.9%. Our Northern Virginia newspapers posted a 7.9% increase, and the Charlottesville market also was strong, up 10.4%.

Turning to the individual revenue categories, Classified advertising increased $4.1 million, or 9.8%, for the quarter. Every newspaper showed increases over the prior year. Strong employment advertising was partially offset by softer automotive advertising.

Employment linage at our three metropolitan newspapers increased 9.1% in the aggregate. The gains were 16.3% at the Richmond Times-Dispatch, 9.5% at the Winston-Salem Journal, and a slight increase at The Tampa Tribune.

Retail ROP revenues for the quarter declined $150,000, or 0.4%. The Tampa Tribune had especially strong retail volume, up 7.3%, and our newspapers in Northern Virginia and Alabama reported solid increases as well. In Tampa, the increases came from strong department store advertising, as well as strong results in the government category, due in part to the aftermath of the hurricanes. The Richmond Times-Dispatch could not overcome difficult comparisons to the prior fourth quarter when it experienced the benefit of two new shopping malls opening in the market.

National ROP advertising revenues were down as well, by $180,000, or 1.7%. The Tampa and Richmond markets declined, due to lower spending by telecommunications, cruise lines and travel clients, while Winston-Salem reported an increase.

Preprint revenues were up $640,000 or 2.5% for the quarter, and most of our newspapers reported increases. New stores, particularly in Community newspaper markets, are driving preprint revenue increases. On the other hand, growth in this category would have been even stronger had it not been for reduced business from Kmart and the sale of Eckerds to CVS.

While Circulation revenue showed gains for the first three quarters of 2004, that trend did not continue in the fourth quarter, when it declined by 0.5%. Rate increases for home delivery in many markets, as well as increased circulation volumes in Tampa, had driven gains earlier in the year. By the fourth quarter, our volume gains had ebbed, and we’d cycled through the prior-year rate increases.

Publishing Division expenses for the fourth quarter increased at a slower rate than in the second and third quarters. Total expenses were up 3.1%. The most significant increases were newsprint prices and programs to support increased circulation volumes, as well as higher repair and maintenance costs.

Salary expense for the quarter increased only 1.5%, mostly because total FTEs were below last year.

Newsprint expense for the quarter increased 10.7% and reflected higher newsprint prices and consumption. The average price per ton increased $42 for the quarter. A November price increase has settled in at approximately $30 per ton.

The Interactive Media Division recorded a loss of $1.7 million for the fourth quarter, 8.2% better than the same 2003 period. Revenues of $3.9 million increased 48% over 2003 and mainly reflected strong classified advertising growth. The Local and National advertising categories posted strong increases as well. Expenses for salaries, benefits and commissions, as well as hosting and content fees for this growing business, largely offset the higher revenues.

I will now turn our presentation over to Marshall.

Remarks from Marshall Morton

Thank you, Reid. For the fourth quarter of 2004, income from continuing operations was $36.8 million, or $1.55 per diluted share, compared with $23.7 million, or $1.00 per share, in 2003, after excluding an accounting change and the results of operations that were sold in 2003. The 2004 fourth-quarter results included an after-tax gain of $3.9 million, or 16 cents per share, from the favorable settlement of a newsprint swap dispute.

It was a strong quarter by any measure:

EBITDA for the fourth quarter of 2004 was $83.1 million, compared with $61.9 million for the prior-year period.

After-tax cash flow was $53.6 million, compared with $39.2 million in the 2003 fourth quarter.

Free cash flow was $45.3 million in the fourth quarter, compared with $30.2 million in the prior-year period.

Consolidated below-the-line items added significantly to the quarter’s good results.

The major factors were a reduction in Corporate expense of 19%, reflecting savings in a host of areas, including legal expense, occupancy costs, and departmental expenses, and we benefited from an increase in Other income/expense, as a result of the favorable settlement.

Interest expense declined slightly, due to a decrease in average debt outstanding that more than offset a slightly higher effective interest rate.

Higher acquisition intangibles amortization is the result of increased network affiliation amortization, due, in part, to a shortened useful life.

Equity income from our share of SP Newsprint was a profit of $1 million, compared to a loss of $483 thousand a year ago. The significant improvement was due mainly to an increase in average realized selling price.

The effective tax rate for the quarter was 37%, compared with 38% in the prior year.

