FOR IMMEDIATE RELEASE
Tuesday, June 24, 2003
Media General Presents at Mid-Year Media Review
Richmond, Va. – Media General, Inc. (NYSE: MEG) executives today updated investors on the company's business strategy, financial position and outlook for the rest of 2003 at the Mid-Year Media Review in New York.
J. Stewart Bryan III, chairman and chief executive officer, provided an overview of the company's strategy. Media General is a multimedia company with excellent local journalism as its core strength. Bryan described the company's regional focus in the southeastern United States and its strong position in growth markets, as well as its strategies for clustering and convergence.
Bryan said, "We are pleased that the new FCC rules on cross-ownership will enable us to expand our convergence strategy. Not only do the new rules allow us to keep our current combinations, but also 90 percent of all markets in the southeast are now open for cross ownership. We intend to grow in a deliberate way. In seeking to acquire or swap assets, we will be a disciplined bidder. We will focus on building the long-term value of Media General for our readers and viewers, our communities, and, in turn, our shareholders," he said.
Reid Ashe, president and chief operating officer, provided an overview of the performance to date of the company's three operating divisions, Publishing, Broadcast and Interactive Media.
Ashe described Publishing growth initiatives, including new products and regional cross-selling, designed to increase readership and revenue. According to Ashe, the Publishing Division has increased newspaper circulation 2% overall as a result of these initiatives. While the new initiatives have associated costs, which represent a long-term investment in the business, spending has been controlled in view of the softer-than-expected revenue performance so far this year. "For the second quarter," Ashe said, "Publishing expenses should be down 2.5 percent, compared to the division's original budget."
In the Broadcast business, new revenue growth initiatives in 2003 are designed to help replace strong political revenues from 2002. According to Ashe, Media General television stations in the aggregate increased viewership by 10 percent in 2002. The Broadcast Division has also implemented an expense reduction program, and in the second quarter expects to reduce costs by 5 percent compared to its original budget.
Interactive Media Division revenue has seen double-digit growth every month this year, driven mostly by classified advertising products. "Eighty to 85 percent of newspaper classified ad buyers also select the online component," he said. He also described new interactive products such as Boxerjam, which provides game shows and puzzles to 2 million registered users and draws revenue from multiple sources. Newspaper and cable TV products based on the Boxerjam games are expected soon, said Ashe.
2003 Outlook
Marshall N. Morton, vice chairman and chief financial officer, presented the company's outlook for the rest of 2003. He said the Publishing Division would show revenue growth in all categories. However, the impact of increases in salary, benefits and newsprint expenses will result in a decrease in profit, offset in part by results of Media General's 20 percent share of The Denver Post. Morton provided the following details:
| Publishing Division |
% increase (decrease) |
| Advertising Revenues |
3 - 4 |
| Total expenses |
5 - 7 |
| Payroll expense |
3 - 4 |
| Benefits expense |
17 - 19 |
| Newsprint expense |
13 - 15 |
| Depreciation & amortization |
(2 - 4) |
| Profit, excluding Denver |
(7 - 9) |
| Denver equity earnings |
— |
| Segment operating profit |
(6 - 8) |
Morton said that the Broadcast Division expects to replace a substantial portion of last year's $32 million in political revenues through a combination of new business development and the conversion of audience rating gains into increased revenue. "We are targeting an increase in local time sales of 6-8 percent and a 4-5 percent gain in national spot sales," he said. The company also expects political revenues of $3.2 million and forecast operating expenses only 1-2 percent above last year, due to cost containment measures. Morton provided the following details:
| Broadcast Division |
% increase (decrease) |
| Total Revenues |
(2 - 4) |
| Time Sales |
(3 - 5) |
| Total expenses |
1 - 2 |
| Payroll expense |
0 - 1 |
| Benefits expense |
19 - 20 |
| Depreciation & amortization |
2 - 4 |
| Segment operating profit |
(14 - 16) |
For the Interactive Media Division, the company forecast revenues of $14 million, representing 30 percent growth over 2002. Expenses should also increase, he said, mostly for additional staff and technology. D&A should rise, due to the improvement and expansion of technology, resources and software. Morton mentioned the gain Media General reported from the first-quarter sale of its investment in Hoover's. "Excluding Hoover's, the division's operating cash flow deficit should be in the range of $3.5-$4.5 million," he said. He provided the following guidance for the division:
| Interactive Media Division |
$ millions |
| Revenues |
14 - 15 |
| Total expenses |
19 - 21 |
| Depreciation & amortization |
1.5 - 2.5 |
| Operating cash (excl. Hoover's) |
(3.5 - 4.5) |
Morton gave the following estimates for Media General's unallocated items:
| |
% increase (decrease) |
| Acquisition intangibles amortization |
1.6 |
| Interest expense |
(29) |
| Corporate expenses |
14 |
| Investment income/SP Newsprint |
— |
| Taxes |
(3) |
Morton said interest expense should be significantly less than last year because of lower interest rates, lower debt levels and lower borrowing fees. Additionally, increased newsprint prices will reduce losses from the company's stake in SP Newsprint from $13.5 million to essentially break-even. The effective tax rate is expected to drop from 39.4 percent last year to 36.5 percent this year.