Total debt at the end of the fourth quarter was $533 million and represented 31% of total capital. Our debt outstanding at the end of the quarter included $238 million in bank debt, $200 million in public debt, and $95 million in consolidated variable interest entity debt. Debt decreased by $94 million, or 15%, in 2004 and currently stands at about $532 million.

Capital expendituresfor the fourth quarter were $8.3 million, compared with $9 million last year. Total capital expenditures for the year were $37.8 million, lower than we forecast in December because our divisions deferred spending on several initiatives in order to soften the impact of the slow economic recovery. These deferred initiatives will be carried over into 2005.

For the fourth quarter of 2004, Publishing Division capital expenditures were $4.3 million and were invested in new press control equipment at the Richmond Times-Dispatch, new production/press equipment at the Bristol Herald Courier, editorial software, new production equipment and replacement fleet vehicles. The Broadcast Division spent $3.7 million, mostly for the new Centralized Master Control operations for our CBS stations, as well as new weather systems, editing and news production equipment. Expenditures by the Interactive Media Division and Corporate were nominal.

As a reminder, our capital spending program for 2005 includes major expenditures for Publishing Division press projects at Bristol and also for the Lynchburg News & Advance, as well as major expenditures for the Broadcast Division to meet the July 1 deadline for full-power digital television. Our 2005 capital spending plan is projected to be approximately $119 million.

Before turning it back to Stewart, I’d like to add that I am honored to have the opportunity to become president and chief executive officer of Media General on July 1. I very much look forward to continuing to work closely with Stewart and our other directors. Media General has enjoyed considerable constructive growth and success since we implemented our mission of being the leading provider of high-quality news, information and entertainment in the Southeast. I am convinced that the best way to move our company forward and enhance shareholder value is to continue to build, guided by our mission.

I am delighted, too, that John Schauss will be promoted to chief financial officer. John will be a tremendous asset to the company as we continue to implement our growth strategies. In addition to the financial duties of treasurer, John has been responsible for the company’s strategic planning process and has had the opportunity to learn all aspects of our operations. Throughout his career, he has promoted a culture of fiscal discipline and accountability.

I look forward to continuing a strong working relationship with Reid, who successfully executes his role as chief operating officer every day. In addition to his deep knowledge of all of our operations, Reid’s experience in leading our successful convergence initiatives will continue to be invaluable.

And, now, I will turn it back to Stewart.

Remarks from Stewart Bryan

Thank you, Marshall.

Before turning to the Q&A part of our call, I would like to comment on the status of the FCC’s cross-ownership rules, as well as our outlook for the first quarter of 2005.

Those who want to seek Supreme Court review of this past summer’s ownership decision must get their petitions on file by the end of this month. This follows a couple of filing extensions initially sought by the government.

Media General will file its petition tomorrow, and we expect to hear during the first quarter whether the Court will take the case. We remain very hopeful that it will. There are issues at stake that are critically important to our industry and that the Court has not considered since the late 1970s. And, we don’t think any of the recently announced personnel changes at the FCC affect any of this, one way or the other.

In the meantime, and as you also know, we are proceeding with the license renewals for all of our television stations, including those in cross-owned markets. We are optimistic that we will receive the necessary waivers that will allow us to hold on to our cross-owned stations at least through the time that all of the courts, and the Commission if necessary, are finished considering media ownership issues. We think that’s in the public interest, and we think it’s in the best interests of all of the communities we serve.

Now, let me turn to our expectations for the first quarter, which, as you know, is seasonally our weakest.

For the Publishing Division, we expect revenues to continue to show gains at a level similar to the fourth quarter of 2004. Our current expectation is 4.3% growth. Classified revenues are expected to maintain their growth trend, with solid gains in employment advertising, and we expect year-over-year improvement in the retail and national advertising revenue categories.

The Broadcast Division faces some challenges, of which you are already aware. While we will not repeat the strong Super Bowl advertising of last January because the game will be aired on Fox, and our 2004 first quarter also had the benefit of early presidential primary advertising, our new revenue development initiatives are expected to drive revenue growth of approximately 2%. Events such as the NCAA March Madness basketball games, which air on our 16 CBS stations, will also drive advertising during the quarter. At the same time, expenses associated with the revenue growth initiatives, including filling open sales positions, are likely to more than offset the revenue increase.

We note that only two of the seven analysts who cover Media General have posted estimates for the first quarter to First Call. We will provide more definitive guidance on earnings expectations as the first quarter unfolds.

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

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