Morton provided guidance for the full year 2003. Income from recurring operations should be in the range of $57-$58 million, or $2.43-$2.50 per share, he said.
Morton also provided guidance on EBITDA, after-tax cash flow and free cash flow:
| EBITDA |
$ millions |
| Net Income |
57 - 58 |
| Interest |
34 - 35 |
| Taxes |
33 - 34 |
| D&A |
66 - 67 |
| Total |
191 - 193 |
| |
|
| After-tax cash flow |
$ millions |
| Net Income |
57 - 58 |
| D&A |
66 - 67 |
| Total |
123 - 125 |
| |
|
| Free cash flow |
$ millions |
| After-tax cash flow |
123 - 125 |
| Capital expenditures |
48 |
| Total |
74 - 77 |
Morton described changes in the 2003 capital spending plan that reduce spending from the original budget of $62 million to $48 million. This was accomplished by deferring some spending, particularly in the Publishing Division, into 2004. Most of the remaining capital expenditures are for equipment replacement and necessary automation and centralization projects.
The company's debt is approximately $590 million and constitutes 36 percent of total capital. Media General's leverage ratio of approximately 2.8 compares to the maximum of 4.0 allowed in its covenants. "We have ample financial flexibility to pursue growth strategies," said Morton.
Morton said the severe downturn in the investment markets and lower interest rates have affected the company's pension plan. He said, "Our current plan calls for making tax deductible contributions of $21 million in June of this year and $35 million in January of next year. Pre-funding the plan in this way may prevent spikes in future contribution levels and should reduce annual accounting expense, which will average approximately $10 million in each of the next two years. It will certainly work immediately to enhance the funding status of the plan," said Morton.
Bryan summarized Media General's outlook. The company will benefit from the new FCC rules, an advertising recovery, favorable cost trends and higher newsprint pricing as it relates to the company's one-third ownership of SP Newsprint. Strong fundamentals include the company's leadership in the Southeast, its ownership of high-quality multimedia assets, and the financial flexibility to pursue value-creating transactions. "We are committed to building shareholder value," he concluded.
A full text and slides from the presentation are available in the Investor Relations section of Media General's Web site, www.mediageneral.com.
A replay of the webcast is at www.midyearmediareview.com and will remain posted for four weeks.
Forward-Looking Statements
This news release contains forward-looking statements that are subject to various risks and uncertainties and should be understood in the context of the company's publicly available reports filed with the Securities and Exchange Commission. Media General's future performance could differ materially from its current expectations.
About Media General
Media General (NYSE:MEG) is an independent communications company situated primarily in the Southeast with interests in newspapers, television stations, interactive media and diversified information services. The company's publishing assets include The Tampa Tribune, the Richmond Times-Dispatch, the Winston-Salem Journal and 22 other daily newspapers in Virginia, North Carolina, Florida, Alabama and South Carolina, as well as nearly 100 other periodicals and a 20 percent interest in The Denver Post. Media General's 26 network-affiliated television stations reach more than 30 percent of the television households in the Southeast, and nearly 8 percent of those in the United States. The company's extensive interactive media offerings include more than 50 online enterprises. Media General also has a 33 percent interest in SP Newsprint Co., which operates newsprint mills in Dublin, Ga., and Newberg, Ore.
Presentation:
Remarks and video
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